> You can grant equity out of the option pool, which you defined in collaboration with your investors.
Obviously I'm simplifying here, but overall yes, it's far easier for a startup to give equity than cash, for the reasons I mentioned.
Especially if I'm an early stage startup, maybe after a small seed round, I will surely have enough options in the pool, or investors lenient enough to let me issue these extra stock in the unlikely case I'll need them.
> I have raised money from VCs.
So you know how unrealistic it is to raise VC rounds just to support salaries for a handful of new engineering hires.
At a $6M seed stage valuation, 1% in equity (vesting over four years) is worth the same as $15k in salary.*
Which is harder for a founder to authorize, 1% in equity or $15k in base salary? Honestly $15k salary sounds a whole lot easier and cheaper to me.
$105k in salary converts to 7% in equity. So if you want to hire than $400k Googler you're going to be paying them $200k salary and 14% equity.
An entire option pool is typically 20% or less.
The only reason giving away equity seems so much easier than cash is because you can trick people into taking far less of it.
* Disregarding the fact that the valuation is based on preferred shares while the equity grant is common shares, which only makes the equity grant even more worthless.
> So you know how unrealistic it is to raise VC rounds just to support salaries for a handful of new engineering hires.
That's literally the entire point of raising a VC round?
Obviously I'm simplifying here, but overall yes, it's far easier for a startup to give equity than cash, for the reasons I mentioned.
Especially if I'm an early stage startup, maybe after a small seed round, I will surely have enough options in the pool, or investors lenient enough to let me issue these extra stock in the unlikely case I'll need them.
> I have raised money from VCs.
So you know how unrealistic it is to raise VC rounds just to support salaries for a handful of new engineering hires.