Wealthfront Equity Plan Playbook for
Owners wealthfront.com

How do you attract and
retain the best employees?

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

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

Plan approach must be RATIONAL
& EQUITABLE

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

 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

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

 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 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 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 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

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 =

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

 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 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 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%

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 =

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

 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 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%

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 =

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

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

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%

 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

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

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

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

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