Advisors · Entrepreneur

What's the value proposition that we must keep before startup advisers ?

kartik mundhra CEO at Coachgator

April 16th, 2016

From the last few days I am in touch with many startup advisers, as we are looking for one to have on board. We are not in position to pay them. So what's the value proposition must be put forward?

Emeka Oguh Founder & CEO at PeopleJoy

April 17th, 2016

Not an exact science but I've heard .25% is a good number. Before taking on an adviser, you should ask yourself what exactly will they be giving you advice with and how they can actually provide value and not just lip service. In my opinion, value equals 1 of 3 things.

1. Product Value (they are able to convince key talent to come join your company)
2. Money Value (they are able to line up investors for your startup, or CAN put in a significant amount of capital themselves)
3. Sales Value (they are a strategic partner and can buy your product or can open doors and make intros to other companies that will buy your product)

Figure out what the biggest need of your startup is RIGHT NOW, and make sure the adviser has a strong skillset in that area. If sales/user acquisition is your biggest problem, then an adviser who is really great with product might not the best use of your equity right now. 

Also, if you can make their equity vest based on hitting certain milestones that provides better protection for your company.

Steve Owens Startup Expert

April 17th, 2016

I would hire an advisory team, not just one person, or a collection of individuals who have never worked together before.

The best ones deffer their payment until some revenue milestones are achieved - that is, they get paid when the company has the revenue to pay them.

Rob G

April 17th, 2016

Kartik, spend some time on and you will find some guidelines on advisor compensation, agreements, etc.  Be clear on what kind of advisor you need and what you expect from the relationship.  If your expectation is that your advisors need to commit to x deliverables over y timeframe then you need to offer a compelling opportunity - cash and/or equity compensation, opportunity to work with other skilled advisors, etc.  You need to have a compelling story.  you need to prove to your advisors that you have significant expertise already on your team, evidence of viable product/market fit, and compelling customer value proposition.  Without these basic ingredients and cash you will have a difficult time convincing the right advisors (or cofounders or partners) to help you with your dream for only equity.  If you are very early stage and you don't yet have these basics in place then what you really need is a mentor who can point you in the right direction as you build/obtain these basics. You can find lots of advisors who will work for cash.  Ideally you want skilled, experienced advisors who's motivations are aligned with the company's - no different than an investor, which they are if they are being compensated with equity only.  No amount of equity is compelling if you don't already have the basic ingredients for success in place. 

John F Seek Marketing and Tech partners to help disrupt beer

April 17th, 2016

Broadly speaking there are two types of advisors. One will give you a few hours of their time per month and, maybe, some investor introductions. These "passive Advisors" are good as window dressing to boost legitimacy and possibly attract some interest. For these a bit of equity will suffice. The second type are "active Advisors" who will spend some serious time helping you assess your markets, put together plans, prep you for fundraising and generally help you avoid mistakes.  These guys are in the business of advising entrepreneurs and need to be compensated with cash. Both types are called Advisors so make sure you're clear about what type of help you're after.

David Ph.D. Brand Strategist, Consultant to Tech, Energy, Financial Services, Hospitality

April 18th, 2016

Hi Kartik,

The advice in this thread is good. But I'd look from another angle, too. Be sure you need the advisors you're inviting to the table. And be sure they will contribute to your enterprise in tangible ways--that is, that their compensation is tied to measurable impact. If they aren't prepared to have skin in the game, you're better off keeping your equity at the source of value creation, namely you.

Good luck,


Maxine Pierson CEO, MJ BIOTECH, INC.

April 16th, 2016

Great question; my advice  is stock in the company and/or  perhaps giving an equity interest in your patents. Is very hard to ask talented people to basically work for free; My very best to you.
Best Regards, 
Maxine Pierson

Saravjit Singh Independent Consultant and Trainer

May 8th, 2016

Consider paying them with shares in your startup. When the startup goes public and is successful these shares will be worth a great deal. 
You work towards success and get paid for it.

Andy Freeman Product Management and ... - Looking for new opportunities

May 18th, 2016

> I have seen many advisors working on a success fee model. They take a %age of funds raised as success fee, %age of revenues generated as success fee.

You have to be careful with this. Very few advisors are registered broker-dealers. I mention broker-dealers because only registered broker-dealers can legally take a cut of funds raised in return for help in fundraising. That's US law, but some other countries have similar restrictions. (You care because illegal fundraising scares off many investors.)

For example, specifically calls out "Engaging in, or finding investors for, venture capital or "angel" financings, including private placements;" and says that B-D restrictions apply when "Does your compensation for participation in the transaction depend upon, or is it related to, the outcome or size of the transaction or deal? "

Google "registered broker dealer definition" for more information.

Sumit Goswami Senior C Level Executive, CEO, Co Founder, Board Member

May 17th, 2016

I have seen many advisors working on a success fee model. They take a %age of funds raised as success fee, %age of revenues generated as success fee. 
The model that really works is a combination of equity and cash. Cash can be deferred or linked to revenue generation milestone, if the advisor is really interested to help you succeed.