Paying with equity might not be the best option
Should I Pay People With Equity?
As Founders, we tend to pay or spend equity like it’s free — only to come to learn that equity is not only expensive now, it’s way more expensive later as the company grows. And we now hold less of it. Paying people with equity is synonymous with startups.
Founders love being able to buy things with Monopoly money and newly granted shareholders dream of a huge windfall someday. And that sounds awesome.
But the problem is that equity isn’t like cash — it’s far more valuable, yet we tend to spend it like it’s free. Paying people with equity isn’t a bad idea IF we value it properly. But equity, especially in the early days, is often spent with little consideration for its long term value.
Equity is the most expensive money we will ever spend because it represents 100% of our own future return.
While we don’t want to be entirely stingy, we need to be very frugal — because every dollar we spend today reduces the many dollars we may ever see in the future. Paying with equity might not be the best option!
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