Bengaluru-based edtech major Unacademy has found itself at the centre of a fresh debate after changes to its Employee Stock Option Plan (ESOP) rules triggered concerns among former employees. Addressing the issue head-on, co-founder and CEO Gaurav Munjal has issued a detailed clarification explaining the rationale behind the revised ESOP exercise window and the company’s current valuation realities.
The clarification comes at a time when the Indian startup ecosystem is witnessing valuation corrections and tougher funding conditions, particularly in the edtech space. Unacademy, once among the most highly valued startups in the segment, is navigating this changed environment while exploring strategic options for the future.
What Has Changed in Unacademy’s ESOP Policy
Unacademy recently revised its ESOP policy for former employees, reducing the time period to exercise vested stock options to 30 days from the effective date of the change. Earlier, exited employees had a much longer window, in some cases extending up to several years after leaving the company.
This sudden contraction of the exercise window led to unease among former staff members, many of whom felt the new timeline left them with limited time to arrange funds or evaluate the financial implications of exercising their options. In India, ESOP exercises can also attract tax liabilities at the time of conversion, making such decisions even more complex for individuals.
Munjal’s Explanation on Valuation Reality
In his clarification, Gaurav Munjal acknowledged the concerns raised and explained that the decision was not taken lightly. He pointed out that Unacademy’s current valuation is significantly lower than its peak valuation during the height of startup funding activity. According to him, the company’s latest fair valuation assessment stands at around ₹2,650 crore, a sharp drop from earlier multi-billion-dollar levels.
Munjal explained that Unacademy has raised substantial capital over the years at much higher valuations. As a result, many investors hold liquidation preference rights. In a potential merger, acquisition, or liquidation scenario at the current valuation, these preference rights could take priority, leaving little or no value for ESOP holders if corrective steps were not taken.
Why the Shorter ESOP Exercise Window Was Introduced
The Unacademy CEO said the revised ESOP exercise timeline was designed to protect employees rather than disadvantage them. By allowing former employees to convert their vested options into common shares now, the company aims to ensure they are treated as shareholders in any future stock-based transaction.
Munjal emphasised that without such a mechanism, ESOPs could become entirely worthless in certain deal structures due to investor preference clauses. He admitted that the situation is far from ideal and described it as a difficult but necessary decision in the context of current market conditions.
Founder and Leadership Also Affected
In an attempt to reassure employees, Munjal highlighted that the impact of the valuation correction and ESOP restructuring is not limited to former staff alone. He stated that founders and senior leadership, including himself, are also subject to the same valuation realities and risks. This, he said, reflects the broader challenges facing startups that expanded rapidly during a bullish funding cycle.
Employee Reactions and Wider Industry Context
The revised ESOP policy has drawn mixed reactions. While some see the clarification as a rare moment of transparency from startup leadership, others continue to express concern about the financial pressure such short exercise windows place on individuals.
Industry observers note that Unacademy’s situation mirrors a wider trend across Indian startups, where companies are reassessing compensation structures, costs, and long-term sustainability amid funding slowdowns. ESOPs, once seen as a major wealth-creation tool, are now being re-evaluated in light of realistic exit scenarios.
The Road Ahead for Unacademy
As Unacademy continues to streamline operations and explore strategic options, including potential partnerships or mergers, the conversation around employee equity is likely to remain in focus. Munjal’s clarification signals an attempt to balance transparency with tough decision-making in a challenging market.
For many in the startup ecosystem, this episode serves as a reminder that ESOPs, while promising, are closely tied to market cycles and company performance. How Unacademy navigates this phase could influence how other Indian startups handle employee equity in an era of more cautious growth.