It lowers employee salary in a time a company is supposedly the least profitable (Starting up and having no products or customers) You're essentially loaning fr

It lowers employee salary in a time a company is supposedly the least profitable (Starting up and having no products or customers) You're essentially loaning from your employees untill you become profitable and their stock options become something of worth. No matter how big or small your company, everyone has a limited budget. or at least seeks to not overspend on trivialities. Though the real world often doesn't reflect the theory due to unforeseen complexities. It also makes sense from a game theory perspective, If your below market rate employees do not believe in your company or are agnostic to the companies success then the chance that their stock options become worth something will be less. It should also attract more people who understand the value or direction of your company yielding better decisions and hopefully increase their stock option worth. Again, just theory. but its solid nonetheless