THE MYTHICAL CREATURE OF SAAS: STOCK-BASED COMPENSATION

Summary from the TLDR Founders newsletter

Stock-based compensation (SBC) is a controversial topic in SaaS. In the 2010s growth era, SBC fueled hiring with less scrutiny. However, as the market cooled, dilution's impact on returns became a headline concern. SBC often exceeds 20% of revenue, rivaling other major expense categories. CFOs must thoughtfully balance SBC's benefits (alignment, less cash burn) with dilution impacts. Having a clear SBC philosophy is essential, not optional. SBC isn't inherently good or bad - it's a strategic tool to wield intentionally.