Advisors · Equity

How much equity would you give an advisor?

Monica Zent Founder, CEO, Investor; Board Member, Advisor

July 17th, 2013

For a key advisor who is bringing value- how much are you (as a founder) willing to give in terms of equity?

In sharing your thoughts, please assume these facts:

-you are the founder

-the company is beyond seed stage

- you have not givenequity to any other advisors to date, and

-the advisor is bringing value (but not personally funding),available to meet once p/mo., believes in the company,etc.

Based on that, curious what the consensus is on what theequity and vesting for the advisor should be.

Thx for your input.

Mohamed Alborno Director / Producer @ The New Country Film Project

July 17th, 2013

One of the ways is to calculate how much time is s/he putting in multiplied by their hourly rate (or the rate that you think they are worth). Then see how much is this based on your valuation.

Based on what you say, I would give 0.5% - 2%, the cliff and vesting would be negotiated.

Regards from Montreal.

Mohamed

crowdsway.com

Inspiring explainer videos by aspiring filmmakers

Duane Nickull Chief Marketing Officer, Co-Founder at Cheddar Labs

July 17th, 2013

@paul Travis brings up a very important concept.

Make the initial offer in a way you have a way to monitor the AB board members' contributions.

Ask them to propose what their commitment is worth and what they expect to be compensated for it.

Ensure that the proposal make sense to you. If I do X, the value of X must be X + <something> to the company.

Ensure that you have the right to discontinue if at any time they fall below that commitment or some sort of sliding scale.

Make sure you offer the AB member an incentive. If X works, and 10 times X equals ten times the cost, motivate them to do more X. The more they do X, the more it benefits the company. make sure it is bottom line.

- ensure that all AB members are properly chosen based on their likely ability to help you. If XML, get a Tim Bray, if XSLT, get a Ken Holman, if Neo4J, get Peter Neubauer.

And last but not least, buy beers for all of us nice successful founders on the list who have helped you ;-)

The Founder dating group may wish to provide some incentive suggestion scale in the event some of us old time founders actually help out the new companies seeking our advice. I have noticed some very notable names who are helping out here with great ideas based on the accumulation of their life experiences. There are not many other forums where new companies have access to such individuals.

Just a thought..... ;-)

Toddy Mladenov CTO and Co-Founder at Agitare Technologies Inc.

July 18th, 2013

FAST contains the suggested %age depending of the stage:

www.fi.co/docs/FAST.doc

Brian McConnell

July 17th, 2013

If the advisor is not putting money in and is not working full time then as little equity as possible. You need to conserve it for employees and investors. If the advisor is helping with introductions or biz Dev then tie equity to results.

Paul Travis Multifaceted Online Executor: Product Marketing to Program Mgmt. to Business Development

July 17th, 2013

The topic prompted me to check a couple of my bookmarks (actually I use Delicious for cross-browser, cross-platform bookmarking -- but wait, that's another topic altogether...)

and found an apropos TechCrunch piece -- hope you find it helpful!

http://techcrunch.com/2011/09/22/free-startup-docs-how-much-equity-should-advisors-get/

Anonymous

July 18th, 2013

Everything you ever wanted to know about advisors, Part 1 & 2

http://venturehacks.com/articles/advisors

http://venturehacks.com/articles/advisors-part-2

Duane Nickull Chief Marketing Officer, Co-Founder at Cheddar Labs

July 17th, 2013

It depends on experience, fit and reach. I sit on several advisory boards. If the company is working on technology i helped pioneer or co-invent, then 1.5-2% is perhaps warranted if the person has the ability to provide a 10X ROI. On the other hand, as low as 0.5 can be quantified. Here are some examples:

One company I sit on the AB of was working with SOA and Web Services. Since I was a contributor to the W3C Web Services Architecture Working Group, Chaired the OASIS SOA reference Model technical committee and also contributed to many WS specifications, my presence was deemed instrumental to a company wishing to make it's name in that space.

Another company was all about Web 2.0. I was a co-author of "Web 2.0 Architectures" (O'Reilly) so again my endorsement of one company in a crowded space was worth 1.5%.

It also depends on the deliverables and timing too. An exclusive endorsement from a technologist who has co-invented the area the company is working in is worth a lot.

Duane

Rob G

July 20th, 2013

take a look at Steve Blanks site. he always has good input on such topics, tools/templates to use for calculations and i'm sure he has a few form contracts/agreements that you can use to formalize the arrangement with your advisor. steveblank.com

a quick search on his site yielded this article: http://steveblank.com/2013/07/09/dont-give-away-your-board-seats/

Paul Travis Multifaceted Online Executor: Product Marketing to Program Mgmt. to Business Development

July 17th, 2013

Three pieces of fodder to add to all the good comments:

* At the end of the day, a small percentage of a successful company is worth more than a big percentage of an unsuccessful company.

* I was going to go higher in order to provide incentive that he/she come aboard to provide more value than 1x/mo. Might they be helpful on your board of directors, if their value add is sound business judgment and/or industry knowledge?

* I'd look at this in the context of a rough "desired" cap table allocation breakdown (investor pool, employee options pool, directors/advisors, etc).

Joe Hurd Husband. Father. Operator. Advisor. Investor.

July 17th, 2013

0.1 to 0.5 pct (10-50 bp) vested monthly over a 2-3 year term. Sent via smartphone - Pleez excuz mistaks. Blame Siri. +1 650 215 3115 Hurd3rd@gmail.com

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