Jason Borrevik on All You Need to Know About RSUs at Private Companies

What are RSUs?

Jason Borrevik
Nov 12, 2018 · 4 min read
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Considerations

A growing number of private technology companies are looking at whether restricted stock units (RSUs) make sense along with or in lieu of stock options. Jason Borrevik states that companies consider RSUs as part of the overall equity compensation strategy in addition to factors such as:

  • Ongoing grants — When and why should employees receive additional awards (e.g., tied to vesting of initial awards, new financings, annual cadence)
  • Grant size — What award size is appropriate by employee level and location?
  • Award vesting — Recommended time or performance criteria for award vesting
  • Annual burn rate and total employee ownership — How does the equity strategy look on an aggregate basis relative to market practice and investor expectations?
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Jason Borrevik —technology and life science companies consider RSUs as part of the overall equity compensation strategy.

Are RSUs common at private companies?

No, a limited number of technology companies broadly grant RSUs to employees prior to an IPO.


Why do private companies still choose options over RSUs?

Prior to IPO, most companies do not grant RSUs due to tax and administrative challenges. Implementing RSUs requires a coordinated effort with internal and external company advisors including payroll, legal, finance, stock administration, tax and treasury.

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Why would a company consider RSUs prior to IPO?

Jason Borrevik states that RSUs are an extremely effective vehicle to recruit and retain top employees. RSUs are always “in the money” and never “underwater”.

What about post-IPO?

After an IPO and the establishment of a liquid market for company stock, many Silicon Valley companies quickly transition to include RSUs in the equity mix for employees to attract/retain top talent and minimize dilution over time.

Jason Borrevik Outlines Key Takeaways

Consider RSUs in the context of your overall equity and compensation strategy.


Jason Borrevik

Jason Borrevik was raised in the Pacific Northwest and has…

Jason Borrevik

Written by

Jason Borrevik is an expert in the executive compensation advisory field for over 20 years. Currently, Jason is a principal at Compensia.

Jason Borrevik

Jason Borrevik was raised in the Pacific Northwest and has been a management consultant for over 20 years. In 2005, Borrevik joined Compensia, whose vision is the top independent advisor for technology and life sciences companies. He currently lives in Eugene, Oregon.

Jason Borrevik

Written by

Jason Borrevik is an expert in the executive compensation advisory field for over 20 years. Currently, Jason is a principal at Compensia.

Jason Borrevik

Jason Borrevik was raised in the Pacific Northwest and has been a management consultant for over 20 years. In 2005, Borrevik joined Compensia, whose vision is the top independent advisor for technology and life sciences companies. He currently lives in Eugene, Oregon.

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