Startup Equity Information - a free ebook from Performensation 2017

©2017 Performensation, LLC
%-#-$ - Startup Equity: It’s Enough to Make You Swear! 2
409A vs Investor Value 3
Why are VCs Getting So Stingy with Equity? 4
Comparing Your “Currency” to a Competitor’s 5
Synthetic Equity or, “Sharing Without Sharing” 6
Isn’t It Refreshing? (maybe not) 8
The Most Common Mistake 9
No. They Don't Get It. 10
Three Crucial Variables 11
What About Performance? 12
Staying Private in a Public World 13
But Can’t I Pay Less Cash? 15
You’re Coming With Me, or maybe NOT 16
In Conclusion 17
eBook
by Performensation
Startup Equity
a 14 part series
Equity Compensation is the term used for pay that links the
ownership of value of stock to the compensation of individuals.
This may include stock options (ISO AND Non-qualified),
restricted stock, restricted stock units (RSU, stock appreciation
rights, phantom stock, carried interest, profits interests,
employee stock purchase plans and similar plans.
This publication is focused on the purpose, design,
management and execution of these programs for startups and
other privately held companies.
There is be no area of compensation with more complexity and
variability than equity compensation. This often leads to
confusion and mistakes on the part of investors, founders,
employees and their advisors.
Innovative startups deserve the same excellence,
customization and innovation that they build into their own
products and services. This begins with better information
Performensation created this series of articles to fill a void in the
industry knowledge-base. We hope that you will find these
articles useful.
Unusual Pay for Usual Companies, Usual Pay for Unusual Companies
What’s Inside
Startup
Equity

2
1) %-#-$ - Startup Equity: It’s
Enough to Make You Swear!
Figuring out the right amount of equity compensation at
startups is a challenge. How much should I grant? How big
should the grant be? How should I size the grant relative to
base pay? Investors, boards, executives, HR and
compensation departments at start-ups have conflicts over
these questions all the time. In the past I have written about
the 11 Reasons Your Equity Compensation Survey Data is
Wrong. This article focuses on three common ways to
determine equity at startups regardless of your survey source.
% Percentage of FD Outstanding Shares
This is where most companies start. The first 10 or 20 key
players at a start-up are likely to have their grants determined
as a percentage of “Fully Diluted Outstanding Shares.” It is
nearly impossible to determine the real value of a very young
company. How much is an idea worth? How about a half
working prototype that has only been seen by six people?
Since values are usually flat out guesses, percentages make
sense. Since values are also very low, it generally makes sense
to grant stock options. Options offer more income and tax
planning flexibility. Participants should expect these
percentages to be diluted somewhat as the company brings in
Angel and Venture Capital funding rounds. As values rise and
more people join the company it becomes increasingly harder
to grant percentages. Who really wants 0.0034123% of the
company in stock options? The key is determining when to
start changing your approach.
# Number of shares
Traditionally this is the next step for most companies.
This is especially true for grants to non-executives. Executive
grants may be primarily determined as percentages until very
close to the IPO. Some companies start as early as employee
50 or 60, others may wait until they have 200 or more equity
holders. Numbers of shares is an easy way to grant equity. It
is also wildly volatile and often very incorrect, especially when
using stock options. As the company value grows, so does the
option strike price. Giving one engineer 25,000 stock options
with a $0.03 strike price and a later hire the same number of
options with a $12.50 strike price is a good way to create
retention and motivation problems down the road. The
earlier hire may have taken more risks, but in a fast growing
company those risks may not represent the different in future
value. Consider this math. Assume the company goes public
at $18.00 per share. The earlier grant would have a value of
$449,250. The later grant would have a value of 137,500.
Those are differences that are hard to squeeze into a
compensation philosophy document.
$ 409A Value, Investor Value and Potential
Realizable Value
Dollar value is where most compensation professional
are most comfortable. With big, established companies this is
often a great starting point. With startups this has always
been difficult. In today’s world pre-IPO companies may be
valued anywhere from less than $1Million to more than
$10Billion. Companies may also move to Restricted Stock
Units (RSUs) as dilution becomes a concern. Getting rid of the
strike price changes the entire equation. But, let’s start with
the multiple ways a start-up is valued. First is the IRC 409A
value. This value is usually determined by an outside
professional. Most companies use the most conservative
assumptions they can to keep the value low. The “Investor
Value” is typically the price from the last round of funding.
This can be significantly higher than the 409A value. Investors
As values rise and more people join the
company it becomes increasingly harder to
grant percentages. Who really wants
0.0034123% of the company in stock options?

3
are seldom thinking of a conservative, low value. They look at
the current value in light of what they hope to gain in the
future. It is not uncommon for the Investor Value to be ten or
more times the 409A Value. Many investors believe the
Investor Value is the value that should be used for equity
compensation. It reflects the value of their investment,
regardless of whether that investment may later prove to be
overly exuberant. The Potential Realizable Value is based on
the value the company hopes to have at IPO or Change in
Control. This is the number(s) on the business plan
projections. This is best modeled in a variety of scenarios.
With some pre-IPO companies now being valued in the
billions the difference between reality and hyperbole can be
hard to estimate. In the end this is the value that determines
a baseline of what participants will “own” at the time of a
corporate event.
None of these methods is foolproof and I generally
recommend that companies model all three methods (and
sometimes others) from fairly early in their growth cycle.
Modeling each requires many additional considerations
including; 1) the number of additional rounds of funding and
dilution to get to an exit, 2) whether there will be a need for a
forward or reverse split prior to the IPO, 3) the time that the
company expects it will take to achieve its goals, 4) the
strength of the IPO or M&A market for their industry, 5) the
number of employees they believe they will need at exit and
many other factors. There is no simple solution to such a
complex set of equations, but understanding all of the above
is a good place to start.
2) 409A vs Investor Value
We have all seen the headlines, “XYZ receives $100M in
funding at a $3B valuation.” We seldom see the “other”
valuation showing the same company is worth $350M. For
publicly-traded companies, value is determined by investors
working as a group in a real-time market. They are generally
purchasing the same kind of stock. Values are based on a
combination of publicly disclosed information, supercool
computer models and gut feel. But in the world of the pre-IPO
start-ups, values take on a life of their own.
Investors in startups are buying stock with more risk and
more upside potential. Companies only sell stock to investors
on an occasional basis, further changing the value dynamic.
Each investor may be able to negotiate the terms and
conditions that control when and how their investment will
deliver its value or protect the investor from loss. And, larger
investors are essentially negotiating directly with the
company for 1) the privilege to own stock and /or, 2) the
responsibility of giving money to a company who needs it and
has no guarantee of returning it. All of these factors
contribute to the investor value. If a company has equity
compensation plans they must also have a value that meets
IRC 409A requirements.
IRC 409A covers a whole bunch of stuff, but for the
purpose of this publication, we are only going to discuss
valuation. The 409A valuation is used to determine the strike
price for stock options. The strike price for stock options is a
critical element in calculating the compensation expense for
stock options. The strike price is also the hurdle that must be
exceeded to deliver real value to plan participants. So, if the
409A value is low, it makes stock options less expensive for
the company and more lucrative for the holders. Most
experienced venture capital investors understand this, but as
the number of so-called “unicorn” startups (those with a
value of more than $1Billion) has grown, questions regarding
the value of shares have become pretty common.
It can be frustrating for an investor to purchase stock
only to see stock options granted with a strike price that is a
fraction of their investment price. Often the investor value is
a double digit multiple of the 409A. Adding to this confusion is
the reticence of startups to consider the potential dollar value
of the equity they are granting. It can be equally frustrating
for the plan participants. They are attracted to companies
with these amazing investor values only to find that the
internal value of the company is far less. It can be deflating
and confusing.

