Well... that's a small number of "insiders," essentially. The person most vulnerable to the OP's concerns is a rank and file employee with $100k of paper wealth

Well... that's a small number of "insiders," essentially. The person most vulnerable to the OP's concerns is a rank and file employee with $100k of paper wealth structured as an incentive to stay long-term, the 162nd hire. Equity starts as part of ordinary compensation, but converts to long term employee retention incentives as times goes on and the company increases in value. To be indifferent to these employees' interests is immoral, after you've essentially asked them to make long term decisions based on this deal. These employees understand the least, have the least amount of information. They have the least negotiation power, and hence have equity deals with the fewest protections. They have the least influence over strategic decisions like this, so their interests come last. Owning so much private shares in one company is typically a bad wealth strategy for them, possibly 100% of their "portfolio." Typically after leaving, iliquid shares must be purchased with cash (exercising options) or the options are lost. At the very least, (1) employees should have their options exercised, converted to shares at the companies' expense, after vesting. (2) The protections (preferences, anti-dilution etc.) an average investor would demand should be attached to these shares. That would leave them with an asset they may prefer to sell, but at least they unambiguously own it. Generally though, I agree with the OP. If after raising significant funds and expanding the employee equity pool past 10-20 employees, you can either go for a 5 yr race to IPO or find another liquidity solution for employees. It's possible.