What’s the best way to compensate your advisors?

Babak Nivi (Co-founder of AngelList and Venture Hacks. Previously, he was an entrepreneur-in-residence at Bessemer Venture Partners and Atlas Venture.)
Everything you ever wanted to know about advisors, Part 2 – Venture Hacks

What should I pay advisors?
Nothing—get them to pay you. Ask advisors to invest. You get money, save stock, and amplify the advisor’s social proof in the process. But lots of good advisors can’t or won’t invest

Babak Nivi (Co-founder of AngelList and Venture Hacks. Previously, he was an entrepreneur-in-residence at Bessemer Venture Partners and Atlas Venture.)
Everything you ever wanted to know about advisors, Part 2 – Venture Hacks

The normal advisor gets 0.1%-0.25% of a company’s post-Series A stock. Normal advisors do something important for the company and aren’t expected to do much beyond that. For example, they introduce the company to a key customer or investor.
Normal advisors are also assembled by naive entrepreneurs who think the mere presence of an advisory board will create social proof and help them raise money. But investors don’t take these mock advisory boar… (read more)

Babak Nivi (Co-founder of AngelList and Venture Hacks. Previously, he was an entrepreneur-in-residence at Bessemer Venture Partners and Atlas Venture.)
Everything you ever wanted to know about advisors, Part 2 – Venture Hacks

The super advisor can get as much stock as a board member: 1%-2% of a company’s post-Series A stock. Super advisors help make your company happen. They know all your prospective customers intimately. Or they raise your money for you. Or they bring you a handful of great employees. They can even add more value than an independent board member because they don’t have to deal with corporate governance.
If you find a super advisor, you want to incent… (read more)

Babak Nivi (Co-founder of AngelList and Venture Hacks. Previously, he was an entrepreneur-in-residence at Bessemer Venture Partners and Atlas Venture.)
Everything you ever wanted to know about advisors, Part 2 – Venture Hacks

Whether you’re hiring a normal advisor or super advisor:
Advisory shares are usually issued as common stock options.
The options typically vest monthly over 1-2 years with 100% single-trigger acceleration and no cliff. Although the advisor is on a vesting schedule, you should expect them to add most of their value up-front—that’s normal.
Many advisors want options they can exercise immediately—that’s fine.
If your company hasn’t raised a Seri… (read more)

Babak Nivi (Co-founder of AngelList and Venture Hacks. Previously, he was an entrepreneur-in-residence at Bessemer Venture Partners and Atlas Venture.)
Everything you ever wanted to know about advisors, Part 2 – Venture Hacks

Angels or seed investors may ask for advisory shares. They might argue that they will be more helpful than the other investors, so they should get advisory shares.
But every investor thinks he will add more value than the other investors. We would like to propose a shareholder’s code of conduct: if you think you’re doing too much, you’re probably just doing your share.
So, how do you decide whether you should give advisory shares to an investo… (read more)

Mike Crill (High-tech CFO since 1995, helped raise over $150MM in angel and venture funding)
How to Divide Equity to Startup Founders, Advisors, and Employees | thinkspace

Directors – 1/2% to 2% option. Vested 36-48 months. No cliff, no cash.
Advisors – 1/10% to 1/2% option. Vested 36-48 months. No cliff, no cash.

FounderDating (Network of talented entrepreneurs with different backgrounds and skill sets all ready to start their next company or project)
| FounderDating

Company Stage
Advisor Experience Idea/pre-launch Seed Series A Series B+
First/second time advisor .2 – .5% .1 – .4% .1 – .25% .1 – .25%
Fairly experienced .2 – .5% .25 – .4% .1 – .3% .1 – .3%
Known Entity .5 – 1% .4 – 1% .2 – .5% .1 – .4%

FounderDating (Network of talented entrepreneurs with different backgrounds and skill sets all ready to start their next company or project)
| FounderDating

Why do I have to give equity, can’t we pay cash?
Advisors, the way we’re defining them, are individuals that are able to give strategic advice based on experience as entrepreneurs, executives and/or deep expertise in a certain area. Your incentives should be aligned around growing the company and equity is the best way to do this. There is nothing wrong with project-based on hourly consultants, but FD:Advisors and this agreement does not serve t… (read more)

