Advisors · Startups

What is the best way to include an advisor in the capital of a startup?

Anton Yakovlev Founder of four successful businesses on two continents who can help you do the same

October 18th, 2015

Plainmark needs to include a couple of advisors. What are the best practices to give them their shares? A stock option? Common stock? Some other way? 
You’re ready to turn your idea into a business. But how do you protect it from competitors and copycats? In this course, an experienced patent attorney explains the different types of legal protections to help you determine which is best for your business.

Peter Kestenbaum Advisor, Investor, Mentor to Emerging firms

October 18th, 2015

Stock vested over a period of time is the legacy approach..  A half to one percent has been traditional.
If the advisor has a very specific role.. Say you have a software package applicable to wall street and he is a retired svp for Citibank you should tie a success fee to performance.     Upon the advisor helping you secure an order exceeding x from one of the following named firms he is entitled to.....
Other approaches used has been allowing advisors to invoice you but payable only upon certain milestone schedules such as an institutional investment or revenue.  Just a token such as a maxof 2% of any investment over 250k.  A method to save cash that I once used was allowing my invoice for services to be credited into the founders original convertible note.  No cash out of his pocket, upside for me, and accelerated vesting of sorts.

In all these the key is to have the advisor invested in the success of the firm on one side and the ability of the founder to separate if it makes sense

Hope that helps

Peter Johnston Businesses are composed of pixels, bytes & atoms. All 3 change constantly. I make that change +ve.

October 21st, 2015

It is very tempting to give away equity. WHen you have a startup it seems like worthless paper - after all 10% of a company worth a few thousand dollars is a lot less money than paying them - right?

But think of your unicorn. 10% of a billion dollars is 100 million. Is their advice worth that. Because you are tied to that valuation for ever.

Be more pragmatic. Think about what motivates them. For some it will be money, for more it will be about helping people, making a difference - or perhaps they are just engaged in the problem being solved.

I see it like a present. Stock options are like the gift voucher - little thought behind it and it takes a lot of money, but isn't seen as having that much value. Put some thought into the present and you'll get more engagement, more perceived value and a real shared sense of purpose.

Brett Fox Respected, Results-Oriented CEO, Entrepreneur, Author, and Coach

October 18th, 2015

Advisors should be given stock options vesting over a four or five year time period with no cliff.  In other words advisors should vest 1/48th or 1/60th of their options every month.

This is pretty standard, and this is what I have previously done.

Steven Rahseparian Founder & Chief Executive Officer at Secured Universe

October 18th, 2015

0.10% - 1.00% common stock grant vesting over 24 months.  

Advisor with no on-going duties = 0.10%

Advisor making valuable intros/connector, very active and one of your evangelist = 0.50%

Advisor that is actively helping the company on a weekly basis, helping you fundraise, bring in sales, etc = 1.0

Thomas Kaled Business Development Consultant @ thomas.kaled@gmail.com

October 18th, 2015

Are the advisors willing to accept stock? What advisors are needed? Are you asking about board members or business advisors? Do you have a Stock Option plan that creates the Class of Stock necessary for non employees and what will the exercise price be?

These are just some questions to answer before making a decision. Typically a stock option plan creates qualified and non-qualified classes. Qualified is typically granted to employees, has a holding period (option period), is treated differently by the IRS and if not public a buy-back clause. Non-qualified is for non-employees and has less (typically no) restrictions about holding etc. 

Susannah Kirksey Marketing, PR and Business Development Executive, Executive Coach and EMDR-Trained Psychotherapist

October 18th, 2015

Done it many years! A mix of equity and cash optimally, an advisor who brings to the table for start-ups their time, network and expertise across major business functions from BD, Investor Funding, Software Development, Operations to Marketing/PR.

Vesting is important, but alas, if you've done it, not many start-ups and options/stock ever make it to vesting! Short-term vesting or stock, but the details are not as important as the broad split b/w equity and cash compensation.

Andrew Lockley

October 19th, 2015

Depends on stage of development. If the firm is established, vesting is appropriate. Otherwise, almost all the risk, and most of the work, is up front.

Adam Walker

October 20th, 2015

CUT THE NOISE, please use the Founder-Advisor-Standard-Template, this'll sort you out: http://fi.co/contents/fast

Gab

October 18th, 2015

Stock options with vesting, without a doubt.

Don Kingsborough VP Global Retail , BD and Corporate Development

October 18th, 2015

You should give me stock options with a 4 year vest.  If they are going to be more than just advisors you may have to pay them a daily fee.