Learn how do you attract and retain the best employees with stock options & equity grants.

1. Wealthfront Equity Plan
Playbook for Owners
wealthfront.com

2. How do you attract and
retain the best employees?

3. CHALLENGING
WORK
ENVIRONMENT
ENGAGING
CULTURE
COMPELLING
EQUITY
INCENTIVES
1
2 3
ATTRACT
RETAIN

4. Equity incentives must both
ATTRACT NEW
EMPLOYEES
RETAIN
OUTSTANDIN
G
EMPLOYEES
AND

5. Plan approach must be
RATIONAL & EQUITABLE

6. Over the past 25 years…
6
 Our founder Andy Rachleff
designed a plan that accomplishes
both goals at a level of dilution that
is quite tolerable
 That plan has become known as the
Wealthfront Equity Plan
 What follows is a detailed recipe for
how to implement this plan

7.  Company
– Consumer Internet
– 50 employees
– San Francisco Bay Area
 Staffing Goal
– Grow employee base to
100 by end of next year
Let’s Start With An Example Company
7
2X

8. A compelling equity compensation plan
has four types of grants:
PROMOTIONS PERFORMANCE EVERGREENNEW HIRES

9. Let’s first focus on new hires:
PROMOTIONS PERFORMANCE EVERGREENNEW HIRES

10.  List all functions and expected
number of people to be hired
 Next, determine the market
rates to hire these individuals
– Consult the Wealthfront
Startup Compensation Tool
– Let’s look at some examples
New Hires
10
Function Hires
Software Engineer – Level 3 10
Software Engineering Manager 1
Product Management - Level 3 2
Design – Level 3 4
Technical Support – Level 1 10
Technical Support Manager 1
Marketing – Level 3 5
Marketing Manager 1
Admin – Level 1 6
Sales – Rep 3 4
Finance – Level 2 4
Business Development – Level 3 2

11. 11
CASH $ in Thousands
SF Bay Area
Per
centile
Sala
ry
Equ
ity
75
th
$1
30k
0.1
05%
25t
h
$11
4k
0.0
36%
Startup Compensation Tool: Example 1
Software Engineer Level 3 51 - 100 SF Bay Area
JOB FUNCTION JOB LEVEL COMPANY SIZE REGION
Try it Now »
This Tool is intended to be used as a guide and not as a predictor or guarantor of future job market conditions or salaries. Results should be used as one source of information among others and not as the final
word in compensation negotiations or decision-making. Source: 2013 data for 14,720 non-executives in 235 privately held technology companies. Updated: September 4th, 2013
Average 0.
07%
EQUITY
% of Company

12. 12
CASH $ in Thousands
SF Bay Area
Per
centile
Sala
ry
Equ
ity
75
th
$1
28k
0.1
05%
25t
h
$1
03k
0.0
12%
Startup Compensation Tool: Example 2
Product Management Level 3 51 - 100 SF Bay Area
JOB FUNCTION JOB LEVEL COMPANY SIZE REGION
Try it Now »
This Tool is intended to be used as a guide and not as a predictor or guarantor of future job market conditions or salaries. Results should be used as one source of information among others and not as the final
word in compensation negotiations or decision-making. Source: 2013 data for 14,720 non-executives in 235 privately held technology companies. Updated: September 4th, 2013
Average 0.0
8%
EQUITY
% of Company

13. 13
CASH $ in Thousands
SF Bay Area
Per
centile
Sala
ry
Equ
ity
75
th
$2
33k
0.0
86%
25t
h
$1
05k
0.0
04%
Startup Compensation Tool: Example 3
Sales Rep 3 51 - 100 SF Bay Area
JOB FUNCTION JOB LEVEL COMPANY SIZE REGION
Try it Now »
This Tool is intended to be used as a guide and not as a predictor or guarantor of future job market conditions or salaries. Results should be used as one source of information among others and not as the final
word in compensation negotiations or decision-making. Source: 2013 data for 14,720 non-executives in 235 privately held technology companies. Updated: September 4th, 2013
Average 0.0
4%
EQUITY
% of Company

14. Repeat This Process for All Hires Listed
Create an “Equity Budget” to Calculate Total Dilution for New Hires
14
Function Hires % Per Employee Dilution
Software Engineer – Level 3 10 0.07 0.70
Software Engineering Manager 1 0.10 0.10
Product Management - Level 3 2 0.08 0.16
Design – Level 3 4 0.04 0.16
Technical Support – Level 1 10 0.01 0.10
Technical Support Manager 1 0.06 0.06
Marketing – Level 3 5 0.04 0.20
Marketing Manager 1 0.06 0.06
Admin – Level 1 6 0.02 0.12
Sales – Rep 3 4 0.04 0.16
Finance – Level 2 4 0.01 0.04
Business Development – Level 3 2 0.06 0.06
x =

15. Next, let’s focus on promotions:
PROMOTIONS PERFORMANCE EVERGREENNEW HIRES
1.92%

16.  Need to give employees who have
been promoted the amount of stock
necessary to get them to the market
rate for their new position.
 If the person being promoted is
already over the market rate, then
grant an amount equal to the
difference between the market rate
of new position and the old position.
Promotions

17. 17
CASH $ in Thousands
Promotion Scenario 1: Below Market
Software Engineer Manager 51 - 100 SF Bay Area
JOB FUNCTION JOB LEVEL COMPANY SIZE REGION
Try it Now »
This Tool is intended to be used as a guide and not as a predictor or guarantor of future job market conditions or salaries. Results should be used as one source of information among others and not as the final
word in compensation negotiations or decision-making. Source: 2013 data for 14,720 non-executives in 235 privately held technology companies. Updated: September 4th, 2013
EQUITY
% of Company
Originally hired at 0.06% equity
Per
centile
Sala
ry
Equ
ity
75
th
$1
54k
0.1
34%
25t
h
$1
34k
0.0
66%Average 0.10
5%
Promoted Position Rate
Grant the difference between promoted rate
and original grant: 0.045%

