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The Wealthfront Equity Plan (Stanford GSB, March 2016)
This document outlines Wealthfront's equity plan to attract and retain employees. It discusses using equity incentives for new hires, promotions, performance bonuses, and evergreen grants. For new hires, it provides examples of equity budgets based on job role and market rates. It also discusses granting additional equity for promotions, using equity to reward top performers, and implementing evergreen grants to encourage long-term retention. The total estimated dilution for this example company is 3.945% per year, which is within the generally acceptable range of 3-5% dilution.
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Introduction to Wealthfront Equity Plan presented on March 8, 2016.
Focus on strategies to attract and retain top talent through equity incentives in a rational, equitable manner.
Overview of four types of equity grants: New Hires, Promotions, Performance, and Evergreen. Details on new hire grants including market rates and equity budget for hiring scenarios.
Discussion on equity grants for promoted employees and maintaining market rates through scenarios.
Equity rewards for top performers, ensuring significant boosts while maintaining fairness in distribution.
Long-term retention through evergreen grants, avoiding cliffs and explaining grant timing and amounts.
Summarization of total dilution rate from all types of grants, confirmed within an acceptable range.
Citation and source information for the Wealthfront equity plan content.
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The Wealthfront Equity Plan (Stanford GSB, March 2016)
- 1. Wealthfront Equity Plan Playbookfor Owners March 8, 2016
- 2. How do youattract and retain the best employees?
- 3.
- 4. Equity incentives mustboth ATTRACT NEW EMPLOYEES RETAIN OUTSTANDING EMPLOYEES AND
- 5. Plan approach mustbe rational and equitable
- 6. ©2014 Wealthfront Inc. 6 Overthe 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.
- 7. ©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
- 8. A compelling equitycompensation plan has four types of grants PROMOTIONS PERFORMANCE EVERGREENNEW HIRES
- 9. Let’s first focuson new hires PROMOTIONS PERFORMANCE EVERGREENNEW HIRES
- 10. ©2014 Wealthfront Inc. 10 NewHire 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
- 11. ©2014 Wealthfront Inc. 11 NewHire Scenario #1
- 12. ©2014 Wealthfront Inc. 12 NewHire Scenario #2
- 13. ©2014 Wealthfront Inc. 13 NewHire Scenario #3
- 14. ©2014 Wealthfront Inc. 14 ExampleNew Hire Budget Create an “equity budget” to calculate total dilution for new hires
- 15. Next, let’s focuson promotions PROMOTIONS PERFORMANCE EVERGREENNEW HIRES 1.92%
- 16. ©2014 Wealthfront Inc. 16 PromotionGrants • 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.
- 17. ©2014 Wealthfront Inc. 17 PromotionScenario: Employee has less equity
- 18. ©2014 Wealthfront Inc. 18 PromotionScenario: Employee has more equity
- 19. ©2014 Wealthfront Inc. 19 ExamplePerformance Budget
- 20. Now let’s focuson performance PROMOTIONS PERFORMANCE EVERGREENNEW HIRES 1.92% 0.5%
- 21. ©2014 Wealthfront Inc. 21 PerformanceGrants • 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
- 22.
- 23. ©2014 Wealthfront Inc. 23 ExamplePerformance Budget
- 24. Finally, let’s focuson evergreen PROMOTIONS PERFORMANCE EVERGREENNEW HIRES 1.92% 0.5% 0.125%
- 25. ©2014 Wealthfront Inc. 25 EvergreenGrants • 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
- 26.
- 27. ©2014 Wealthfront Inc. 27 EvergreenScenario • 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
- 28. ©2014 Wealthfront Inc. 28 EvergreenExample Budget
- 29. Add up allgrant dilution PROMOTIONS PERFORMANCE EVERGREENNEW HIRES 1.92% 0.5% 0.125% 1.4%+ + +
- 30. Total Dilution 3.945% (well withinacceptable range of 3-5%)
- 31. ©2014 Wealthfront Inc.31 SOURCE Source Title