Before communicating equity packages to your candidates and employees, you'll need to make sure to properly set up all the facts about your company's equity and your employee plans.

As you're going through the following steps, keep in mind that most of this information should live in your cap table management software (such as Carta or Shareworks). If you aren't sure about anything, loop in your equity administrator or executive team, they should be able to get you this information fairly easily.

* Note: This article is geared towards managing equity for private companies. If your company is Public, you will have some different steps, which our support team would be happy to help out with!

Read below about configuring your Equity Settings or jump ahead to one of these sections:

First, let's head to Equity Settings > General. Here you'll enter your basic data:

Next, head to Equity Settings > FMV. Here you'll configure your fair market value (FMV) history. The fair market value is also known as the 409a valuation and is generally used to determine the strike price if your company is offering options.

Here you'll be able to create a table full of the history of all 409a values your company has obtained over time. We'll utilize the most recent row in that table to determine the projected strike price for new options offered to candidates.

If you are currently undergoing a new 409a valuation and you do not want to show a value to candidates before you've obtained your new value, you can turn this off by clicking on the toggle shown below:

Click "Add new FMV" to add a new entry to the table. Once you've created an entry, you can always click a row in the table to edit it.

Note: FMV can be removed from the offer letter upon request.

Let's do the same for Equity Settings > Preferred. The preferred value is the price investors paid for your company's stock in the latest round of funding. Most private companies use this as the benchmark for what their equity is worth, so by default the most recent preferred price that you enter will be used to determine your company's stock value.

Similar to above, create the full history of your company's financing by clicking "Add new preferred price" and entering each funding event, the date it happened, the preferred price for that round, and the post-money valuation for the round.

As mentioned above, by default your current share price will be set to the most recent preferred price that you enter.

Some companies prefer to use their own formula to determine the current price for their equity rather than the last preferred price (perhaps your company has made significant progress since your last round of funding). You can set a custom value for the price you'd like to use to calculate your equity share value by adding a new row in the table, setting the "closing date" to today (or more recent than your last round of funding), and selecting the "event' type to be "custom" (by scrolling down to the bottom). This will reveal a new input for you to enter an explanation giving some context behind that valuation so that your candidates can have some understanding of why that number is being used -- this will be shown to candidates in their offer letter.

The price you choose here is very important, as it will determine the projected equity value for a candidate/employee's grant in their offer letter (price * # shares), as shown below:

Next, you'll want to set up equity scenarios, which can be found at Equity > Projections. These are purely for communication purposes -- candidates/employees will be able to play around with these scenarios and get a sense of the value of their equity if your company grows. Here is what the result of your scenarios will look like for candidates:

Each scenario is compromised of the following:

The multiplier, value per share, and company valuation are linked to ensure consistency, so if you change one, the rest will automatically update.

By default, you'll start with the scenarios of "Current", "Good", "Great", and "Home run". We recommend updating these to be specific to your company. Many companies use these to talk about if they were to achieve different funding milestones or overtake one of their competitors. This is your chance to get creative!

We recommend having no more than five scenarios in order to keep things looking good and to avoid information overload for your candidates.

* Tip: if you want to openly communicate a scenario in which their equity is not worth anything, you can add a scenario with a multiplier value of 0x. This will ultimately show a projected equity value of $0 when they click on that scenario.

Go to Company > FAQs > Equity to set up frequently asked questions about equity for your company and avoid having the same back and forth with all of your candidates. They will show up in the offer letter as seen below. Additional details on how to set up FAQs can be found here.

The last step is configuring the communication of equity in your offer letters by heading to Offer Letters > Equity. Equity can be communicated to candidates either as a Quantity of Shares or Monetary Value.

Here you have a few settings to control what about your equity is communicated to candidates:

Choose between showing candidates the Monetary Value of their equity, or the Quantity of Shares they are receiving. If possible, we recommend private companies share a Monetary Value so the candidate has access to as much information as possible in understanding their offer.

If you choose to communicate equity in terms of a Monetary Value, you may still show candidates they estimated share count that they'll receive based on your current share price, assuming no change. To allow for this, keep the option "Show an estimated share quantity when equity is expressed as a monetary value" toggled on.

When toggled on candidates will also see what percentage ownership their shares represent in the company. We will automatically calculate this by dividing their share count by the total number of outstanding shares (which is set by in Equity Settings > General)

We have a few settings to streamline your offer creation flow for recruiters:

The format here is percent vested each year, cliff length, vesting frequency. Here the 25/25/25/25 represents 4 years of vesting, getting 25% each year. The "1 year cliff" means no equity will be vested until they reach the one year mark (at which point they will receive the full 25% of their first-year), and "monthly" represents that after the cliff they will get to vest equity every month.

* Note: If you don't see your vesting schedule in our list, please reach out to our support team letting us know your vesting schedule, and we'll be able to create one for you. The anatomy of a vesting schedule is shown below:

You're now all set to start including equity in your offers! When you create offers, all you'll need to do is select the number of shares, type of equity, and vesting schedule and the result will show to the candidate based on all of the work you've done above!