I'm not saying this is right or wrong. But, if you're ventured backed, then this strategy is usually at odds with your investors. The reason stock options were used in the past was because you were signaling to everyone (you, your family, your grandma, your early employees, your current investors, your advisors, your future investors, etc.) that you were strapping on to a rocket ship. By paying them more and giving less stock, this means your capital raises don't stretch as far (from a perspective of time). This in turn will be a signal to your investors that you may take the $1M and not the $3B deal (see Google/Yahoo), which they may not like.