A lot of smaller/early stage/seed startups actually do this. It's a restricted stock grant. And for the people saying they don't do it because of taxation on an

A lot of smaller/early stage/seed startups actually do this. It's a restricted stock grant. And for the people saying they don't do it because of taxation on an illiquid asset, this is why 83(b)'s exist. They let you pay the full tax on a stock grant at time of the grant, not time of vesting. You get a 409A valuation to establish the Fair Market Value of your stock. That valuation isn't based on the same criteria that investors use, it is much more rigorous and based on income, cash in the bank, etc. You could very well have a company raise money at at $10MM cap and be "worth" less than $1MM. If you grant someone stock at that price, their taxable income will be negligible - usually only a few hundred to a few thousand dollars, and then they don't have a giant tax bill at the end. You still have to pay capital gains, but that only applies when you sell the stock, so you have the money to pay it.