Many tech stocks appear cheaper after market corrections, but massive stock-based compensation (SBC) creates significant, ongoing shareholder dilution. This hidden cost means the underlying businesses are not as inexpensive on a fundamental basis as their stock prices suggest.

Snap's valuation languishes despite a massive user base because of its extreme stock-based compensation ($2.5B in 12 months). This financial tactic inflates adjusted profits while massively diluting shareholders, revealing a fundamental disconnect between user growth and actual investor value creation.

Instead of relying on venture-led secondary sales, Column uses 25% of its annual earnings to conduct its own tender offers. This provides regular liquidity to employees, enhances retention, and aligns the team long-term without the dilution from new funding rounds.

Instead of granting equity to every employee, Applovin now restricts it to the top 10-15% of performers who can afford the risk. The rest receive cash compensation and an optional ESPP. This protects junior employees from stock volatility and concentrates ownership with the highest-impact individuals.

Instead of traditional stock options that dilute shareholders, Lifco uses a synthetic option program personally backed by founder Carl Bennett's own shares. Executives are granted options exercisable in 2030, tying compensation directly to long-term stock performance while ensuring non-founder shareholders are not diluted.

Unlike many founders who guard their equity, Brad Jacobs intentionally uses share issuance to fund value-accretive acquisitions. He has stated he's willing to go from 90% ownership to 10% if the resulting company's value makes his smaller stake worth more in absolute terms.

Software's heavy reliance on stock-based compensation (13.8% of revenue vs. 1.1% in other sectors) distorts key valuation metrics. The cash spent on share buybacks to offset dilution isn't factored into free cash flow calculations, making software companies appear more profitable than they are.

To conserve cash, especially in a downturn, founders can pay key employees 10-30% below market rate in salary. The key is to compensate for this deficit by offering double or triple the industry standard in equity. This strategy attracts top talent aligned with long-term success while keeping the company's cash burn rate low.

When a SaaS company's stock falls 90%, its stock-based compensation (stock comp) becomes untenable. A company previously valued at $1B paying $100M in stock comp (10% dilution) is now a $100M company paying the same amount, creating 50%+ annual dilution that is unacceptable to investors and employees alike.