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Introducing Open Equity: Buffer’s Equity Formula and Full Individual Breakdown

Ever since we established the Buffer values that are at the heart of our company culture, we’ve been continuously on the lookout for new ways to live those values every day – particularly our important value of defaulting to transparency.

Last year, Buffer shared all of our salaries and the formulas behind them. We regularly share what we’re reading, how we’re working to improve ourselves – even the mistakes we make. Without this ongoing commitment, our value of transparency is little more than a word written on a piece of paper.

That’s why today we take one more step toward turning Buffer into a completely “open company” by sharing our equity structure and individual breakdown, too.

What is Open Equity?

I’ve always wanted to demystify equity. Although the concept is deeply ingrained in startup culture, it’s often a cloudy topic. Many tech companies give you options, but explaining them is so complicated that employees still struggle to know what it all means. And with Buffer being a fully distributed team, many of our team members are far outside the Silicon Valley tech world and haven’t had experience with it before.

Leo and I had no idea how to approach equity at first. We ended up doing quite a bit of research, talking with people we trust who had great guidance for us. In the end, we set aside 20% of Buffer to give out as stock options to our team and advisors.

Right now, there are 11,256,468 Buffer shares issued and available. We issue them to team members through our “Open Equity”– a simple formula to calculate equity (actually, “options” – but more on that in a minute) that is open to the whole team. Here’s how it works.

The formula


Here’s a breakdown of each element in the formula and how we calculate it.

Type of role:
Each key role at Buffer carries with it a base percentage of equity. (Note: Operations and Executive Officer roles have 0 only because the roles are currently filled by Leo and I, who get zero options. We have founder equity as displayed in the table below.)

When you finish your 2-month “Buffer Bootcamp” period and come on full-time at Buffer, you have a choice to make: $10,000 additional salary or ~30% more equity.

Risk Layer:
When you join a startup, there’s a big risk difference between starting as the 5th person versus starting as the 50th. For Buffer, we use the company’s size to determine a relative “risk layer to reflect this risk.
equity risk layer

Right now, we have two levels of seniority: lead and senior. A lead-level team member has or will have a team to manage, while senior-level team members have shown exemplary leadership but may not have a team to manage. We are not at the size to have additional levels such as VPs just yet. In the future we will add these here.

Breakdown by individual

Those are the components of the formula. Here’s how that formula breaks down in percentage equity for each member of the Buffer team today (this is an abbreviated version; you can see lots more at our open salary and equity spreadsheet).

current equity

The reason we use percentage in most areas is that this makes the concept slightly easier to grasp – it seems to be easier to understand that you hold 10% of a company’s value than that you have 1,125,646 options in a company. (An additional 500,279 options belong to a small group of Buffer advisors and former team members who retain options from partial vesting.)

Example acquisition scenarios

In general, choosing more equity means taking more risk. But a small change in equity can mean a big change in monetary outcome. So we also share with each team member a few examples of exit scenarios for Buffer. For example, let’s look at someone with options for 0.5% of Buffer:

  • Buffer sells for $30M. They make $150,000.
  • Buffer sells for $60M. They make $300,000.
  • Buffer sells for $600M. They make $3,000,000.

Keep in mind, these figures would have to be deducted by the amount the employee pays for the options (for example $0.02/share if they are an early employee at Buffer) and any taxes that apply. So in the $150,000 example, effectively with those deductions it would become $148,874.35.

The way the number $0.02/share or $0.17/share is determined is through an outside firm valuing Buffer through a process called a 409a valuation. They come up with the price/share which can then be used to issue options for all Buffer employees. Every company has to do a new 409a valuation once a year.

Our vision for Buffer is to keep going for a long time, so we might not exit. However, there may still be opportunities for team members to sell their options along the way.

Important note: Options vs. Equity

What a team member actually gets when joining Buffer is a number of options in Buffer, not actual equity. An option, as defined by Wikipedia, means the following:

“an option is a contract which gives the buyer (the owner) the right, but not the obligation, to buy or sell an underlying asset or instrument at a specified strike price on or before a specified date.”

Say Buffer has 100 shares. When you join Buffer, you get 10% in options as part of your compensation package. This means you get 10 options, each with the right to buy 1 of the 100 shares, at a fixed price. Let’s say that price is $1. So if you want to get your 10 Buffer shares, you will pay $10 and then you will hold 10% in the company. Now, let’s say Buffer sells the company to Google for $1,000. Since you have 10 options, you can pay $10 for your 10 shares, and since Buffer just sold, you will get $100. Effectively, you will make a $90 profit – pretty sweet!

The older Buffer gets, the more valuable the company (hopefully!) becomes. So the fixed price to pay for the options also go up. As an example, when Buffer started, the first few people could pay $0.02/share. The next batch, after Buffer became more valuable, had to pay $0.17/share. So the difference between option price and the worth of the actual share went down slightly – it should always be so that it’s still very worthwhile to have these options.

Thoughts about the future of Open Equity at Buffer

I hope this is a start towards demystifying equity – at least when it comes to Buffer.

