This issue is getting particularly visible in silicon valley where the value of a top software engineer has risen considerably in recent years. Let’s say that you want to hire a top software engineer and are competing with equity grant offers from Facebook and Google where the value of the grant is $1mm. If you have a current valuation on your company of $10mm, then you have to offer 10% of the company to compete for that engineer. I am not saying the engineer isn’t worth it. She is. I am just pointing out how dilutive employee equity is becoming in silicon valley. We are seeing similar things happening in NYC and I imagine they are happening elsewhere.
I don't agree with Fred Wilson on this. In this particular model, you are treating the engineer as if they treat the same Google offer and your company's offer at the same level. This is not true for most engineers.
There is something to be said of mission, the upshot and the actual value of the company. I agree with Sam Altman that you should be "fair" about your equity share with the company. The idea was NOT to share $1MM worth of equity with the engineer.