Pulley vs. Carta: Can Your Management Team Read Their MIP?

A typical MIP layers several features on top of a simple percentage: a preference stack that pays sponsor capital back first, a hurdle the company's return has to clear before management units participate, and sometimes a rollover structure where departing sellers reinvested part of their proceeds into the new entity.

Each layer changes what a given management unit is actually worth at a given exit value, and most executives holding units have never seen a model that shows them their own payout at a range of realistic outcomes, only the plan document's dense legal language.

A CEO who was told their units represent a meaningful percentage of the company can still end up with very little at a modest exit if the preference stack and hurdle are structured conservatively. That is not a flaw in the plan by itself. It is a reason the executive needs to see the actual numbers, not just the headline percentage, before treating the grant as a specific dollar expectation.

Pulley is built primarily for straightforward venture-style cap tables: founders, employees, options, and a fairly simple path to dilution through funding rounds. It does not natively model preference stacks, hurdles, or rollover mechanics the way a private equity-backed structure requires.

For a portfolio company, this is a real limitation, not a minor gap. If your MIP includes any of these features, which most do, Pulley alone will not give management an accurate picture of their position.

That gap tends to show up first when a management team member asks a specific question about their own payout at a hypothetical exit, and whoever administers the cap table realizes the platform simply has no way to answer it directly.

Carta's tools for modeling waterfalls, preferences, and more complex capital structures make it the better-suited platform for a sponsor-backed company, and it can produce scenario models showing management what their units are worth across a range of exit outcomes.

That scenario modeling is the feature that actually matters here. A management team that can see their payout at a conservative, base, and strong exit case understands their incentive far better than one reading a plan document once at signing and never again.

Modeling the MIP correctly in software is necessary but not sufficient. Someone, typically the CFO or the sponsor's deal team, needs to actually walk the management team through their own numbers periodically, not just once at grant, so the incentive keeps doing its job as the company's performance and the exit timeline evolve.

A MIP nobody understands does not motivate anyone, regardless of how well it is structured or modeled. The modeling makes the conversation possible. It does not replace having it.

A periodic walkthrough with the management team should cover these points:

• The current preference stack, meaning whether sponsor capital is paid back before management units receive anything at exit.
• The hurdle the company must clear before management units participate, and where the current trajectory sits relative to it.
• Each holder's estimated payout across a range of realistic exit values, not just the headline percentage in the plan document.
• What changed after a refinancing, dividend recapitalization or add-on acquisition that altered the capital structure above management's units.

What is the preference stack, and does sponsor capital get paid back before I see anything? What hurdle does the company need to clear before my units participate at all? At a realistic exit value, what would I actually receive?

If a management team member cannot answer these three questions about their own equity, that is a gap worth closing regardless of which platform holds the underlying model, since the plan is currently doing less to retain and motivate them than it was designed to.

A refinancing, a dividend recapitalization, or an add-on acquisition can all change the capital structure sitting above management's units, sometimes without anyone explicitly walking the team through what changed. A hurdle that looked achievable before an add-on may look very different once new sponsor capital has been layered into the stack.

Build a habit of revisiting the MIP model at every major capital event, not just at the original grant and the eventual exit. A management team that watches their position shift without explanation loses trust in the plan faster than one that understands why the numbers moved.