Wealthfront Equity Plan Playbook for
Owners March 8, 2016

How do you attract and
retain the best employees?

CHALLENGING WORK ENVIRONMENT ENGAGING CULTURE
COMPELLING EQUITY INCENTIVES 1 2 3

Equity incentives must both ATTRACT
NEW EMPLOYEES RETAIN OUTSTANDING EMPLOYEES AND

Plan approach must be rational
and equitable

©2014 Wealthfront Inc. 6 Over
the past 25 years… • Our founder, Andy Rachleff, designed a plan that accomplishes both goals at an appropriate level of dilution • The plan has become known as The Wealthfront Equity Plan • Simple, transparent & fair, it has now been adopted in various forms by a number of companies at varying stages.

©2014 Wealthfront Inc. 7 Example:
Startup in Hypergrowth • Company • Consumer internet • 50 employees • San Francisco Bay Area • Staffing Goal • Grow employee base to 100 by end of the year

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

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

©2014 Wealthfront Inc. 10 New
Hire Grants • List all functions & expected number of people to be hired • Next, determine the market rates to hire these individuals • Let’s look at some examples

©2014 Wealthfront Inc. 11 New
Hire Scenario #1

©2014 Wealthfront Inc. 12 New
Hire Scenario #2

©2014 Wealthfront Inc. 13 New
Hire Scenario #3

©2014 Wealthfront Inc. 14 Example
New Hire Budget Create an “equity budget” to calculate total dilution for new hires

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

©2014 Wealthfront Inc. 16 Promotion
Grants • Employees who have been promoted need to be at market rate for their new position • Two scenarios • The person being promoted has equity below today’s market rate • The person being promoted has equity above today’s market rate.

©2014 Wealthfront Inc. 17 Promotion
Scenario: Employee has less equity

©2014 Wealthfront Inc. 18 Promotion
Scenario: Employee has more equity

©2014 Wealthfront Inc. 19 Example
Performance Budget

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

©2014 Wealthfront Inc. 21 Performance
Grants • Give additional equity to a limited number of people to reward performance (Top 10-20%) • Bump needs to feel large, but maintain equitable nature of the entire plan • 50% of equity grant for their current role, if hired today

©2014 Wealthfront Inc. 22 Performance
Scenario

©2014 Wealthfront Inc. 23 Example
Performance Budget

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

©2014 Wealthfront Inc. 25 Evergreen
Grants • Goal is to retain employees for the long term • Avoid vesting cliffs so employees to avoid artificial anxiety points to stimulate interest in new opportunities

©2014 Wealthfront Inc. 26 Evergreen
Scenario

©2014 Wealthfront Inc. 27 Evergreen
Scenario • Start offering additional grants at 2.5 years. Predictable. • Give 1/4 of current market offer for their current role / title. • In this case, 0.018% per year (0.07% ÷ 4) • Vests over 4 years • Grant every year avoids cliffs

©2014 Wealthfront Inc. 28 Evergreen
Example Budget

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

Total Dilution 3.945% (well within
acceptable range of 3-5%)

©2014 Wealthfront Inc. 31 SOURCE
Source Title