>> the very beginning, I wanted all my friends to be shareholders. If I had a deep, intellectual conversation with someone, I’d give them 10 shares.

Yeah, it probably violates some securities laws... but when everyone makes lots of money on the deal, there's rarely an issue. When investors lose money, they're all too happy to bring up securities law violations and fraud claims. Better to do everything by the book and not give anyone an excuse to sue you later.

I'm not a securities lawyer, but in a nutshell, startup companies should prefer a very small number of professional (and accredited) investors.