I don't think VC money cares whether you are soft on the employees. They are there to buy as big a slice of a small pie before it gets big. Anything you keep for yourself or give to your employees is pie that could be theirs. If they show up and you've already promised half the pie away they'll pay less for what's left, or you won't be one of 100 slices in their pie portfolio. Maybe you can convince them the motivated employees will lead to more growth, but it's not the type of thing they are normally swayed by.

I think the end result is that it's probably not possible to pay employees with meaningful equity anymore so you'll have to go back to paying them the old fashioned way with money. I know I'm no longer willing to take RSU lotto tickets and a pay cut to work at a startup.