Issuing stock to founders, employees, contractors, and advisors is the primary way to compensate a startup’s team when there’s little to no revenue coming in to pay salaries. That said, it can sometimes be necessary for you to explain that the value in being a shareholder doesn’t come from the value when issued, but from the value when their stock is sold – the potential of a huge payday when a stock’s value skyrockets at an exit can help attract and retain talent.
There are many ways to issue stock, and the methods and restrictions that can be put in place may sound confusing. Read on to learn about the most common ways startups get equity into the hands of founders, advisors, contractors, and employees, and how to keep each one of these people honest and committed to the success of the startup.
