[jimmykennedy]

"It's more valuable to have them invested long-term in the company's success." Why? A cash bonus of "If we meet this deadline you will receive $X" is going to increase my productivity much more than "you own 0.01% of an illiquid, unprofitable company". Startup equity is way too abstract for employees to affect their motivation. Peer pressure, mission, pride in work, cash bonuses / raises / promotions are infinitely more impactful.

[firloop]

Sure, the argument isn't that equity is the end-all to employee compensation. But early-stage startups often aren't able to to give (significant) cash bonuses, and more importantly, compensating an employee with equity means that 5 years down the line, you're more likely to have someone on the cap table that both contributed to past efforts that made the company successful and also cares about the company's future.

I think in practice this preference makes more sense when you consider that most of the (non capital based) value that early-stage investors can provide applies mostly to early-stage companies.

[Retric]

It's not about having equity now.

If you have a seed company that fails in two years then the equity equation is meaningless. However, if in two years things are going good, but it's not clear you are the next google then you really don't want to lose key employees and it's going to take more equity to keep them interested. On the other hand if in two years it looks like you will be the next google then getting more capital is easy and you really don't want to lose a key person.