Taxes. At least in the US, if a company with a non-zero valuation grants actual stock to an employee, income tax is due at the time of grant on the difference

Taxes. At least in the US, if a company with a non-zero valuation grants actual stock to an employee, income tax is due at the time of grant on the difference between what the employee paid and what the stock is "worth" (I'm assuming the employee files an "83(b) election" -- if not then it's even worse). There are only two ways out: either charge the employee the current "fair market value" of the stock (which can be very expensive on day 1) or the employee has to pay taxes on grant (which can also be very expensive on day 1). By contrast, if you grant ISO options, $0 is due in taxes at grant. $0 is due when it vests. Taxes only become relevant when an employee decides whether or not to exercise. As Altman discusses, there's an argument to be made that it should be 10 years after quitting rather than 90 days after quitting, but either way it gives the employee a lot more information about whether this is a good company or not.