New Delhi, 13th October, 2022 – In these times of “The Great Resignation” and volatile equity valuations, when employee loyalty and retention are on a slippery slope and ‘offer-shopping’ by hiring candidates is becoming unsustainable for businesses, this fintech venture MissCallPay implements VenEx as an innovative and more inclusive solution in addition to ESOPs. VenEx makes wealth-creation a lot safer for all employees and gamifies it by aligning everyone to the company’s mid-term (2-4 years) business goals that are a lot more tangible than ESOP liquidity events (commonly known as exit events).
Fintech start-up MissCallPay came across a novel idea of VenEx at a time when it is getting harder and harder to attract and retain quality talent, especially in the high-growth tech sector. Until now, the Employee Stock Options Plan (ESOP) and other forms of Sweat Equity were the only tools available to enable employees to create wealth from the company’s success. While this century-old model has various shortcomings, the VenEx concept came to MissCallPay as a breath of fresh air by providing an innovative solution to help drive more tangible wealth-creation for all employees.
VenEx is about gamification of business in such a way that all the employees are aligned to key metrics like revenue and important milestones like funding rounds to take the business to the next level. It lays down the rewards system in such a way that the organization is benefitted and the business grows. It works on the model of Wealth Points that have emerged as a safe bet against Stock Options, given the uncertainties in real capital gains with the latter, like the dependency on exit events (eg. IPO, M&A, and secondary sale) as well as unpredictable timelines and valuations. The Wealth Points, instead, are offered to an employee as a part of her annual pay or pay-hike package and awarded to her based on her loyalty and performance. They are later converted to fiat currency (each Wealth Point converts to one INR in India, one USD in the US, and so on) and paid to the employee based on predefined percentages linked to the company’s actual cashflows over an auto-elastic period. This provides employees with a clear vision of wealth-creation and the company’s business goals for the same, thus driving overall growth, capital-efficiency and productivity, and making ownership and wealth-creation accessible to all employees instead of just the equity-holders.
MissCallPay has configured VenEx in its recommended mode, where, much like vested or exercised Stock Options, an employee’s hard-earned Wealth Points remain valid even after her employment period, until all of them get converted to cash and paid out to her.
Many employees and hiring candidates feel that real wealth-creation with ESOPs, is like a pot of gold at the end of the rainbow, rather a tunnel, and no one knows when the tunnel would end. On the other hand, VenEx is more predictable as the Wealth Points are given as rewards for loyalty every month and converted to cash on a more consistent basis as the company keeps hitting predefined business or fund-raise milestones. In the case of revenue and/or profit milestones, the conversion to fiat currency ie. Payout is, in fact, monthly, as a share of actual revenue and/or profit achieved in the previous month. Notably, there is no dependency on an equity exit event or volatile share valuations. By doing this, the VenEx model caters to the reality that employees are becoming increasingly risk-averse. Indeed, they cannot diversify their risk by working with 10s or 100s of ventures like the business model of financial investors allows them to do.
There are many other advantages. For example, VenEx can be offered to all employees, from the top to the bottom of the hierarchy, and even to consultants and vendors, whereas ESOP benefits are usually accessible only to select full-time employees. Unlike ESOPs, employees are not required to pay any amount to the company or any taxes for exercising the options ie. buying the equity shares. Also, while ESOP directly dilutes the share-holding of all stakeholders, the VenEx model doesn’t touch the capitalization table; instead, the awarded Wealth Points sit on companies’ books as a contingent liability, to be paid only on the occurrence of the predefined event(s).
Although both ESOP and VenEx carry a certain risk factor, MissCallPay found VenEx to be more predictable and less risky. It is safer and more rewarding for the employees and vendors, as well as serves to boost the business, valuation and impact of the company for its investors/stakeholders. With VenEx in place, the entire organization starts working towards real business goals, unlike ESOPs where returns are more market-driven, meaning that the yield depends on factors that are not actually in the employees’ control.
Here’s what Yashraj Sah, a Product & Business Manager with MissCallPay, said about the initiative: “I was offered VenEx Wealth Points as well as ESOPs when I joined MissCallPay. I never knew about the Wealth Points concept and just took it at face value; it appeared as some points being issued to me every month in the VenEx app, until one fine day I started getting extra cash other than my salary. This was because my Wealth Points were maturing with the company’s early growth, and now I know that those late nights and weekend efforts are paying off instead of only benefitting the company. I have not yet received any benefits linked to ESOPs as there’s been no exercise option available to me as yet, and in fact, I will need to pay the company as well as pay significant taxes at the time of exercising my stock options, whereas the actual cash gain to me from that investment may happen only sometime in the distant future. I consider VenEx as a great motivation factor as it rewards my loyalty and my work consistently. Also very much like ESOPs once vested, my VenEx Wealth Points will remain with me even after I leave this company, until all of them are converted to cash and paid out to me by the company. I thank my company’s leadership for bringing such an innovative concept to MissCallPay and making everyone in the company a part of wealth-creation.”
The VenEx model is not only a unique alternative to ESOPs; it can also work with it as a ‘wrapper’ on ESOPs. This provides clear visibility to employees and hiring candidates on ESOP liquidity or buy-back plan, pre-linked to their individual Wealth Point Balances and the company’s actual cashflows every quarter/year. This enables predictable cash gains to them from a portion of their vested ESOPs, as configured by the company. By helping the company pre-budget the buy-back plan in its business projections in an auto-elastic way, the visibility is provided to participants from the offer stage itself, thereby making ESOPs a lot more attractive and rewarding to employees and hiring candidates, as well as creating resonance in the teams towards achieving mid-term business goals, something which founders and business leaders claim that ESOPs fail to do in their current form. The pre-budgeted buy-backs also replenish the company’s ESOP pool consistently and automatically to support further growth.
Mr. Mitesh L Thakker, Founder and CEO of MissCallPay said, “It is very clear to us that our team will play a huge role in creating a large value and impact through MissCallPay. The unique VenEx model has enabled us to, very meritocratically, define how the created wealth will be shared, on an ongoing basis, with every team member, as everyone is contributing to the future of MissCallPay. It has enhanced the quality of talent we’ve been able to hire and retain within our budgets. Secondly, the clear visibility of wealth-creation to the team, through the personalized VenEx dashboard, has led to increased ownership and effort from all of them. The model has also helped us become more capital-efficient and extend our capital runway, giving us more time to raise the next round of capital. Last but not the least, it has helped us conserve equity making it available to raise more capital for faster growth. We hope that our deal with VenEx sets a new milestone in the business ecosystem.”
Speaking about the partnership, Mr. Avinash Agrawal, Co-founder of VenEx said, “In over 100 years of their history, Employee Stock Options have scaled to just a small segment of employees in a small segment of businesses. Besides, it’s a very precious instrument, often given to a few, thus creating ‘ownership disparity’ in the team and promoting transactional behavior like offer-shopping among the rest; and business owners are aware that this directly impacts their balance sheets. Together with pioneering customers like MissCallPay, we believe we can create a world with ‘ownership at scale’, where people shun the ‘employee mindset’ and feel & act like business owners, rewarded with ‘a share of wealth’ for each unit of their loyalty and performance, a world where people truly co-create wealth and compare their ‘ownerships’ instead of their ‘salaries’. We love to partner with customers like MissCallPay who want to see this happen quickly within their teams, and then we put our heart & soul, supported by automation, into positively impacting the Finance and People pillars of their businesses, and of course, the business itself, in the short-term as well as the long-term. We thank MissCallPay and all our customers for partnering with us on this journey.”