These are the slides from my guest lecture at the Stanford Graduate School of Business on February 17, 2017 in the People Operations: From Startup to Scaleup class.

1. Wealthfront Equity Plan
Playbook for Owners
February 16, 2017

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

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

4. Equity incentives must both
ATTRACT NEW
EMPLOYEES
RETAIN
OUTSTANDING
EMPLOYEES
AND

5. Plan approach must be
rational and equitable

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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

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

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

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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

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New Hire Scenario #1

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New Hire Scenario #2

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New Hire Scenario #3

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Example New Hire Budget
Create an “equity budget” to calculate total dilution for new hires

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

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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.

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Promotion Scenario: Employee has less equity

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Promotion Scenario: Employee has more equity

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Example Performance Budget

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

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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

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Performance Scenario

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Example Performance Budget

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

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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

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Evergreen Scenario

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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

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Evergreen Example Budget

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

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