Advisors · Advisory boards

Equity question: Switching roles from an advisor to full time employee

Rasmus K E-commerce & omni-channel retail professional (Kraft Heinz/Amazon/Rakuten/Astri/Baltika/Deloitte)

November 30th, 2019

Hi all,

What is usually the best practice for the following case.

I was "hired" 1,5 years ago to a startup as an advisor (as a first advisor to them) and the startup gave 2% equity for this role. Now the startup wants to hire me full time (salary + equity) as one of their Directors to "Department x" as the startup has received seed funding.

Given that the advisor role was already promised 2% equity before, what kind of offer/compensation package would be fair to receive from the startup perspective regarding the additional equity part?

As an advisor, what kind of offer would you view fair and would like to receive in this case?

As the startup founder, would you be somehow (in which way?) more generous in your offer given the fact that the advisor was on board and helping out from the beginning of the startup vs other later advisors?

Paul Garcia marketing exec & business advisor

December 4th, 2019

I would guess that there is no single answer to your question. It depends heavily on what's important to you. People all like to be compensated in different ways. Sometimes it's a title, sometimes it's cash, sometimes it's decision-making authority, sometimes it's freedoms or flexibility. What matters to you is much more important in this case than what's "fair." Business isn't about being fair, business is business.

My personal feeling is that if you convert from advisor to employee, you would not have earned more equity. You have already claimed what your advice was worth. Now you get salary as an employee, not more equity. Your conversion is not proof that you're indispensable. It simply says they're willing to pay you for more of your time and trust you to continue delivering value in return.

If it were my company, I would not offer additional equity to a converted advisor. Now that I'm paying you money, that's your compensation. Equity was only when I could not pay you with cash. Remember, ownership has nothing to do with fairness or generosity. It's about what works for the business. It would be entirely different if you asked to buy equity in my company to demonstrate your faith and to take on more of an ownership role when you convert. But granting it to you, that seems far from likely.