Equity Allocation for Advisor Compensation

[daniellea]

Is there a predefined (e.g., 0.1% - 2%) percentage for how much equity one should offer to the advisor?

 

[miabby]

@daniellea It’s a tricky question. There are answers upon a quick google search. But the nuance lies in your relationship with the advisor as well as their understanding of being an advisor to a startup. The issue occurs when an advisor who isn’t well versed with startup advising begins to get greedy looking at valuations and inflates the value of their advice. In such instances, it might be simpler to communicate objectively; state what you’re looking for specifically and how much of their time you’d need on retainer. Then present the dollar value of the compensation you’d be offering them for their advice as opposed to percentages. It’s a simple reframe, but it tends to put things into perspective better. Percentages always seem so small

 

[daniellea]

@miabby thanks @miabby for your advice... it becomes tough when the compensation round come... what is the fair equity we should give...

 

[miabby]

@daniellea There is no fair compensation in reality. It all depends on the expectations. If the advisor is open and relying on you to share what the equity component would be then it’s best to search on YC’s extensive resources for what an ideal amount would be based on your company stage; and offer that.

 

[1faith4all]

@daniellea Carta has some data on it. BenchSci's CEO wrote a good article on it on Medium (too lazy to pull up links)

 

[daniellea]

@1faith4all I found a post from carta ceo

https://www.linkedin.com/posts/pete...6-Q9Pm?utm_source=share&utm_medium=member_ios

 

[meki]

@daniellea CARTA has data on advisor compensation.

Go to LinkedIn and look up Peter Walker from CARTA.

In his post history in the last 30 days he details advisor equity compensation.

 

[daniellea]

@meki I found it … thanks for the details…
https://www.linkedin.com/posts/pete...6-Q9Pm?utm_source=share&utm_medium=member_ios

 

[meki]

@daniellea You bet!

 

[faith61]

@daniellea Usually don't get an advisor. There is usually no signal for it with venture capital.

Top tier individuals will invest in your co with small cheques if they believe in you...and that is a good signal. You can reward these people with outsized equity for their investment. But don't give people equity for advice.

The signalling doesn't exist. Period.

You can sign a contract for equity grant if they hit certain milestones (sales intros, etc).

 

[romane91]

@daniellea This refers to board but applies one a 1:1 level too https://bothsidesofthetable.com/should-your-startup-have-an-advisory-board-c7cab4872838

 

[ruthracheal]

@daniellea As much as they pay for with cash or work

 

[johnhus1966]

@daniellea Advisors should be for very unique circumstances. Most startups do not need them. If you want an advisor get them to invest in your startup at current valuation.