4
Compensation professionals must be better at evolving
equity in light of extended pre-IPO periods, increasing
differentiation between investor value and 409A values and
growing concern among some investors that 409A values are
kept artificially low at the expense of investors.
Communications to both plan participants and investors need
to bridge the gap between the low 409A value and the often
overly optimistic value of the most recent funding round.
None of this is really new, but the increased values of
pre-IPO companies have made it far more common. In 2007,
Facebook sold 1.6% stake to Microsoft for $240M. This gave
Facebook an investor value of $15B. Almost a year later
Facebook allowed employees to sell some stock back to the
company at a 409A valuation of $4B. Which was the “real”
value of Facebook? Likely neither of them in the sense that a
compensation professional would like to evaluate. This is
what makes equity compensation at startups so interesting
and fun.
Use the following as your rule of thumbs (hopefully you
have more than 2 thumbs).
1. 409A values are intentionally depressed to keep costs
down and potential up.
2. Even with Rule 1 in place, smaller companies may find
their 409A values higher than expected when the
market around them is especially hot.
3. Investor value is largely based on whether your
company is getting the favor of an investment, or
giving the favor of an investment. In virtually no
situation will this value be closely linked to your 409A
value.
4. Your less experienced investors will always push to
have executive and employee equity linked to their
own cost of investment. More experienced investors
may link equity compensation to the future size of the
pie. In a world of leverage, initial values have less
impact than future multiples.
5. But that doesn't mean that strike prices mean nothing!
If your 409A value goes from $0.10 per share to $1.25
per share in a year, is has a BIG impact on two
otherwise equal executives who may be getting the
same percentage of equity. Use this information as a
motivating tool for potential hires on the fence. If you
are growing and know that a 409A valuation is on the
horizon, then now is the time to join the company.
3) Why are VCs Getting So Stingy
with Equity?
You had a great idea and turned it into a company.
Somehow you got to the point where Venture Capitalists
were willing to invest. You may have had less than 50
employees and less than 15% of the company committed to
non-founder employees. You grew and kept innovating.
Equity compensation was the currency of the day and the
hope of tomorrow. Your value grew and more investors came
on board. Then the equity spigot became a trickle.
What's up?
Many VC returns have shrunk in 2016. When VCs see
their value melting, they react exactly as you might expect.
They become more protective of what they have and less
excited about the risk of the future. Many behavioral
economic studies have shown that the risk of loss drives
actions more strongly than the potential of reward. This is
especially true when the values are large. You may not worry
about losing 5% of your investment when it is worth $100,
but you are very concerned about 5% when your investment
The 409A valuation is used to determine the
strike price for stock options. The strike price
for stock options is a critical element in
calculating the compensation expense for
stock options.

5
is worth $1B. So, as values have risen over the past 5-10
years, the gut punch of losses feels even more traumatic. In
market with few IPOs this concern is felt even more keenly.
In addition to VC’s seeing losses, there are a few other
things going on right now.
1. Weak IPO market. A less than stellar IPO market means
investors cannot liquidate their investment even when
there is a strong growth in value. When this occurs
investors tend to tamp down on equity compensation.
They want to be assured that their own investments
will have value before they continue a steady stream
of sharing more of that potential value.
2. Unexpected long periods to become “IPO ready.”
Many current “unicorns” and “half-a-corns” would
have gone public a long time ago if the markets
worked like they did in the past. Long periods to IPO
have two main impacts on equity compensation. First,
many of these companies have far more employees
than IPOs had in the past. For companies using broad-
based equity, this means far more people with equity.
Second, a lot of people have had outstanding equity
for a while. Keeping equity compensation fresh after a
decade or more can prove difficult.
3. Huge company values. Most startups use percentages
or numbers of shares to determine grant sizes. With
high values, this can result in grants that look to have
enormous value when they are given. This is especially
true with the move to RSUs. Investors look at grants
that are worth tons of money on paper and start to
wonder how much of that “money” is really needed.
The best thing you can do is study and
prepare.
Find out what successful companies in your industry had
as equity overhang when they went public or were acquired.
Understand that stock plan overhang grows the longer you
remain private and generally drops very quickly after you go
public. This is especially true for companies who require some
type of corporate action to trigger vesting. Exercises of
options and vesting of RSUs reduce your overhang. Restricting
these types of transactions can make overhang concerns
much worse.
Learn how many employees it took to get similar
companies to a liquidity event. There is a big difference
between a company that requires 500 employees to go public
and one that requires 5,000 employees to get to the same
point. Here's an interesting article looking at HUGE
companies.
Look at the potential value of equity awards given your
business plan and its impact on company value. The values of
companies going public have continued to rise. The same
percentage of ownership that made sense 15 or 20 years ago
may be more than needed in today’s environment. Are you
looking at 10% of a $100M or is 6% of a $950M company
sufficient?
Your investors will respect you more and work with you
better if you have done your homework and can negotiate
with an understanding of their side of the equation.
4) Comparing Your “Currency” to
a Competitor’s
Comparing base pay is relatively easy, equity not so
much. A dollar is a dollar. And, if a dollar isn't a dollar (let’s
say it’s a Franc), there are published exchange rates to help
convert values. But, with equity compensation, the base
currency is your stock, and its value is not easily translated.
This fundamental disconnect is one of the most challenging
Exercises of options and vesting of RSUs
reduce your overhang. Restricting these types
of transactions can make overhang concerns
much worse.

