[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.