18. 18
CASH $ in Thousands
Per
centile
Sala
ry
Equ
ity
75
th
$1
30k
0.1
05%
25t
h
$11
4k
0.0
36%
Promotion Scenario 2: Above Market
Software Engineer Manager 51 - 100 SF Bay Area
JOB FUNCTION JOB LEVEL COMPANY SIZE REGION
Try it Now »
This Tool is intended to be used as a guide and not as a predictor or guarantor of future job market conditions or salaries. Results should be used as one source of information among others and not as the final
word in compensation negotiations or decision-making. Source: 2013 data for 14,720 non-executives in 235 privately held technology companies. Updated: September 4th, 2013
Average 0.07
%
EQUITY
% of Company
Early employee,
hired at 0.15% equity
Current Position Rate
Per
centile
Sala
ry
Equ
ity
75
th
$1
54k
0.1
05%
25t
h
$1
34k
0.0
36%Average 0.10
%
Promoted Position Rate
Grant the difference between promoted
position and current position rate: 0.03%

19. Example Promotion Increase
19
To Be Promoted Starting Equity Market Rate for
Promoted Position
Additional
Grant
Engineering Manager 0.06% 0.105% 0.045%
Scenario 1: Current Equity is Below the Promoted Position
Equity
To Be Promoted Current Equity Market Rate for
Current Position
Market Rate for
Promoted Position
Additional
Grant
Engineering Manager 0.15% 0.07% 0.10% 0.03%
Scenario 2: Current Equity is Above the Promoted Position
Equity
# of Promotions Average Incremental Grant / Promotion Total Dilution
5 0.1% 0.5%
Total Equity Dilution for All
Promotions
x =

20. Now let’s focus on performance:
PROMOTIONS PERFORMANCE EVERGREENNEW HIRES
1.92% 0.5%

21.  Give equity bumps to a limited number
of people to make it seem special
– Only the top 10-20% employees
 Need to give a bump that feels large but
maintains equitable nature of the whole
plan
 We propose an amount equal to 50% of
what they would get hired at today
Performance

22. 22
CASH $ in Thousands
SF Bay Area
Per
centile
Sala
ry
Equ
ity
75
th
$1
75k
0.1
76%
25t
h
$11
8k
0.0
45%
Performance Scenario
Product Management Manager 51 - 100 SF Bay Area
JOB FUNCTION JOB LEVEL COMPANY SIZE REGION
Try it Now »
This Tool is intended to be used as a guide and not as a predictor or guarantor of future job market conditions or salaries. Results should be used as one source of information among others and not as the final
word in compensation negotiations or decision-making. Source: 2013 data for 14,720 non-executives in 235 privately held technology companies. Updated: September 4th, 2013
Average 0.11
%
EQUITY
% of Company
Grant 50% of the average: 0.055%

23. Example Performance Increase
23
High Performer Today’s Market Rate Additional Grant (50%)
Software Engineer 0.11 0.055
# of Top Performers Average Incremental Grant / Performer Total Dilution
5 0.05 0.125%
Total Equity Dilution for
Performance
Equity Dilution for Our Example
x =

24. Finally, let’s focus on evergreen:
PROMOTIONS PERFORMANCE EVERGREENNEW HIRES
1.92% 0.5% 0.125%

25.  Goal: retain employees for the
long term
 Avoid vesting cliffs so they
don't look around for new
opportunities
Evergreen

26. 26
CASH $ in Thousands
SF Bay Area
Per
centile
Sala
ry
Equ
ity
75
th
$1
30k
0.1
05%
25t
h
$11
4k
0.0
36%
Evergreen Scenario
Software Engineer Level 3 51 - 100 SF Bay Area
JOB FUNCTION JOB LEVEL COMPANY SIZE REGION
Try it Now »
This Tool is intended to be used as a guide and not as a predictor or guarantor of future job market conditions or salaries. Results should be used as one source of information among others and not as the final
word in compensation negotiations or decision-making. Source: 2013 data for 14,720 non-executives in 235 privately held technology companies. Updated: September 4th, 2013
Average 0.
07%
EQUITY
% of Company
Grant 25% of the average each year
starting at 2.5 years: 0.018%

27.  Start offering additional stock
at 2.5 years
 Give 1/4 of current market offer for their
current job each year on anniversary of
first evergreen grant
Evergreen: Smooth Out Grants & Avoid Cliffs
 In this case, we grant 0.018% per
year (0.07% ÷ 4)
 Each grant vests over 4 years
 Granting small amounts every year
avoids cliffs
Initial Grant
EQUITY
TENURE
years

28. Example Evergreen Increase
28
Level Evergreen
Grants
Average Incremental
Grant / Level
% Granted
Per Year
Additional
Grant
Executives 4 1.0 0.25 1.0
Non Execs 16 0.1 0.25 0.4
Total 20 1.4%
Evergreen Role Market Rate for
Current Position
% Granted
Per Year Additional Grant
Software Engineer 0.07 0.25 0.0175
Total Equity Dilution for Evergreen
Employees
Equity Dilution for Our Example
x =x

29. Add up all grant dilution
PROMOTIONS PERFORMANCE EVERGREENNEW HIRES
1.92% 0.5% 0.125% 1.4%+ + +

30. (well within acceptable range of 3–5%)
Total Dilution:
3.945%

31. Wealthfront.com