Jerry Talton, Director of Data and Machine Learning, Carta

1. Equity, Inequity, & Machine Learning
Jerry Talton
Director of Data & ML

2. Equity

3. ● Equity is a stock or security representing an ownership interest
● Equity usually vests over time (e.g., four years with a one year cliff)
● Liquidity events necessary to convert privately-held equity to $$$ (IPOs,
M&As, tender offers)
● Tax implications of equity vary wildly depending on type of security and
length of ownership (ordinary income, long-term capital gains, AMT)
Equity 101
https://carta.com/blog/equity-101-equity-basics-for-founders/

4. ● Founders awarded common stock; investors buy preferred stock; early
employees get options to buy common stock; later employees get RSUs
● Preferred stock may have liquidation preferences, antidilution provisions,
observation rights, board voting rights, etc.
● Options have a strike price, a fair market value (or 409A valuation), and a
post-termination exercise period (historically 90 days)
Equity 101

5. Relationship status:

6. Relationship status: it’s complicated

7. What is Carta?

8. We issue
electronic securities

9. We track
the cap table

10. We track
the portfolio

15. The Ownership Graph

16. “Come for the tool,
stay for the network.”
@cdixon

17. AverageInitialShares
AverageInitialValue
Initial Equity Grant by Employee Number
1 150 300
(Equity data anonymized & aggregated)

18. Equity Events as a function of Job Tenure
(Equity data anonymized & aggregated)

19. Average Initial-to-Total Equity Ratio by Employee Number
(Equity data anonymized & aggregated)

20. Post-Termination Exercise Rate by FMV-to-Strike Price Ratio
(Equity data anonymized & aggregated)

21. Inequity

22. The Gap Table
● Joint work with #ANGELS investment collective
● 6k companies; 15k founders; 180k employees; $45bn in equity
● Excluded companies whose ToS exempt them from aggregate analysis
● Analyzed options, RSUs, and common stock
● Used 409A FMV and strike price to calculate option value
● Binarized* names to male & female using US Social Security data
● 13.6% of shareholders removed due to ambiguity (<85% gender associated)
https://carta.com/blog/gap-table/

27. Equity is the most valuable component of
startup compensation

28. Equity is the most valuable component of
startup compensation
Wealth inequality is driven more by
ownership than by salary

29. Equity is the most valuable component of
startup compensation
Wealth inequality is driven more by
ownership than by salary
Democratizing ownership is key to
reducing inequality

30. Machine Learning

31. The Future
Compensation Analysis
What’s a market equity offer?
Data-Driven Valuations
How should we price our round?
Startup Network Effects
Who drives the most value?

32. And one more thing…

33. Life is hard.
If you need help, ask for it.

34. Life is hard.
If you need help, ask for it.

35. Thanks!
Follow me: @jerrytalton
We’re hiring: carta.com/jobs