How does private equity backed equity work. Say I got $500k in equity grants. Is the value of the equity only based on growth of the company. Say company hits 2.0x is my net at the end of exit $500k or $1M. I’m confusef

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The PI agreement will have the details.
The $500K might be Target exit EBITDA, a multiple of MOIC. Go below you get less, go above you might get more.
Composition of the PI’s matter. The $500K might only be if you blow by your MOIC target and only $300K is at target. Or could be baseline MOiC target and there could be upside like $200K more if you crush the MOIC.
It should all be spelled out in the paperwork and the fund guys will be more than happy to explain it to you.
Also there is probably a vesting period and you can’t cash it out only at a sale or leave the company

The value of the equity is based on a “target” exit value of the company. For example let’s say your $500k grant is based on the company selling for $1B. If the company sells for more or less than that there’s a formula that determines what your equity will be worth (it’s not linear). It’ll all be laid out in the paperwork and explained to you.

It typically vests at something like 20% per year if you leave before the PE fund exits. Also you only get cashed out when the company is sold or has an IPO, even if you’re fully vested.

Like others mention it’s tied to target but you should be able get a current NAV report with present value of the equity. I just went through this process with a bunch of different equity instruments so it’s important to actually determine if value is tied to NAV or based upon a liquidity event.

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