6
issues faced by anyone dealing with equity compensation at a
start-up.
Let's start with the oversimplified example above. There
are exchange rates from dollars to francs, but they are not as
consistent as the prices available for publicly traded stock.
Then there is the basic fact that a franc may not be a franc.
Switzerland uses the franc, as do Senegal, Rwanda, and Togo.
In fact, there are eight or nine different types of "franc” used
by about 22 countries. You had better fully understand which
franc you are converting before you give a value. This is much
like the confusion around instruments like stock options and
restricted stock units (RSUs), or other real or synthetic equity
tools.
If you don't know what you are comparing, then you are
probably going to be wrong. But, with nearly every currency,
you can go to the internet or grab a good newspaper and find
a fairly recent and accurate conversion rate. With start-up
equity, very little is recent and very few are accurate. In fact,
very little is published and what is, is very often incorrect. It
makes a big difference if someone offers to exchange Manat
for Dollars. Turkmenistani Manat current convert at 1 Manat
to 0.29 dollars. Azerbaijani Manat converts at 1 Manat to 0.57
Dollars. Not knowing the difference can make all the
difference.
Getting 2,500 Stock options or RSUs means almost
nothing. Being told that the current stock price is $0.10 /
share also means almost nothing. For equity compensation to
have perceived value, you must understand the value of the
company and the preferences of any other investors. Without
this foundation, you have no idea if you have been granted a
big piece of something or a tiny piece of almost nothing.
But, we're not done. If you want to understand your
company's currency exchange rate to the real world, you
must also understand the potential future value of the
company and when that potential might be realistically
achieved. It's like if someone gave you Deutsche Marks a
week before the move to Euros, but told you they couldn't be
exchanged for five or ten years. You would have known the
current value, but even the best economist would have a hard
time predicting the success of the Euro and how inflation,
deflation, the global economy and other factors would impact
value in the long run. And let's be honest, your start-ups stock
is not as stable or predictable as the current of one of the
largest economies in the world.
What’s all of this mean in the world of startups and
compensation?
If you are a company offering equity you must be willing
to share information or be prepared for your expensive and
possibly hard-fought equity program to have little or no value
to your employees.
If you are an executive or founder, don't expect anyone
to appreciate what you have given up, if you are unwilling to
communicate its current and potential value.
If you are a compensation professional, stop looking at
values in surveys and expecting them to correlate to your
situation.
Most importantly, ask a ton of questions before you get
started and keep asking them over and over again after you
get moving. The most amazing and exciting thing about
currency isn't any of the above. It’s the simple fact that very
few investments move faster, change more often and have
greater potential upside and downside than trading money. If
that doesn't sound like startup equity, I don’t know what
does.
5) Synthetic Equity or, “Sharing
Without Sharing”
When you hear "equity compensation" and startups, you
immediately think of stock options. More recently RSUs
If you are a company offering equity you must
be willing to share information.

7
(restricted stock units that settle in company stock) have also
been popular. But, what if you aren't the "sharing" type? Or
what if your company doesn't have stock? LLCs are a good
example. How does your business compete when it doesn't
have access to the same tools? Synthetic equity is becoming
an increasingly popular answer.
Synthetic equity refers to any type of incentive plan
where the value delivered to participants fluctuates based on
the value of the enterprise, but may not directly deliver
ownership. For corporations, the most common tools are
Stock Appreciation Rights and Phantom Stock (usually
restricted stock units that settle in cash.) LLCs may offer Profit
Interests and Capital Interests. More obscure companies
including some joint ventures and subsidiaries that cannot
offer parent company stock even have synthetic equity
compensation over a synthetic class of stock. Regardless of
the company type, the goals are similar. Create compensation
plans that are competitive with more "traditional" startups
without giving away actual ownership.
These synthetic equity awards fall roughly into two
categories. Appreciation-only awards and full-value awards.
SARs and Profit Interests are in the first camp. The individual
receives a grant that gives them the potential to receive a
portion of the increase in value of the company. These
awards may allow for elective transactions similar to stock
options, or the transaction may be automatically triggered by
time or an event, much like RSUs. Full-value awards provide
the holder with a portion of the total enterprise value. These
awards are almost always transacted automatically based on
time, the achievement of a performance goal or an event like
a change in control.
Regardless of the timing and amount of
compensation, these awards have some expensive
trade-offs when compared to more standard equity
compensation.
1. The company offering the award needs to have cash to
cover the cost of the eventual transaction. These
awards are poorly suited for companies operating at a
loss, or still working on additional funding. Nothing
throws cold water on a plan or company like spending
money you don't have.
2. These awards don't offer the same fixed accounting
treatment as equity that settles in stock. Settling in
cash means accounting these awards as a liability. The
compensation expense must be adjusted to match
future expectations of payout. With growing
companies, this can quickly get expensive. This can be
helpful when you are underperforming, but let's face
it; most companies aren't offering these awards with a
goal of failing.
3. Participants will need additional communication and
education. There may not even be one synthetic equity
resource for every twenty, or even fifty, resources
about stock options or RSUs. Your company will need
to fill the void.
With the distinct challenges come some interesting
benefits.
1. If you are profitable, cash can be much more seductive
and motivating than stock.
2. Giving people real ownership in an LLC or S-
Corporation may require them to claim a portion of
the company's income and file and pay associated
taxes. Synthetic equity can avoid this unappreciated
risk.
3. A lack of resources means far less misinformation.
There are a ton of articles, data sites, and discussion
boards for stock options and other common equity
compensation. An incredible percentage of these
include some, or all, incorrect information. With
synthetic equity, you control the messaging.
4. There is no need to deal with additional owners. It is
best if you treat synthetic equity holders as if they
were owners, but they won’t get to vote. Perhaps even
more important, when they leave the company their
ownership doesn’t hang around forever.
You may be asking why there has been more interest in
these programs. Equity compensation is complex enough,
why add more cloudiness to the picture? Increasingly,
successful companies are bootstrapped by founders who have
their own money. Many industries allow companies to be
profitable very early on. There is a movement by some
companies to stay private for longer periods of time
(including eternity). Lastly, many companies are finding that
the tax rules supporting LLC are more enticing than those
Synthetic equity refers to any type of incentive
plan where the value delivered to participants
fluctuates based on the value of the enterprise,
but may not directly deliver ownership.