Jason Calacanis (CEO of Inside.com, Formerly “Entrepreneur in Action” at Sequoia Capital)
Should you give advisors equity in your startup? | Calacanis.com

Advisors ask founders to trade “advice” and “work” in exchange for equity. Founders who haven’t raised money yet typically get advisors because, well, they are unable to get investors!
Cynics (typically VCs) say things like, “if you could get investors — who advise for free — why would you get advisors who don’t put any cash at risk? Those people are not earning their equity!”
The cynical folks are right 80% of the time — the advisors don’t earn … (read more)

Jason Calacanis (CEO of Inside.com, Formerly “Entrepreneur in Action” at Sequoia Capital)
Should you give advisors equity in your startup? | Calacanis.com

Vest the shares the advisor will receive over two years (you won’t need them longer than that).
Typically they get .25 to .50 points in a startup — one point is they are a complete hero.
Put a dollar value on that equity. If you give .50 in a company worth $10m that’s $50,000 — not a ton of money depending on what they do.
Write a letter of agreement for what they will do for that equity. This should be as detailed as possible: e.g., the advis… (read more)

Founders Institute (Operates as an early-stage startup accelerator)
The Founder Institute: Helping Founders to Build Great Companies

Idea Stage Startup Stage Growth Stage
Standard: Monthly Meetings 0.25% 0.20% 0.15%
Strategic: Add Recruiting 0.50% 0.40% 0.30%
Expert: Add Contacts & Projects 1.00% 0.80% 0.60%

Founders Institute (Operates as an early-stage startup accelerator)
The Founder Institute: Helping Founders to Build Great Companies

It is not uncommon for a technology startup to have a 5% pool of equity allocated to a group of strategic advisors or an advisory board.

Steve Hoffman (Cofounder of LavaMind)
How much equity do I give to my Board of Advisors? | Founders Space

I agree the typical range is between 0.01% to 3%, depending on experience and other assets the advisor brings. It also depends on what stage your company is at. 1% of a startup without VC funding is very different from 1% of a later stage startup with VC funding. The % depends in large part on the valuation and prospects of the company.

Steve Hoffman (Cofounder of LavaMind)
How much equity do I give to my Board of Advisors? | Founders Space

Another good idea is to tie additional equity to goals. For example, you could give all your advisors 0.25% to begin with, and if they hit certain goals, like making 5 or more key introductions a month, then after the first year they get an additional 0.25%. This way you motivate your advisors to really perform.

What’s the best way to write good copy?

David Jackson (Founder, Seeking Alpha)
Best practices in copywriting for marketing your product | A Founder’s Notebook

Don’t make it about you. I want to know what all that work means to me.

John Moore Williams (Head of Content Strategy at Webflow)
10 UX copywriting tips for designers – InVision Blog

When you’re writing copy: 1. Embrace the power of “you”: The word “you” catches attention and establishes a relationship between you and your reader. 2. Don’t make it about you [the seller]. I [the buyer] want to know what all that work means to me. 3. Don’t try to sound smart. Aim for a 5th-grade reading level.

John Moore Williams (Head of Content Strategy at Webflow)
10 UX copywriting tips for designers – InVision Blog

When you’re editing copy: 4. Read it aloud. If it doesn’t sound right read aloud, it’s not conversational. 5. Be the editor writers hate. Aim to cut 50% of your word count with each editing round. 6. Remember that writing and editing are different. Don’t try to write and edit at the same time.

John Moore Williams (Head of Content Strategy at Webflow)
10 UX copywriting tips for designers – InVision Blog

When you’re designing copy: 7. Label. People don’t know what they’re looking at unless you tell them. 8. Embed links in relevant, descriptive language. Make sure your links make it extremely clear what will happen on click. 9. Design with content in mind. Consider whether design is helping or hindering your writing. 10. Scale the page to the topic. If your product’s unfamiliar, complex, or expensive, you’ll usually need more content.

Geoffrey James (a contributing editor for Inc.com, is an author of the award-winning blog Sales Source)
Get Inside a Customer’s Head

Imagine that you look like the customer: same height, same weight, same complexion, same gender. (Hint: check out his or her LinkedIn photo. ) Imagine that you have the exact same background: same education, same companies, same experience. (Hint: LinkedIn again. ) Imagine you must deal with the same challenges: the same customers, the same colleagues, the same vendors, the same bosses. Finally, from that perspective, ask yourself: What benefits … (read more)

What’s the best way to use your board well?

