This post originally appeared on the Nexus Louisiana blog.
Many founders who are growing their business don’t have the cash flow to match salaries that top talent can potentially get elsewhere. Equity compensation, which pays employees with a stake in the company, is an appealing option for startups to get around this problem and bring in high-caliber talent.
At Nexus Louisiana’s first MicroBREW event, Innovation Catalyst’s Bill Ellison and Ben Brodnax shared the basics of equity compensation, when to use it and how it presents in different structures.
What is Startup Equity Compensation?
Equity, or the right to purchase equity, offers employees, board members or advisers an alternative, noncash form of compensation. “Equity is simply ownership in a company,” Brodnax said. It can operate differently based on the structure.