8
supporting C-corporations. Each of these issues slopes the
game board toward synthetic equity.
6) Isn’t It Refreshing? (maybe not)
The historically long periods between the startup and
“big event” for companies has given rise to many issues that
were never considered when stock options and other equity
tools first became the preferred startup incentive tool.
Among these unplanned issues are things like:
1. Wealth inequality between the first 20 employees and
employee 5,000 or 12,000 or more
2. Grants expire when the company has not yet made its
move to IPO
3. 409A Valuations
4. Dilution and burn rate issues long before IPO
5. Grants becoming stale
6. Downward movement in stock prices
In this article we will discuss the controversial issue of
“refreshing” grants for long-term employees. To clarify, these
are not grants for promotions or company-wide performance.
These are equity compensation awards that are given simply
because someone has been around a while and there is a
feeling that they need a “bit more” or a “reminder” to help
keep them focused. Refreshing equity isn't a bad idea, but it
may not be practical or useful for every startup.
FORMULAS DO NOT WORK
Hmm. That was a random statement. Back to the article.
Public companies refresh grants as a standard practice.
All the following factors and more play into public companies
granting new equity to old employees.
1. Their stock prices are more volatile, more frequently
than startup prices.
2. The ability for individuals to sell their shares means
that old grants lose their power (since they no longer
exist).
3. If the stock price is rising, equity plan overhang goes
down as people exercise stock options, or have RSUs
vest. This moves the awards out of the "potential
dilution" column.
4. Public companies tend to hire less mercurially than
startups. Staff increases are budgeted and planned in
advance. Execution is a matter of finding people and
applying a relatively consistent compensation
philosophy to their awards.
Startups have very few of these issues but have other
problems that can make refreshing equity difficult.
As a rule, startup values generally go up. When they go
down, the last thing investors want to talk about is more
dilution.
Since there is no real market for private shares, peoples’
equity awards tend to remain fairly static while prices rise
around them. Value goes up without new awards taking
place.
Overhang at startups goes up. It only goes down when
people with significant grants are terminated (and they don't
exercise prior). The more equity you grant, the grumpier your
investors get.
Startups hire in fits and starts. You hold back as long as
possible. When funding comes in you, scramble to turn
money into talent and products as quickly as possible. One
year you may double in size, the next year may not hire
anyone at all.
Over the past several years many people have touted
their "answer" to the question of equity. Many of these
answers include refreshing equity based on some formula
(oh…that's where that random statement came from.) None
Refreshing equity for the sake of refreshing
equity isn’t great. Equity is both ownership
and money. There isn't an unlimited supply of
either.

9
of these programs can work equally well for companies of any
size, growth rate, funding and exit goals. In fact, most of them
barely work for the company that invented them.
When you tell someone that every 2.5 years you need to
give employees a new grant that is 25% of the size of their
previous grant (that still has 1.5 years vesting remaining), it
sounds like a reasonable plan. When you model this out for
your company of 25 people over the next few years, it also
seems reasonable. Reality hits when your employee growth
rate is far faster, or the value of your company is far higher
than imagined, or your event horizon is still not on the
horizon, or your exit event has turned into a “not yet” event.
You probably can’t pony up enough stock on the 2.5-year
trigger date if you are also in the process of a huge hiring
campaign. Your investors may rebel.
You can't give people a block of new shares every time
their old shares vest or are exercised. The lack of unvested
equity may not be your biggest compensation problem. The
vested or exercised equity may already have more value than
you ever thought that person would earn. An IPO or
acquisition may be looming eminently. Perhaps your initial
grant size was far higher than it needed to be. Maybe the
individual just received a large promotion grant. The
possibilities are nearly endless and do not require “alternate
reality” considerations.
Now, maybe your philosophy is to grant smaller than
market grants upon hire date and reevaluate the
performance of the individual and the value of the grant after
a year or two. Refresh grants may work well.
Perhaps you are in the last year of an initiative that will
fundamentally make your company successful. And, perhaps
that effort is not so much about more employees as it is
about motivating and focusing the minds and bodies who are
already working with you. Refresh grants may make great
sense.
Perhaps you have been around a long time and old grants
are about to expire. Maybe these individuals have been doing
a great job, but it is simply taking longer than planned to get
to the finish line. Refresh grants are probably required.
Refreshing equity for the sake of refreshing equity isn’t
great. Equity is both ownership and money. There isn't an
unlimited supply of either. Before your say, "we always (or
never) refresh grants," make sure you understand what could
reasonably cause a change in the policy. Then be proactive in
the face of changes. If equity were super-easy, everyone
would get it right more often.
7) The Most Common Mistake
Here is my gift to you. I truly believe that equity
compensation helped build the technology industry, and
therefore the world as we know it. But, an unfortunate
number of startups make the same error when using this
complex and powerful tool that drive corporate success.
If you browse the internet, ask entrepreneurs or receive
guidance from someone at a VC firm, you will get similar
answers when asking about equity awards for the first
twenty, or so, employees. This information, while accurate at
a generic level, is likely to be incorrect for your specific
circumstances.
The answer looks a bit like this. Outside of the founders,
the C-level hires should each get between 1 and 2 percent of
fully diluted outstanding shares. Your key talent (varies based
on your industry) should get between .5 and 1.5 percent of
fully diluted outstanding shares. When you do the basic math,
this means that the first twenty people should get 10-12% of
the company. It seems simple. What's the problem?
Most VCs will tell you that you shouldn't expect to grant
much more than 20% of the company. By following this
advice, you will have used half of all of your equity before you
have even started to build your staff. The drop off around
employee 21 is usually far more dramatic than the drop-off
from employee 100 to 101.
Imagine that you're a startup which has the potential of
being worth $50 Billion at IPO. (This used to be insane. It is
now theoretically possible.) The calculations above would

