The general principles of equity awards

Giving equity to employees means making them shareholders, aka owners of the business. Some things to consider:

• Cover the downside: schematically, equity should cover at least the opportunity cost taken by founders and employees when they accept a discount on the salary and take a bigger risk,
• Ensure huge rewards (and thus, incentive) for the upside. Founders and early employees never get rich with salary. They (sometimes) get rich through capital.