Equity · Advisor Equity

What are fair expectations for an advisor who's been given equity?

Sati Hillyer Looking to Hire a Ruby Engineer to join OneMob - 2015 Gartner Cool Vendor for CRM Sales

August 22nd, 2014

I've been seeing a lot of people saying advisors typically take .25% to 1%. What are fair expectations in return?

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Jessica Alter Entrepreneur & Advisor

August 28th, 2014

Fair question. First, we've created both a guide for equity to give and a template agreement (w/orrick and gunderson) that can be found here members.founderdating.com/resources/templates.

Second, for any advisor you start working with you should be cognizant of what they are bringing to the table. In my mind their value can come in a couple categories:
1. Industry Knowledge - they are an industry expert. Often times these aren't startup people, but people inside an industry that understand it and can help navigate it.
2. Product Knowledge - they are great at a certain area you need help in - mobile distribution, hardware manufacturing, B2B sales, technology scaling, etc.
3. Relationships - they are a connector and not only can they get you to people (this can include fundraising) that you need to talk to but they are willing to - important distinction.

4. Entrepreneurial Leadership/Coaching - they've been through the entrepreneurial trenches and they can help you with big and small decisions. They've built teams, they've failed, etc. Don't underestimate the importance of this last category.

You should verbally agree to a time commitment with your advisors and how they want to communicate in between e.g. once a week by skype or every 3 weeks in person. You can put it in an agreement but at the end of the day if they don't want to engage an agreement won't force them.

I also wrote a comprehensive list of questions to talk over with advisors before you formalize the relationship > founderdating.com/questions-to-ask-potential-advisors-the-master-list

Hunter Hayes Founder & CEO at Zerocycle

August 23rd, 2014

Pretty good article. 

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

Darrin Parker

August 26th, 2014

Here are standard advisor expectations and compensation parameters provided by the Founder Institute:

I haven't used the template myself but I am considering it right now.

Cheers,
Darrin

Mark Silva Finance & Operations at KITE

August 23rd, 2014

Agree with other responses. You should spell out expectations in an engagement letter, fwiw. I posted a couple of open source samples you can use as a starter. http://www.scribd.com/RealMarkSilva

I have a range of advisors from ones that look like consultants actively delivering services to our business (legal, design, etc) to ones that complement my knowledge and expertise in specific areas. We expect formal monthly checkins by Google Hangout, availability for 24-hour turn on specific questions (which I don't use/abuse but like having the safety valve there) and twice a year in person.

Hope this is helpful. Cheers! 

Michael Weickert ♦ Strategic & Entrepreneurial Executive ♦ Trail-blazing leadership in biotech, medical device & pharmaceutical business

August 23rd, 2014

Advisors should be on the low end of that range unless they are going to be relatively active participants in the company and actually performing some small services. It is up to the company and advisor to mutually agree to the roles and expectations, and there are no hard and fast rules. That being said, there are some norms to consider.

Typical advisor expectations are: providing feedback and comments on corporate activities in their areas of competence, answering questions in their field, making introductions in their field, attending occasional meetings including with other advisors to discuss company strategy and plans. These activities should be limited to on average no more than 1-2 requests every couple weeks. There may be periods of significant engagement followed by periods of little or no engagement as long as it averages out. If advisors are performing work such as conducting experiments, creating prototypes, testing product, drafting documents, conducting meetings on the company's behalf, the company should be paying them as a consultant, which it can do in addition to their advisory role.

Good luck.
Michael

Max Martinez Creator

September 2nd, 2014

I could spend my time echoing all the great advice given above, but I really think it just depends on how much expertise that person has in the industry and how much time they give your company.

For example, if someone was starting a food service and somehow got a way to get Mark Zuckerberg as an advisor, how much does he know about food and how much time would he give you? Probably not much (although I would never ever doubt him!) and he'd probably command quite a hefty percentage.

But what if you got an advisor who has started a few small restaurants and has been fairly successful? He may not know as many people as Zuck, but he would probably have closer relationships to people in the industry and actually be able to lay out a game plan with you.

Basically, lay out exactly what you want from them and expect them to deliver, that's how you can determine the percentage they get.

Jane He CEO at Signority, secure signature workflows

September 3rd, 2014

Great discussion. The techcrunch template is an excellent starting point. It's very important to have 3 months cliff period, which means you don't compensate anything within 3 months.  

Before you make your decision, be careful if your candidate will spend the time as committed. I have excellent advisors but also had to fire a few in the past. When the business just started, you might have idea. There are lots of, what I called "opportunists": they might have successes in their businesses in the past. They make use of their successful history to sign up many startups, more than 20. Then they don't spend time to understand your business. They might have some "raw" ideas from time to time and then shot you those immatured ideas. This will become very distractions to you. When things go south, they blame you cannot execute, you cannot talk to customers...My experience is: you need to be absolutely believe in yourself. You also have the power to do right things for your company - fire them if you cannot work with them.    

Thomas Loarie "Bringing Entrepreneurs and Technology to Life" CEO and Chairman, Mentoring and Coaching of C-Level Executives

September 2nd, 2014

Templates and guidelines are great but the reality will be "what will it take" to get critical advisors on board. If they are not critical to the mission then they should not be added. Flexibility is the byword. 

Arman Gukasyan CEO at 3DreamTeam Inc. Product Manager of Revizto 3D visual collaboration software

September 2nd, 2014

In my experience when I did not clearly stated my expectations from advisors the real input was irrelevant to our team and our product. 
I agree with other comments you should really understand what you want to get from an advisor in which exact field of expertise. And that all should be clearly stated in an engagement letter. Also involve advisor to project his own expectations of his input that is going to make in your company that's a good exercise for both parties.