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
MBA Mondays: Leveraging Your Partners To Grow And Develop Your Team – AVC

Selectively engage your investors in the recruiting process. Use them when they can help. Use them to close an important candidate. Use them to get a second or third opinion on a particularly important hire. Don’t give your investors control over your hiring decisions but engage them as trusted advisors.

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
MBA Mondays: Leveraging Your Partners To Grow And Develop Your Team – AVC

Expose your investors to your team. Give them a sense of the culture of the company and the composition of the team. Give your best and brightest “air time” with your investors. Your employees will like it and so will your investors. I really enjoy being invited to speak to an all hands meeting, or to have lunch with the team, or to go play paintball with a couple portfolio companies.

David Jackson (Founder, Seeking Alpha)
Do most VCs add negative value? | A Founder’s Notebook

Being aware of where you add value vs. not isn’t just a requirement for VCs — it’s true for everyone. Having clarity myself about where each board member adds value vs. not has significantly helped me get the most out of Seeking Alpha’s (excellent) board.

David Jackson (Founder, Seeking Alpha)
Where VCs and board members add the most value | A Founder’s Notebook

In my experience, Seeking Alpha’s board members have added most value in three areas: (i) helping us hire great people, (ii) introducing us to business partners, and (iii) helping us raise money by enthusiastically introducing us to other investors.

What’s the best way to use your blog?

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
Feature Friday: A/B Testing Headlines On WordPress – AVC

AVC community member Shana Carp has been building a neat service that A/B tests headlines for WordPress posts and helps you figure out the one that will bring the most traffic.
It’s called BayesianWitch. You can sign up here and add the plugin to your WordPress.

David Jackson (Founder, Seeking Alpha)
Thank you @susanmernit for the best advice for bloggers I ever heard | A Founder’s Notebook

Susan Mernit once said to me: “Don’t use your blog as a sledge-hammer. ” I’ve never forgotten that.

What’s the best way to use events and conferences?

Mitchell Harper (Co-Founder & Board Member @ Bigcommerce)
28 things I’d do differently next time around — Medium

Don’t speak at conferences — they’re a massive waste of time

Sam Altman (President at Y Combinator)
Startup Playbook

For anything you consider doing, ask yourself Is this the best way to optimize growth? For example, going to a conference is not usually the best way to optimize growth, unless you expect to sell a lot there.

Dan Martell (Co-Founder of Flowtown, CEO and Co-Founder of Clarity)
Startup Conferences 101: Getting Your Money’s Worth | @getmoreclarity

In order to do an effective post-mortem on the return on the conference, set aside some time before the event to determine your metrics for success, and use these as benchmarks to hold yourself accountable throughout the conference. For example, often times entrepreneurs attend events to meet new people, expand their network and get introduced to specific people. Make a clear list of the those you want to meet at the event and make sure you get t… (read more)

What’s the best way to use crowfunding platforms?

Paul Graham (Co-Founder & Partner at Y Combinator)
How to Raise Money

There are now sites like AngelList, FundersClub, and WeFunder that can introduce you to investors. We recommend startups treat them as auxiliary sources of money. Raise money first from leads you get yourself. Those will on average be better investors. Plus you’ll have an easier time raising money on these sites once you can say you’ve already raised some from well-known investors.

Sam Altman (President at Y Combinator)
The separation of advice and money – Sam Altman

On the positive side, founders may end up with less total dilution and get to choose whatever advisors they want [with funding platforms]. On the negative side, advisors probably wont work quite as hard for a company that they don’t have a lot of capital invested in.

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
Decoupling Advisory From Custody – AVC

I think the idea of a 10 year fund where the VCs have custody of the LPs’ capital and make all the decisions is not going to be the norm. Companies like our portfolio company CircleUp and AngelList are building important new platforms and paving the way with regulators to allow the same kind of thing that is happening in the stock market to happen in the venture capital market. And that’s a good thing. Change is good, even in my own business.

What’s the best way to use banner ads?