10
mean that the first 20 people (not including founders stock)
would split around $5 Billion. In a world where billionaires are
more common than ever, this doesn't sound too crazy.
Imagine that this fantastical company you are building
requires you to have 10,000 employees at IPO. $5 Billion
might be better described as five-thousand chunks of one-
million dollars each or one-thousand chunks of five million
each. In a world where larger IPOs are the ones fighting
hardest for great talent, a $1 Million guarantee makes a big
difference in hiring a great engineer. Heck, in this scenario,
you could hire 5,000 of the best engineers from most of your
competitors combined.
Instead, by following this advice, it will make twenty
people rich enough to start a VC firm for themselves. This is
where nuance is important. While $50 Billion is possible for
some companies, it is impossible for others. In fact, many
companies, if they are honest with themselves, have value
caps of $50 Million, $250 Million or some other fraction of
our multi-billion dollar example. Other companies may need a
staff of only 500 or 1,000 to achieve their goal value. Some
may require far more than 10,000. Yet, each of these
companies receives the same basic advice on how much to
give the first twenty hires.
The biggest mistake startups make with equity is not
understanding who they may be when they grow up. It isn't
always easy, but it's seldom a complete unknown. When you
give what "everyone else” gives, you are almost always going
to be wrong. The magnitude of that error can be the
insurmountable hurdle that stymies your Series B financing,
or blocks your chance at hiring the perfect employee or
creates a caustic division within your company.
You’ve made this far, here’s my simple gift:
1. Know who you, as a company, are.
2. Know who you will need to become to achieve your
goals.
3. Know that wasting equity (or conversely, hoarding
equity) early on, based on the advice of people who do
not intimately know numbers one and two, may be the
one thing that stops you from reaching your true
potential.
8) No. They Don't Get It.
During a recent presentation I did for industry
professionals, an attendee claimed that his employees didn't
need additional education on their equity compensation
because they worked in tech and "already understood” these
plans. I pointed out that he was mistaken. I stated that most,
and perhaps nearly all, employees misunderstand, or do not
even try and understand, their stock-based compensation.
This is especially true for startups.
Check out a site like Quora, or attend a Technology or
Human Resources conference. The questions about stock
options, restricted stock units, dilution, values, taxation and
more are wide-ranging and numerous. For almost 30 years,
equity compensation and startups have been a ubiquitous
combination. This long-term relationship has lead us to
believe that people not only value equity, but they also
understand its value. They don’t.
Stock options became popular before internet browsers
existed for ordinary people. And, like the internet, stock
options are a mystery to nearly everyone who benefits from
them. Are they a series of tubes*? Did Al Gore invent them?
Why is there a vesting schedule? Why is it always four years?
(It’s not.) Are they better than cash and most importantly,
when will they make you a millionaire?
If you are granting equity prepare for this simple fact:
Your staff will not “get” how their awards work if you don't
take the time to educate them. For many companies, this is
part of a weird secret goal. If people don't understand their
The biggest mistake startups make with equity
is not understanding who they may be when
they grow up.

11
equity, then they are free to invent whatever cockamamie
value they wish. People motivating themselves on a dream is
sweet for a while, but the truth always makes itself known
eventually.
If your staff doesn't understand their equity, then you are
probably going through a lot of pain for very little gain. Equity
compensation beyond Series A usually requires convincing
your investors to accept additional dilution. If your company
is like most, by the time your company has an IPO or is
acquired, these requests for shares can become battles that
stall far more important strategic and tactical decisions. If the
return on your equity compensation is random or the value is
not understood, then you may be fighting for nothing.
Equity compensation is likely the most complicated way
for an average employee to make money. That being said, it is
not difficult to ensure that your staff understands, at the
minimum, the following:
1. How their grants work (basic features, timing,
mechanics, and risks)
2. Why equity is used (in addition to, or instead of, cash)
3. How to determine a potential value of an award
4. The workings of the value exchange between
investors, founders, management and employees
No matter how vanilla your plan is, no matter how many
other startups your employees have worked for, they don't
get it. Not without help. Not without facts. Not without
reminders. And, not without effort. If you haven't already
started your education process, the time to start is now. If
you're not sure where to start, ask in the comments, and I will
gladly point the way.
*Former Senator Ted Stevens – Alaska
9) Three Crucial Variables
Startup equity has approximately a gazillion moving
parts. But three of these variables are far more important
than all of the others. These three components are what
make your plan uniquely yours. They are the things that
require real thought. They are also the elements that are
most commonly viewed as “plug-and-play” in the world of
startups.
1. Vesting Schedule
Stock options are grants with four-year vesting
schedules. Everyone knows this. RSUs have a three-year
schedule. Everyone knows this as well. However, while
these are the most common vesting schedules, they are
not as “standard” or as scientific as you may think.
The truth about vesting is a bit more complex.
Vesting should align with expected employment cycles
and potential company objectives (time and
performance.) If four years fit this bill, then great! If not,
you should consider something(s) different. Two years
may be right or maybe seven year make sense. You may
even need more than one vesting schedule depending on
the level of participant and goals for that job. Your
vesting schedule is a key competitive differentiator.
Doing the same thing as everyone else puts you at a
disadvantage unless you are the absolute best in your
industry.
If you are granting equity prepare for this
simple fact: Your staff will not “get” how their
awards work if you don't take the time to
educate them. For many companies, this is
part of a weird secret goal. If people don't
understand their equity, then they are free to
invent whatever cockamamie value they wish.
People motivating themselves on a dream is
sweet for a while, but the truth always makes
itself known eventually

12
2. Termination Rules
If you die, you get one year to exercise. If you leave
while still in good standing, you get 30 days or three
months. Unvested options and RSUs expire immediately.
Again, this seems to be common knowledge but it is not
based on facts.
A small number of companies have started granting
equity that does not expire. While this is a generous
offer, the likelihood that it will result in running out of
grantable shares is far too high for most companies. But,
you may want to look at longer periods for key positions,
or termination rules that align with the tenure of an
individual. If someone has been with you for eight years,
they may deserve more leeway than a new hire. There is
no easy answer that works, only easy answers that don’t.
3. Change-in-Control and Related Liquidity
Things are less standard in this area. Should vesting
accelerate? What should expire? What the heck qualifies
as a “change-in-control?” Accelerating vesting sounds
great, but it may limit a company’s ability to show value.
If critical positions have no “stickiness” then acquirers
may offer less in return for the risk of losing key players.
Acceleration of RSUs may result in income and taxes at
times when participants cannot afford it. On the other
hand, acceleration may be a great negotiation tool for
participants in key positions.
All of this may lead you to “inspire” people to stick
around after the transaction via continued vesting or
earn-out periods. This can be effective, but may backfire
if the time to transaction has already been extensive. One
solution may be to build in performance criteria that
trigger acceleration only if the value of the company
exceeds a certain level. Properly designed and
communicated, this can provide targeted motivation that
drives those most responsible for achieving this value.
The emerging fourth member of the big three is
performance conditions. Ten years ago these were seldom
seen at startups. Now they are still uncommon, but
commonly requested. We will cover this topic in an up coming
post.
Take a look at your plan and agreements. How “vanilla” is
your vesting, termination and change-in-control provisions?
More importantly, why? Don’t sell your company short on
such a big component of pay and motivation package. The
impact of minor differences in these three areas can have a
major impact on your ability to hire, motivate and keep your
best talent.
10) What About Performance?
“But, how do I make sure that the person is a great
performer before I am forced to give them equity?”
This question gets asked by nearly every Founder,
Investor or Compensation Committee Member very early in
the development of an equity compensation plan. Sometimes
it is expressed more genuinely as, "I don't want to give away
part of my company to someone who hasn't carried their fair
share." Either way, the concern is valid. Sometimes the
answer is very simple, and sometimes it is not.
Your equity compensation plan should be aligned with
the strategic needs, executable capabilities and cultural
strength of your company. Clearly identifying these in any
company can be tough. At a startup, it can be nearly
impossible. That doesn't mean it shouldn't be done. Startups
are used to the concept of impossible.
Performance conditions can be incorporated into nearly
any types of equity, but the easiest tool is Restricted Stock
Units (RSUs). Performance conditions can impact all the
following: whether someone gets an award, the size of the
award, the timing of vesting and the amount of vesting. Here
are some of the key points to consider.
What are good performance conditions for equity? Most
companies want to reward results, but results in a startup are
notoriously hard to predict. What will your revenue be in
three or four years? How about EBITDA? What is the correct
margin number and how can you predict a relatively accurate

