[blennon]

The problem with plain old stock is the tax implications. Suppose you join my company when our last round valuation was $10M. Let's also say you negotiated 1% equity. If we granted you 1% equity, you would have a $100,000 tax liability. We just gave you something worth $100,000 so you have to pay taxes on it. You'd be crazy to be willing to pay taxes on risky equity that's theoretically worth $100,000. The company won't pay your taxes for you either. That's a huge waste of money. That's why stock options exist, to give employees the upside and minimize the tax liability.