Advisory boards · Advisor Equity

Many first-time entrepreneurs form advisory boards and grant 0.25-0.5% equity to each adviser. Is this ok?

Yana Podskrebalina QA Test Engineer at Woact Company

November 1st, 2016

My colleague and I just founded a startup. Since we have no prior experience in running a business we plan to form an advisory board. We just started so we don't have a lot of resources but of course we want to compensate them somehow. I have read recently that the usual thing to do when newly founded company forms an advisory board is to grant them some equity. How much should that be? What do you think?

Jorge Lopez CFO & Chief Strategy Officer, Cofounder at ConquerX - MassChallenge Finalist | altMBA | Mentor @MIT Global Entrepreneurs

November 2nd, 2016

Usually advisors take something between 0,25% to 1%, with a vesting period of 1 to 3 years, it depends the seniority of the advisor, it is common to pay a defer rates as well that may vary from 100$ to 200$/hr that startup will pay once the pre-defined goals have been achieved, like funding round Seed round or Series A, signing a partnership agreement, users tractions ... or whatever goals you have defined previously.

Selvan Rajan

November 1st, 2016

0.25% to 0.5% is the norm. I would suggest a few points on even within this range, which one is appropriate 0.25% or 0.5%: 1. how relevant to your industry, 2. how many hours in a month he/she can spare for you, 3. other than running the business, does he/she bring other values like industry contacts
Still, please make sure that it has the same vesting points: 25% at the end of first year and then either monthly or quarterly for the next three years.