13
estimate of how you will get there? These are all hard, but
there are more far more challenging questions.
When will you “pivot” and who will you become? Who
else is building something similar and how much better or
worse is their team and execution? What will your second and
third round of investors want to see from you? How will those
hurdles conflict with or support the goals already in place?
These are impossible to predict; therefore, performance
equity plan needs to be avoided or designed to evolve.
THE BEST APPROACH
Rather than focusing on the specific results associated
with each metric, focus on what will need to be accomplished
to drive success in each metric.
1. You want revenue to hit a certain number? Then, you
better make sure that the product is viable and ready
on time. You also need to make sure that your go to
market strategy is as bulletproof as possible. Your sales
people need to have the tools and marketing collateral
to be successful. This list goes on.
2. You want the company value to increase by X%. You
need to be willing to squash passion projects and focus
on the things that your valuation professional says will
increase your multiple. Your need to hone your
investor pitch deck to get that extra bit of value out of
each new funding round. You better be prepared to
navigate your market as it sways and spins over the
years.
The unpredictable nature of the issues above is why stock
options, remain so popular. They have a single metric which is
stock price. The have a single goal to take the stock higher in
the future than it is today. They are just and fairly elegant.
The can also be a crude tool for a nuanced topic. And, adding
performance conditions to something that already has a stock
price hurdle can end up in "hitting your performance goals"
while having the stock price flat or down due to market
conditions, operational errors or any number of other things.
RSUs require no stock price hurdle to create value
(therefore investors increasing dislike RSUs.) But, they are far
less dilutive than stock options (therefore investors increasing
love RSUs.) When you add in performance conditions that can
help modulate unexpected great performance and provide a
softer landing to unintended underperformance (within
reason), you give yourself and investors something that may
be far better for your company and employees than anything
else.
Of course, it takes a bit more time and effort to create,
manage and evolve a plan like this. But in an age where
investors are more careful and, potential values are more
fantastical than ever before, performance-based equity may
be the solution to the question that nearly everyone has
when they start their exploration process.
11) Staying Private in a Public
World
It is readily accepted that an IPO is Nirvana to a startup.
Of course, a fantabulous acquisition will also work in a pinch.
Most startups design their equity plans around one or both of
these possibilities. The events increasingly trigger vesting
events, earn-out periods, house purchases and early
retirements. But, what if you want to build something far
longer-term? What if you only want to grow, make money
and accomplish some important goal? Do equity plans even
work for these companies?
RSUs require no stock price hurdle to create
value (therefore investors increasing dislike
RSUs.) But, they are far less dilutive than stock
options (therefore investors increasing love
RSUs.)

14
The short answer is, they can. The better answer is they
ABSOLUTELY can, as long as you and the person designing
your plan know what they are doing. A surprising number of
companies with no intention of trading publicly have
successful equity compensation programs. We’ll stay away
from the wonky technical details in this post and focus on
some of the things that can help make your program
successful.
Privately held companies vary in size far more than
publicly held companies. How you should handle the issues
varies widely depending on your company’s size, profitability
and growth expectations. Many of the issues I have discussed
here and elsewhere apply whether or not your company
intends to eventually have an IPO or get acquired by a
publicly traded company. Feel free to go to
www.performensation.com and read some of those articles
to get reacquainted.
Common Types of Private Companies and
Considerations for Equity
Mega-Super-Giant Company
These are technically not startups, so I will keep this brief.
These are the companies that often dwarf publicly traded
companies. They can be found in almost any industry. They
may have tens of thousands of employees or more.
Sometimes they even have to file reports with the SEC due to
having so many shareholders.
These companies may use equity plans in a manner
similar to public companies. The biggest difference is that
there isn't a broad group of outside investors who can fund
future employee transactions. This means that these
companies may make a market in their stock, offer equity
that settled only in cash, or more recently, offer programs
that are funded through pre-approved private investors.
Profitable High-Growth Companies
These companies are in the enviable position of making
money. They don't need money from investors to thrive. They
are in many "old school" industries, but they can be found in
tech, biotech and other industries that typically look to VC or
PE money to grow.
A surprising number of startups are profitable. These
companies have very little reason to tap into other peoples'
money, whether private or public investors. Because of this,
they have far more freedom to design their plans to meet
their specific needs. They don't worry about how the "next
round" will dilute people. They seldom worry about getting
the approval for new share allocations. They have a broad
range of options.
But, they do not have outside investors to fund
transactions. They must still compete for talent with
companies with more traditional plans. Success drives their
growth but also is throttled by current and future needs for
investment. In short, they can't simply rollout a typical plan
and hope it will work.
But, they have interesting opportunities in plan design.
Some may offer a regular or occasional dividend or dividend
equivalent payments to their equity plan participants. This
allows people to extract some value, without needing to wait
for an "event." They may settle all awards in cash or add in
performance metrics that would otherwise be difficult with
outside investors looking over your shoulder. They often have
vesting schedules that are far shorter or longer than their less
profitable, or more typical competitors.
The main ingredient in their successful equity plans is
playing to their unique key strength. Real money. Their
profitability drives their valuations. The profitability provides
funding for employee transactions. Their profitability allows
employees to feel there is less risk in equity. But, in a world of
unicorns, it requires a LOT of money to compete for the
absolute best talent.
Family-Owned, Professional Services, etc.
These companies have often been around for decades.
They know how to operate in their space. Growth is always an
objective, but often not the most important goal. They have
well-established company cultures and often focus on
excellence before innovation.
Historically it’s has been unusual for these companies to
broadly share real equity. It is more common for real equity
to be reserved for a relative few at the top of the company
and offer synthetic equity or no equity to the lower ranks.
This paradigm is starting to shift. Professional services firms
are offering more techy-style products and solutions. Family
businesses are being taken over by a new generation of
leaders dealing with a new type of worker. These companies
are looking at things as if they are a startup with a brand new
lease on life. They are exploring equity because it has become
a ubiquitous element in current total reward programs.
A surprising number of startups are profitable.
These companies have very little reason to tap
into other peoples' money, whether private or
public investors.

