ESO Fund raises funds for financing employee stock option purchases

Employee Stock Options Fund, a San Mateo, California-based fund, closed a $100 million third fund and a nearly $75 million second fund, according to a pair of regulatory filings.

The filings say that 96 and 98 LPs participated in the third and second fund, respectively. The first sales took place in March 2017 for fund III and October 2014 for fund II.

ESO Fund provides current and former employees of VC-backed companies a loan for purchasing employee stock options and covering taxes associated with the rise in stock option value.

Unlike in a secondary market sale, employees continue to own the stock, but are required to repay ESO Fund principal and interest once the underlying company is sold or goes public. This arrangement allows employees to get an upside if their current and more often former employer has a successful exit.

ESO Fund uses its experience in venture capital, private equity and operations at entrepreneurial companies to evaluate startups’ likelihood of a liquidity event. In the event, exit doesn’t materialize, the fund, not the employee, takes a loss.

Since its founding in 2012, ESO Fund has supported more than 850 employees in more than 350 companies and realized returns on dozens of exits including Twitter, Lending Club, Business Insider and AppDynamics.

The fund was co-founded by venture capitalists Scott Chou, Stephen Roberts and Jimmy Lackie.