How do you successfully communicate complex equity concepts to employees or stakeholders?

47% of companies struggle to explain equity compensation to employees. This communication gap is costly—when employees don’t understand their equity, they undervalue it, leading to higher turnover and failed recruitment.

Modern startups use complex capital structures with SAFE notes, preferred stock, and option pools. While this flexibility helps attract investors and talent, it makes equity communication extremely challenging.

Companies that master equity communication gain a competitive advantage: 72% report it gives them an edge in hiring, and 84% use it to align employee goals with company objectives.

Invest in employee education

When your employees reach a certain level of financial literacy, you should extend equity-related education programs to every stock option plan participant.

The curriculum of these programs should include the following concepts:

• Types of equity interests
• Vesting schedules and conditions
• Basics of company valuation techniques
• Dilution and its impact on returns
• Importance of liquidity
• Relevant tax considerations

Your employees should be able to understand these concepts in the context of their stock options. The program should enable your employees to understand the impact of any stock option-related updates, at least on an intuitive level. You can go a step further and provide actionable insights through decision trees. This can be helpful when an employee is trying to figure out how to save taxes.

How to design employee education programs?

When you are designing an employee education program, you must consider many factors with a combination of media such as:

• Instructional videos – You can seamlessly incorporate visualizations and animations into videos to effectively break down complex concepts through examples. Crisp and concise narrations are key to capturing attention without overwhelming the audience.
• E-books – While videos are great at explaining concepts, they are not reliable for quick references. So, employees will need e-books where they can simply search for the topics they want to learn or revise. Also, the cost of an e-book is much lower than the cost of producing a series of videos for the same curriculum. Thus, e-books make it easier to cover a wide range of topics in depth.
• Newsletters – Updates regarding valuations and changes in stock option policies can be distributed through newsletters. You can enhance these newsletters by personalizing them. For instance, in a newsletter, you could include a section on how this changes the value of the employee’s stake.
• Town hall meetings – Despite your best efforts in designing the employee education program, you might not be able to satisfactorily explain all topics. Hence, you may need to hold town hall meetings where employees can freely ask questions and voice concerns. This would help you identify gaps in your curriculum and communication.
• Creating points of contact – In town hall meetings, everyone might not be able to ask their questions due to the limited time. Sometimes people will simply forget their questions or feel shy to ask them. So, you must create different points of contact in your organization who would be able to answer all equity-related queries. These points of contact could be members of your human resource team or your finance team.

Equip employees and stakeholders to explore data independently

Even if your employees and stakeholders are well-versed in finance and equity-related concepts, certain calculations can be extremely complex and time-consuming. Hence, you should develop and distribute spreadsheet templates or a dashboard of the following kind:

Cap table template

A cap table is meant to track the ownership and stake values of all stakeholders in a company. You must be careful not to share the complete cap table with every stakeholder. Detailed information about key individual or corporate investors should be shared strictly on a need-to-know basis. This would require you to prepare different cap tables for different levels of access. Eqvista’s cap table software has the following pre-built access levels: Full Access, Full View and Limited View.

Full Access

Full View

Limited View

Option vesting tracker

Stock options vesting schedules and conditions can be complex, especially if the options were issued as performance-based incentives. Building such a dashboard involves standardizing and collecting performance reviews from managers. While such a project increases the responsibilities of your managers, it will also make equity administration much easier.

Waterfall analysis

When a company issues various kinds of equity interests, the payout preference hierarchy can be opaque. It might not be as simple as simply prioritizing preferred shareholders over common shareholders. You would need to carefully review funding agreements to outline the payout preference hierarchy.

Your employee shareholders and other stakeholders would not have the bandwidth to conduct such an exercise. So, when there is a possibility of a liquidity event, you should present a waterfall analysis that shows the distribution of exit value as per the payout preference hierarchy.

The waterfall analysis looks as follows:

Scenario modelling

The valuation in a funding round can vary greatly depending on the outcome of negotiations. While you may need to be considerate to incoming investors, accepting a valuation that is too low would either reduce the returns of existing investors or prolong their investment periods. So, to head into a negotiation well informed, you may need to conduct scenario modelling.

Funding negotiations can extend for weeks and occur numerous times in a startup’s journey. So, it would be convenient for founders and key investors to have access to a scenario modelling tool.

Dilution modeling

Every time a startup issues equity, existing shareholders would experience dilution. This can hurt the returns and influence of the stakeholders. On the other hand, equity is typically issued to onboard new investors, attract talent, or reward good performance and loyalty, all of which can add value to the company.

Whenever a startup has the choice of issuing equity, stakeholders must weigh the benefits of issuing equity against dilution. Making these assessments would be straightforward if you provided a spreadsheet for this specific purpose.

When you provide dashboards and spreadsheets, you might end up releasing updated versions that are more relevant to your startup’s present state. In such instances, you must remember to communicate whether previously shared materials still produce accurate results.

Enhance your communications with visualizations

Certain equity-related events cannot be sufficiently explained using text alone. Consider the following text meant to explain the outcome of a funding round:

TribeHub has secured $80 million in its Series B funding round at a post-money valuation of $500 million, 150% higher than the Series A valuation. As a result of this funding round, the share price has changed from $50 to $105.

The incoming investors have agreed to provide exits worth $40 million to existing stakeholders.

We are pleased to inform you that you are eligible to make a 50% exit at this stage. Since you own a total of 20,000 shares, you can secure an exit of $1.05 million.

Please inform us as soon as possible, and no later than August 10, 2025, if you wish to take advantage of this exit opportunity.

When someone who is not familiar with funding rounds reads this, they are likely to have the following queries:

• If the valuation increased by 150%, why did the share price grow by only 110%?
• If the incoming investors have agreed to provide exits of $40 million, why am I getting an exit of only $1.05 million? Why can’t my entire stake be sold?

How Visual Communication Clarifies the Most Complex Equity Scenarios

Now, consider the case where the update is shared in the following manner.

This section will explain how visual communication can clarify even the most complex equity scenarios, ensuring your stakeholders are fully engaged and equipped to take action.

TribeHub’s valuation grows from $200 million to $500 million

Incoming investors to provide exits worth $40 million

Your potential exit value

Particulars	Amount
Overall employee stock ownership	$16,800,000
Funds available for employee shareholder exits	$8,400,000
The percentage of shares each employee shareholder can sell	50%
Your shares	20,000
Shares eligible for sale	10,000
Share price	$105
Your exit value	$1,050,000

Such communication, which incorporates charts and tables, can be easily interpreted in the following manner:

• The value of all outstanding shares at the time of the Series A round grew from $200 million to $420 million.
• Share price growth = Pre-money Series B valuation ÷ Post-money Series B valuation − 100% = $420 million ÷ $200 million − 100% = 210% − 100% = 110%
• Overall valuation growth = Series B valuation ÷ Series A valuation − 100% = $500 million ÷ $200 million − 100% = 250% − 100% = 150%

The second version does not overwhelm the reader while providing deeper insights. The reader is more likely to correctly comprehend the changes and have a clear plan of action by the deadline of August 10, 2025.

Eqvista – Simplifying equity!

The key to successfully communicating complex equity concepts to employees and other stakeholders lies in understanding your audience. Certain stakeholders would prefer that you simply share the data, while others might demand in-depth explanations. Ideally, you should take a personalized approach to communication.

By managing your equity on Eqvista, you would have already taken the first step towards a personalized communication approach. Our tools make it easy to share equity-related updates with the right stakeholders, ensuring sensitive information is protected and access levels are maintained. Contact us to know more!