15
Outside of these three types of private companies is a
wild kingdom of others. There are as many potential solutions
as there are business models. The point is this: Equity isn't
only for tech startups and an IPO is not the perfect goal for
every company. Staying private is a path that can allow
companies to compete for talent in unexpected ways. Don't
limit yourself to the rules that must be followed by companies
who require outside funding.
12) But Can’t I Pay Less Cash?
This series of articles has covered a lot of ground, but this
article touches on a critical component that we haven’t really
discussed. When equity first begin to be used in the Silicon
Valley, prior to the boom of the late-1980’s, the goal was
getting senior players to have some skin in the game. This is
still a major objective of equity.
As the stock market took off in the late 1980’s and flew
through the 1990’s equity became a cheap replacement for
cash. The accounting rules ensured equity barely touched
companies’ books. The stock market ensured that equity
delivered far more, far faster that any form cash
compensation. These high growth companies were able to
keep cash pay low. This allowed the to easily compete for
talent against large mature companies. This is no longer the
case.
Many things have changed since the 1990’s. When it
comes to equity compensation, the biggest change is that you
only see lower cash pay at the earliest of startups. Far more
Angel and Venture Capital money is being spent on staff than
in the past. This means that less is going to research and
development, or larger investments are required to build
companies with no better potential than those in the past.
Remember that the accepted “value” of startups is based
on recent investment rounds. Very few consider that a far
great percentage of these investment rounds is being spent
on staff than ever before. In fact, below the very top roles, we
see very little differentiation in pay between public and
private companies. The startup discount no longer exists for
most industries.
What does this mean if you are an executive, HR leader
of compensation professional? First, you need to budget the
essentially the same base pay, and perhaps cash short-term
incentives regardless of whether you have just finished your
B-Round or your IPO. Second it means you need to be far
better at using equity intelligently and efficiently. You can no
longer throw a basic equity plan out there and expect to also
get away with sub-par salaries.
Add to all of this the rapidly changing workplace and
experience. Companies are spreading out more quickly.
Employees of all levels are looking for more workplace (and
time) flexibility. Housing prices are skyrocketing in nearly
every location where equity compensation is a strong
component of total rewards. The fundamental equation has
changed and companies, and their leaders, must learn and
adapt. They must understand that the bargain garage-based
startup is far different when a garage now costs $1Million.
So, in answer to the question: “How much less can I may
my employees if I also give them reasonable equity?” If, you
are typical startup, equity will not give you any direct cash
savings. Of course, if you are in any industry where equity is
uncommon it may still have some capability to reduce cash
pay, but those industries are becoming increasingly rare.
The next pieces of this series will touch upon some of the
most technical equity issues that are often not included in
terms of compensation. These include: Call and Put Rights,
Drag Along and Tag Along Rights and Rights of First Refusal.
The fundamental equation has changed and
companies, and their leaders, must learn and
adapt.

16
13) You’re Coming With Me, or
maybe NOT
We’ve covered a lot of ground in this series, but there is
always more when it comes to equity compensation. Sharing
ownership can be messy and participating in a liquidity event
can be even messier. Companies, majority shareholders, and
minority shareholders have defined tools to help avoid some
of this messiness. Three of the most important provisions to
consider in a startup equity plan are 1) Rights of first refusal,
2) Tag along rights and 3) Drag along rights. Often these are
defined in your lawyer’s boilerplate document and never
addressed during the design and approval phases of your
plan.
1. Rights of First Refusal:
These are designed to protect the company from
unwanted shareholders. They can be the bane of, or boon to,
employees and other equity plan participants. The most basic
form allows the company to buy shares from a potential seller
for the same terms and conditions offered by a third party
prospective purchaser. If someone wants to cash out, finds
someone willing to buy their shares, and is not otherwise
prohibited from selling their shares, they must first offer the
shares to the company for purchase. If the company decides
not to buy, the third-party can become a shareholder.
Rights of first refusal can be designed to allow the
company to buy back shares at the most recent valuation
price instead of the price offered by the third-party. This can
ensure that the company is not “held over a barrel” by a seller
who has found someone who passionately wants to become
an owner and is willing to pay top dollar. This can be
upsetting to a seller who has not read their agreement. This is
especially true when the “investor value” far exceeds the
value the company currently deems reasonable pursuant to a
valid valuation.
Very few companies WANT a shareholder they do not
know or whom they are not on friendly terms. Most
companies will exercise their right. But, what if they can’t?
Not every company has the cash to buy back shares on a
whim. Savvy equity holders can use this to their advantage by
timing their potential sale to occur when the company is cash
poor. It is critical that a company consider every possibility
before simply signing off on a basic equity compensation plan.
2. Tag Along Rights
These are designed to protect minority shareholders.
Imagine a majority shareholder decides to sell their shares.
Imagine also that you are employee #5 and have purchased
and held your share for a while. When the majority
shareholder sells, a tag along right ensures that the minority
shareholder(s) can sell an equal percentage of their shares at
the same price. If you are the minority shareholder, this can
be huge. It helps ensure that the control and value of the
company isn't sold out from underneath you, especially if the
purchaser is someone with whom you may disagree.
3. Drag Along Rights
These are designed to give additional power to majority
shareholders. In many cases, a potential acquirer will balk at
having to negotiate individual terms with minority
shareholders. A well-designed, “drag along right” allows the
majority shareholder to require minority shareholders (often
equity compensation plan participants) to sell a pro rata
portion of their shares to the acquirer for the same price,
terms, and conditions as agreed to by the majority
shareholder. This can be especially powerful if someone is
looking to acquire 100% of a company. Negotiating with only
Rights of first refusal can be designed to allow
the company to buy back shares at the most
recent valuation price instead of the price
offered by the third-party.

