Pretty much every tech company gives some amount of equity to it's employees, from the smallest startup to Google. 1-3% for employee number two is very reasonab

Pretty much every tech company gives some amount of equity to it's employees, from the smallest startup to Google. 1-3% for employee number two is very reasonable. You should try to think about this in terms of utility. Giving this person a small amount of equity might be the difference between retaining and not retaining them. How easy would they be to replace? After 7 years I'm going to guess not very easy. Giving them equity also helps to align incentives - they do well when the company does well. IMO you should grant a certain amount of stock (say 2%) and have it vest quarterly over four years. Meaning each year he stays he gets another .5%, and he has to stay for four years to get all of it. This is a standard deal. I would strongly consider vesting a chunk up front (say the first year) as a show of good faith since he's been there so long. Hire a lawyer to set up a cap table, it should cost you (I think, depending where you live) less than $1k.