This is an odd post because Fred closes saying: > I don’t have any specific recommendations to make on this topic except that Boards should be thinking way mor

This is an odd post because Fred closes saying: > I don’t have any specific recommendations to make on this topic except that Boards should be thinking way more deeply and creatively about this issue than we are. Equity compensation came about as a way of paying employees when cash was tight. It also tends to (arguably) align incentives between the company and the employee in the long term. Now equity compensation exists largely because the likes of FAAMG pay senior engineers $300k+ in total comp and, again, smaller startups just can't afford that kind of cash outlay. So what "creative" way is going to "solve" that problem (from a VC's perspective)? Consider if you had 50 engineers that you pay $100k + equity to and these are 60% of your costs. Your burn rate is just north of $8M/year. Now if those engineers were paid $300k/year instead and your other costs didn't change, your burn rate is now north of $18M/year. Equity compensation is your way of lowering expenses and reducing your burn rate. That extra $10M/year will mean you'll need bigger funding rounds more often and then you end up diluting your stock to investors rather than employees. Is this better? How? Another point: when it comes to mature companies (ie publicly listed), equity is a pretty tax effective way to pay someone. Say an engineer joins an FAAMG company for $170k base salary, target bonus of $30k and $400k in RSUs (4 year vest, 1 year cliff). That's notional total comp of $300k. More when you consider annual refresh grants. Assuming $100k refresh grants, total comp is pushing $400k by year 4. But there is risk attached to that, namely that the stock could go down in value. If that didn't interest you, that same engineer could go work for Netflix and just get a $300-350k salary with no equity (which is fine). But if that stock goes up 20% before the cliff, you've made an extra $80k over 4 years without doing anything. If you approach the problem from the other way, imagine you wanted to make a $400k investment in an FAAMG company. You have some options that include: 1. $400k in after-tax money invested 2. $150k after-tax plus $250k on margin 3. $400k in pre-tax money in a 401k (1) is expensive, (2) is less expensive but riskier (ie margin calls) and (3) is really putting a lot of eggs in one basket plus you'd need a substantial amount of retirement savings even to consider that option. I bring this up because in the all-cash case (eg Netflix), if you do want to invest in your employer's stock this way, it's really expensive to do. Those who say you can just take the cash and buy shares miss or gloss over the leverage you can obtain from an initial stock grant. If you plot even modest stock growth, you'll quickly find the $400k grant with $300k total comp will quickly outpace the guy whose earning $300k (or even $350k) per year as they have to pay taxes on that money then invest it.