Special thanks to goes to:
Joel Spolsky: Joel’s guidance with his concept of layers that he described here has been immensely useful for us to get our formula together.

Wealthfront’s equity calculator: The Wealthfront equity calculator has also been a fantastic guide for us, as we tried to come up with equity options in our formula that were fair and would scale.

Our formula for equity – like much of what we do at Buffer – is still a work in progress. We’ll likely have to make some changes and there’s no guarantee that it will scale as we grow, but it feels good to finally make this element of Buffer open.

I’d love your thoughts, ideas and feedback on our formula and how we can improve it further. Ask me any questions at all in the comments below, or simply tell me what you think.

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  • Another great post, thanks Joel! The Buffer story is inspiring a entire generation of web-entrepreneurs!

  • The open-ness is interesting but do you think you put some of these people (yourself included) possibly at risk of robberies, bank fraud, identity theft and etc by exposing salaries? Plus I wonder how being open about salaries might effect a persons ability to be hired by another company should they leave Buffer, since the salary they made at Buffer is open to everyone. If person A is making say $50k at Buffer it would be hard to “demand” a higher salary at a different company for an equal job.. Just some thoughts.

    • I would expect people who leave Buffer after successfully working there to be able to find more senior jobs, so negotiating more senior salaries shouldn’t be a problem.

    • Great questions Scott!

      I can’t think of a reason why public salaries would put people at risk. I can understand it in theory. In practice I think it’s not something that comes up. Having salaries public has been much less of a big deal than we might have anticipated. In addition, there are many public sector jobs where salaries are made public.

      In terms of being hired by another company, we are aiming to always pay above the market average so that hopefully reduces some of the concern. At the same time, I could see how it might be hard to demand a higher salary if the new employer knows your salary. What’s unique about Buffer, though, is that we really have a focus around getting the most out of Buffer while you’re here. We have regular 1:1 sessions for team leads with team members (I do several a week) and encourage people to work on themselves through blogging, speaking opportunities, etc. This generally means that people finish in a much better position than they started, no matter how long or short their time at Buffer.

      • Alec Matias

        How do you think Buffer’s current salaries compares to market rates? 20% below average? 5%? How much above average would you think you’d like to go?

        As our company begins a trend towards open and transparent salaries, I had the same thought: if you’re paying above average, then the employee has to compare the quality of their day-to-day work to make a decision, not a straight up numbers comparison. To me that seems like a “flawless” idea, but there has to be a perspective I’m not considering.

    • David P

      It is all about living/working/behaving in love mode, not fear :) Think ]+[ not [-]

    • Ariel

      Hi Scott. I see you got some answers from the guys above. However, some months ago I’ve heard an NPR Planet Money podcast about this subject that I think you may find interesting.

  • Great stuff – I am curious how you handle things when employees leave? I know vesting is involved, but do you get lawyers and everything involved everytime? What happens to their options?

    • Hey Justin! Great question. We involve our lawyers to wrap things up there, and generally we are on the generous side (e.g. if someone is vested 11 months we will most likely push it to 12 months so they don’t get zero shares). We have 4 years vesting and a 1 year cliff, so if someone leaves after 6 months they don’t get shares. If they’ve been with us 1 year they get 25% right away and then it accumulates monthly from there.

      • Joe Kendall

        Hi Joel! I love this and am curious to see how it evolved with your experiment as a Teal company. Also am interested in your timeline for exercising options after people leave – do you also do the typical 90 days to exercise or do you have thoughts on that as well?

  • I always wondered about how equity/options worked for employees, so thanks for this great explanation! Although – to be honest — I’m still a tad bit confused. But that has nothing to do with YOUR explanation… Perhaps I need to invest in a course in “Equity/Stock/Shares for Dummies” or something… But again, thanks :)

    • Courtney Seiter

      Equity is really, really complicated! I would definitely read “Equity/Stock/Shares for Dummies” :)

  • Cool to see this all laid out so concisely, Joel. We just had a company-wide sit down with our COO last week and he went over the whole explanation of stock options with us. For some people without a business background (and even some who have) it can be hard to ‘visualize’ the potential benefits of being offered stock options. This should clear up the basic process for anyone searching.

    • Very cool Tia, I think that’s such an important conversation to have! Kudos to you guys.

  • Alec Matias

    So happy you shared this, I’ve been waiting for this one! Thank you.

  • Williamson

    This is an interesting concept. Has Buffer considered the possibility of going public? I feel that, with your given klout in the industry now, you can only go up and offer more opportunity for the company and exit strategies for early investors.

    • Wow, that’s amazing to hear, thanks for chiming in with this comment. We’re certainly committed to the long-term, so perhaps one day we might be lucky enough to have something interesting for the public markets.

  • This is really amazing. A whole new level of transparency. Thanks for this, Joel!

  • How long is the vesting period?
    Also, what happens if you take the Equity choice for a couple of years and then change your mind? do you lose the options associated with the Equity choice?

    • Hey Richard! Great questions.

      We have a 4 year vesting period, with 1 year cliff.

      The salary/equity choice is a one time thing. We have some additional options planned for loyalty and promotions, so that’s the key way to get more options down the line.