17
the majority holder while guaranteeing the participation of
every shareholder can smooth the process considerably. It
also gives the majority shareholder significantly more
negotiating power.
Lacking control of future transactions makes everyone a
bit uneasy. Everyone should know whether they can leave the
party, join the party or forced to shut down the party.
Building your equity compensation program to reflect your
potential future transactions is a way to ensure all parties are
treated in a way that can be both expected and relatively
conflict-free. Most companies and plan participants do pay
attention to these details until the conflict has already
started.
14) In Conclusion
It feels odd to be wrapping up this series on Startup
Equity. I started the series almost six-months ago, and
although I have written around 10,000 words, I still have
nearly endless things that we can discuss.
This eBook was designed to provide some insight into the
variations, complexity, power and hurdles that come along
with equity compensation focused specifically on startups and
other private companies. The information available is often
too unreliable, too high level and too inconsistent to be
useful. I hope this series has given readers multiple different
perspectives and can provide the start for better
conversations, better plan designs, and more successful
companies.
1. You should know that determining grant size can be a
challenge and that traditional techniques used for cash
compensation do not translate well to the more
variable nature of equity compensation. Using more
refined methods can create much better results.
2. You should know that NO ONE agrees on the value of
equity compensation. Not ever. But, that’s OK as long
as each party communicates the reasoning for their
valuation.
3. I hope you a have better understanding of the
concerns of Venture Capital firms and similar early
investors. Also, that you can better explain your case
for equity and how it can drive their goals as well as
yours.
4. You should have a better understanding of how to use
equity as your currency. You must also be willing to
embrace your equity uniqueness, and why you
shouldn’t put too much focus on comparisons to other
companies (especially publicly traded)
5. You may be able to evaluate better when you can
accomplish your equity compensation goals with only a
synthetic instrument. Sometimes polyester can
outperform silk. Knowing when and how is the key.
6. You should have a better grasp of when it makes sense
to give additional equity grants and when it may be a
recipe for failure. Most importantly, you should be
clear that other companies, entrepreneurs, or thought-
leaders’ formulaic method, or proven process, is
unlikely to work perfectly for your company.
7. You should be fully aware of the MOST COMMON
MISTAKE startups make when using equity
compensation.
8. You should be confident that your employees don't
understand their equity compensation any better than
politicians understand the Internet.
9. You should know that the variables that have the most
impact at startups are Vesting, Termination Rules and
Change in Control provisions. If you get these right for
... you should be clear that other companies,
entrepreneurs, or thought-leaders’ formulaic
method, or proven process, is unlikely to work
perfectly for your company.

18
your goals and timeline, you are more than halfway to
success.
10.Performance-based equity shouldn’t be that scary to
you. Yes, there is more to it than time-based equity,
but it can be far more effective at getting you to your
destination.
11.Staying private and using equity compensation in a
world obsessed with IPOs should no longer seem crazy.
Equity compensation is very a useful tool and can even
offer significant design advantages if you are willing to
explore the possibilities.
12.Hopefully, you know more about the evolution of cash
pay and equity compensation levels over the past
decade or two. Equity may no longer give you the
savings that it once did, but that can offset by its long-
term competitiveness.
13.You may better understand more technical issues like
Rights of First Refusal, Tag Along Rights and Drag Along
Rights. Not everyone goes public, and not everyone
stays at your company forever. Proper planning and
documentation can lead to less stress and angst.
You will notice that I haven’t touched too much on some
of the more commonly covered topics like accounting and
taxation issues. I have barely talked about things like
Incentive and Non-Qualified Stock Options. And, I haven't
gotten into everything that goes into the final 12-18 months
in the run-up to IPO. There are at least one-hundred other
topics that tend to only come up in very specific
conversations, but this eBook has laid a foundation for
startup equity considerations. Feel free to contact me directly
if you have special topics you would like to discuss.
...The variables that have the most impact at
startups are Vesting, Termination Rules and
Change in Control provisions. If you get these
right for your goals and timeline, you are more
than halfway to success.
DAN WALTER, CECP, CEP
President and CEO
TollFree 1 877 803 9255 ext 700
Office 1 415 625 3406
Mobile 1 917 734 4649
dwalter@performensavon.com
Twiwer: @Performensavon
The arvcles in this publicavon were authored by Dan
Walter, CECP, CEP.
Dan founded Performensa9on, LLC in 2006 to create pay
programs that support the strategic vision and cultural
iden9ty of his clients. Performensa9on has helped
hundreds of companies improve their pay programs. With
more than 20 years of experience, Dan’s exper9se
includes both execu9ve and broad-based cash and equity
programs.
Dan has worked with companies in all areas of the US and
in a wide range if industries and his work with young
entrepreneurial companies and established Fortune 100
companies provides his clients with an unique perspec9ve.
His focus is on effec9ve, and at 9mes innova9ve,
company-specific solu9ons. He also provides post-
consulta9on support to help ensure programs are working
as designed.
Dan is also a highly sought aQer speaker on a broad range
of topics. He has served on the boards of the Na9onal
Center for Employee Ownership and the Ins9tute for
Human Resources, is an award winning member of the
Na9onal Associa9on of Stock Plan Professionals and an
ac9ve member of World at Work, Global Equity
Organiza9on and the Society for Cer9fied Equity
Professionals.
Other Books by Dan:
Performance-based Equity CompensaXon (author)
Everything You Do in CompensaXon is CommunicaXon
(co-author)
The Decision Makers Guide to Equity CompensaXon
second ediXon (co-author)
Equity AlternaXves: Restricted Stock, Performance
Awards, Phantom Stock, SARs and more (co-author)
If I'd Only Known That Common Mistakes in Equity
CompensaXon and What to Do About Them eleventh
ediXon (co-author)

19
©2017 Performensation, LLC WWW.PERFORMENSATION.COM 877-803-9255 x700
DIAGNOSE
We dig deep to understand your company culture and iden9fy issues that are keeping you from mee9ng your objec9ves. This
phase provides a founda9onal understanding of the human and mechanical impact of your pay programs and their link to
leadership, strategy, culture and company success.
DESIGN
We determine the best approach for your con9nued success. We gather
and review data. We fill gaps and provide recommenda9ons that are
specifically for you. We explain how to correct or improve your pay
programs. This phase may also include draQing, modeling and finalizing a
new compensa9on philosophy or plan elements.
EXECUTE
We provide the final details on how to implement and manage your new
solu9on. This phase also includes essen9al communica9ons for execu9ves,
employees and recruiters.
ADAPT
This service is unique to Performensa9on. Your company, and its pay
strategies and objec9ves must constantly evolve. We don't provide
recommenda9ons and leave. We measure our success by your results.
DIAGNOSE – DESIGN – EXECUTE - ADAPT
We apply our successful four-step process for every project.
Performensation
Performance + Compensavon
Your total rewards should be as unique and focused as your business strategy and culture. Custom can be simple and straight-
forward.
Performensa9on is unique in the world of compensa9on consul9ng. We are not focused on an industry, region or type of
company. We are focused ONLY on solu9ons. Performensa9on evaluates your company’s stage of growth, strategic objec9ves
and culture and formulates the right solu9on for the right 9me.
We apply our proprietary 4-step process to every project.
Some of our most popular services
Compensation-On-Demand
Base Pay and Broad-based Pay
Benchmarking
Salary Structure
Job Analysis
Survey Participation and Management
Risk Assessment and Process Review
Annual Pay Review
Incentive and Equity Compensation
Executive Compensation
Sales Compensation
Communications
Unusual Pay for Usual Companies, Usual Pay for Unusual Companies

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