Trends in Equity Spend: New Hire Grants vs Ongoing Grants

What percent of a company’s equity spend should be allocated to new hire grants vs. ongoing grants to current employees?

The simple answer is that in the early stages, most equity goes to candidates (new hire grants). By the time a company reaches later stages, more than 50% of equity spend is generally burned via ongoing (refresh) grants.

The benchmarks for private tech companies illustrates this trend. Let’s take a look.

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Equity Spend Between New Hire Grants & Ongoing Grants

Pave’s data science team looked at the last full year of equity compensation data for 1,421 private companies. We calculated annual net equity burn rate as the sum of total shares granted over that year-long period net of canceled/forfeited/expired shares, divided by the most recent value of fully diluted shares. Equity burn rate results are broken out by whether they were distributed to new hire grants or refresh/ongoing grants.

An additional way to evaluate the health of your equity program today is to compare your employees’ unvested holdings to market benchmarks for unvested equity.

For example, what is the median unvested equity for your P4 SWEs in Tier 1 locations, and how does that compare to the requisite market benchmarks for unvested equity? Is the holding power of your current equity program strong or at-risk?