I've been asked recently about how to compensate non founder employees at the beginning of a venture. But there is a lot of confusion on whether to make everybody involved on day 1 a founder. Most folks agree there is an upper limit on the ideal number of founders. So taking that for granted, how do you motivate non founders with equity before you have cash?
The usual method is to just give them a big chunk of equity But that can get real hairy because you don't always know how to differentiate quality people vs total hacks. So don't "give" equity to anyone. Everyone should earn equity over time. If you grant it all up front and then find out somebody is a lazy bum the company gets bogged down by a cap table with dead weight.