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 goal...
©2014 Wealthfront Inc.
7
Example: Startup in Hypergrowth 

• Company
• Consumer internet
• 50 employees
• San Francisco Ba...
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 t...
©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 posi...
©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 ...
©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 emplo...
©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 c...
©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
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The Wealthfront Equity Plan (Stanford GSB, March 2016)

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This is a version of the presentation explaining the Wealthfront Equity Plan, a playbook for CEOs & Founders of hyper growth startups on the right way to distribute equity compensation to employees. Based on the original deck by Andy Rachleff, co-founder of Wealthfront.

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The Wealthfront Equity Plan (Stanford GSB, March 2016)

  1. Wealthfront Equity Plan Playbook for Owners
 March 8, 2016
  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
  6. ©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.
  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 equity compensation plan has four types of grants PROMOTIONS PERFORMANCE EVERGREENNEW HIRES
  9. Let’s first focus on new hires PROMOTIONS PERFORMANCE EVERGREENNEW HIRES
  10. ©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
  11. ©2014 Wealthfront Inc. 11 New Hire Scenario #1
  12. ©2014 Wealthfront Inc. 12 New Hire Scenario #2
  13. ©2014 Wealthfront Inc. 13 New Hire Scenario #3
  14. ©2014 Wealthfront Inc. 14 Example New Hire Budget Create an “equity budget” to calculate total dilution for new hires
  15. Next, let’s focus on promotions PROMOTIONS PERFORMANCE EVERGREENNEW HIRES 1.92%
  16. ©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.
  17. ©2014 Wealthfront Inc. 17 Promotion Scenario: Employee has less equity
  18. ©2014 Wealthfront Inc. 18 Promotion Scenario: Employee has more equity
  19. ©2014 Wealthfront Inc. 19 Example Performance Budget
  20. Now let’s focus on performance PROMOTIONS PERFORMANCE EVERGREENNEW HIRES 1.92% 0.5%
  21. ©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
  22. ©2014 Wealthfront Inc. 22 Performance Scenario
  23. ©2014 Wealthfront Inc. 23 Example Performance Budget
  24. Finally, let’s focus on evergreen PROMOTIONS PERFORMANCE EVERGREENNEW HIRES 1.92% 0.5% 0.125%
  25. ©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
  26. ©2014 Wealthfront Inc. 26 Evergreen Scenario
  27. ©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
  28. ©2014 Wealthfront Inc. 28 Evergreen Example Budget
  29. Add up all grant dilution PROMOTIONS PERFORMANCE EVERGREENNEW HIRES 1.92% 0.5% 0.125% 1.4%+ + +
  30. Total Dilution 3.945% (well within acceptable range of 3-5%)
  31. ©2014 Wealthfront Inc. 31 SOURCE Source Title

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