- Hiring & retain talent: Talented people are incentivized to work for the company by the prospect of their equity being worth a lot of money in the future.
- Align incentives: Even companies that can afford to pay lots of cash may prefer to give employees equity, so that employees work to increase the future value of the company. In this way, equity aligns individuals’ incentives with the interests of the company.
- Reduce cash spending: By giving equity, a company can often pay less in cash compensation to employees now, with the hope of rewarding them later, and put that money toward other investments or operating expenses.
