Tax reasons and complications with having >500 shareholders (and shareholder information, etc. rights in general), plus administrative costs. Early on, you iss

Tax reasons and complications with having >500 shareholders (and shareholder information, etc. rights in general), plus administrative costs. Early on, you issue founder grants if you want, at common stock price, paid in cash. A company is worth $100 in total, so you can buy 10% of it for $10. Common and preferred can run separately in terms of price (although there's some relationship between the two; more enforced now than in the past.) After Series A, 1% of the company would be a real amount of money -- maybe a $10mm valuation, so 1% would cost your engineer $100k at hiring. That's a lot of cash for an employee to invest.