  • Hi Joel,

    your transparency – both internal as well as external – is fantastic. Thanks for sharing! Just two questions which came up:
    Do you have any bad leaver clauses?
    How do investor react to your construct? Esp. how would you deal with liquidation preferences etc.?

  • Patrick Randolph

    Hey Joel, I was curious if you guys grant dilution protection?

  • Awesome post, Joel. Thank you for sharing this, including the spreadsheet. As I’ve just written to Courtney in response to her April Content Marketing Report, you guys are an incredible day-to-day inspiration and are hugely impacting the way we’re doing things here at Great gratitude.

  • When do you issue more shares? Does anyone ever get devalued to make room for more shares for new employees?

  • Ryan Kulp

    For anyone who wants to run the Buffer equity calculation in 2 seconds without downloading the spreadsheet, I built an app that does exclusively that here: (100% free)

  • Ryan M. Confer

    Wow! I cannot express my happiness of this open equity concept. This is a disruptive model that seems to have a lot of baked in flexibility and transparency that “should” help breed loyalty among their employees and drive strong talent toward the company. Bravo! I am definitely trying something like this in my next venture.

  • Just wondering

    Have you considered using something like for providing liquidity?

  • Robert E. Capelli

    Joel, I think you guys are hitting this thing out of the park with both the Team setup and product solution, so congrats!

    Company and Team culture are very hard to fake from the top, and you guys seem to eating the same food as you are serving. I am truly impressed by how you guys are building a straight forward concept of equity/salary/benefits – I am sure this is or will be copied by many young companies in the future, and that may end up being your biggest gift to industry. Keep killing it !

  • Thomas Moes

    Hi guys,

    Extremely interesting article, much better than reading a book about equity :)
    I was just wondering, does the equity amount get updated when someone gets promoted to a senior or lead rank? Will he then automatically get more stock options? Or are the first numbers fixed?

  • Hey Joel.
    This has been an amazing read! Thanks so much for the openness.
    I would appreciate if you could also tell us what are the type of stocks that you and your employees are entitled to (e.g. Preferred vs. common stock) and how that affects everyone during their time at Buffer and after a possible exit.

  • Hey Joel & Buffer Team — could you please clarify the equity calculation? On first read it looks like (Role x Choice ) / (Risk Layer + Seniority), but that doesn’t make sense because then hires with more seniority actually get less equity. So instead I tried [(Role x Choice) / Risk Layer] + Seniority, and that gets much closer but still small differences w/ the team list you provided. Please clarify :- )

  • Stefano Tresca

    Including the advisors there is another ~18% to assign. Can you say how much % has been issued to investors?

  • Hugo Garcia-Cotte

    I have a question (if I may ask). Did Carolyn, Sunil and Andy join before or after the investment ? I am pre-investment (but not at the founder stage either) and I don’t know how to compensate my new recruits. I can’t give them a normal salary per say, but the risk decreased a lot too.

    Thank you very much for sharing your adventures ! It is really helpful to tons of entrepreneurs out there !

  • Joel, it’s amazing how transparent you guys are. This makes sense and gives me goosebumps how open you guys are.

  • Keegan Lanier

    You all are doing incredible things to push business forward. I love your values and hope to help continue pushing my companies culture toward more transparency, inclusion and balance. Thanks for sharing @joelgascoigne:disqus

  • Since most of your employees are independent contractors are there any issues for the company by giving them equity?

  • Robbie Hearn

    Hi Joel, I think the concept and the execution of your core ideas are both brilliant, as is the way that you are sharing and responding. One question I have is: while you and Leo I assume were the two founders, your founder equity is substantially different (42% vs 23%). Have I got that right and if so what was the rationale for the difference?

  • Having seen a company that actively discouraged even the slightest discussions about compensation and benchmarking relative to peers, this level of openness is incredible. This blog post alone makes me think the equity at buffer will be worth a lot one day. I was surprised to see the magnitude of options going to founders compared with employees but that makes sense as the people who start it come up with the idea, take all the risk, and come up with the financing

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  • Pavel Matvienko

    Thanks for sharing, it helps me with Options concept in my company.
    Still have a question, you answer will be much appreciated!

    Q: When new teammate chose Equity and gets $10k less salary, what happens the next year?
    Does it means that teammate is able to make the same choice again & get’s more shares or higher salary?


    • Hi Pavel, thanks for the comment. Sorry for our slow reply!

      When someone makes the salary / equity choice, that choice stays for the duration of their time with Buffer. There’s no other window to change the decision, and there’s no annual decision to re-up or double down. If you choose equity initially, you don’t get to choose again the following year (and double your equity or get $10k). Hope that helps!

      • Pavel Matvienko

        Hello Kevan and thanks for a quick reply, really appreciate it!
        Just wanted to confirm: If choice is “Salary”, does it mean that employee receiving $10k higher salary every year?
        (or just first year)

        Thank you!

        • Yes, $10k every year. So for instance, when I made my choice, my annual salary went from ~75k to ~85k, and I kept that salary year-after-year. :)

          • Pavel Matvienko

            Thank you!

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