Tony Haile (CEO at Chartbeat)
Chartbeat CEO Tony Haile: What You Get Wrong about the Internet

Research has consistently shown the importance of great ad creative in getting a visitor to see and remember a brand. What’s less well known is the scientific consensus based on studies by Microsoft [pdf], Google, Yahoo and Chartbeat that a second key factor is the amount of time a visitor spend actively looking at the page when the ad is in view. Someone looking at the page for 20 seconds while an ad is there is 20-30% more likely to recall that… (read more)

Tony Haile (CEO at Chartbeat)
Chartbeat CEO Tony Haile: What You Get Wrong about the Internet

Here’s the skinny, 66% of attention on a normal media page is spent below the fold.

What’s the best way to understand your company’s financial position?

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
MBA Mondays From The Archives: Cash Flow – AVC

One last point and I am done with this week’s post. When you are doing projections for future years, I encourage management teams to project the income statement first, then the cash flow statement, and then end up with the balance sheet.

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
MBA Mondays From The Archive: Analyzing Financial Statements – AVC

Companies can try to bury ongoing expenses in one-time charges and inflate their earnings. You don’t see that much in startups but you do in public companies and it’s a “red flag” if a company does it too often.

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
MBA Mondays From The Archive: Analyzing Financial Statements – AVC

Working capital is the non cash current assets and liabilities of the business. When they grow rapidly in relation to revenues, it means you are financing other parts of the food chain in your industry and that’s a great way to run out of cash.

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
MBA Mondays From The Archive: Analyzing Financial Statements – AVC

So if monthly income and monthly cash flow aren’t in the same ballpark, look at the changes in working capital month over month. We went over this a bit last week in preparing the cash flow statement. If working capital is the culprit soaking up the cash, you need to look at two things.

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
MBA Mondays From The Archive: Analyzing Financial Statements – AVC

If someone asks you how much cash you have in your business, or a business you are analyzing, and you can’t answer that to the last accounting period (at least), then you failed. There is no middle ground. Cash is that important.

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
MBA Mondays From The Archives: The Balance Sheet – AVC

The top line, cash, is the single most important item on the balance sheet. Cash is the fuel of a business. If you run out of cash, you are in big trouble unless there is a “filling station” nearby that is willing to fund your business. Alan Shugart, founder of Seagate and a few other disk drive companies, famously said “cash is more important than your mother.” That’s how important cash is and you never want to get into a situation where you run… (read more)

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
MBA Mondays From The Archives: The Balance Sheet – AVC

After cash, I believe the liability section of the balance sheet is the most important section. It shows the businesses’ debts. And the other thing that can put you out of business aside from running out of cash is inability to pay your debts. That is called bankruptcy.

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
MBA Mondays From The Archives: The Balance Sheet – AVC

In summary, the Balance Sheet shows the value of all the capital that a business has built up over the years. The most important numbers in it are cash and liabilities. Always pay attention to those numbers. I almost never look at a profit and loss statement without also looking at a balance sheet. They really should be considered together as they are two sides of the same coin.

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
MBA Mondays From The Archives: Cash Flow – AVC

There are many examples of profitable businesses that consume cash. And there are also examples of unprofitable businesses that produce cash, at least for a period of time.

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
MBA Mondays From The Archives: Cash Flow – AVC

Cash flow is really easy to calculate. It’s the difference between your cash balance at the start of whatever period you are measuring and the end of that period. Let’s say you start the year with $1mm in cash and end the year with $2mm in cash. Your cash flow for the year is positive by $1mm. If you start the year with $1mm in cash and end the year with no cash, your cash flow for the year is negative by $1mm.

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
MBA Mondays: Accounting From The Archives – AVC

If you have a company, you must have financial records for it. And they must be accurate and up to date. I do not recommend doing this yourself. I recommend hiring a part-time bookkeeper to maintain your financial records at the start. A good one will save you all sorts of headaches. As your company grows, eventually you will need a full time accounting person, then several, and at some point your finance organization could be quite large.
There… (read more)

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
MBA Mondays From The Archives: The Profit and Loss Statement – AVC

A profit and loss statement is a report of the changes in the income and expense accounts over a set period of time. The most common periods of time are months, quarters, and years, although you can produce a P&L report for any period.

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
MBA Mondays From The Archives: The Profit and Loss Statement – AVC

Every business needs to look at its P&L regularly and I am a big fan of sharing the P&L with the entire company. It is a simple snapshot of the health of a business.

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
MBA Mondays From The Archives: The Profit and Loss Statement – AVC

Numbers don’t tell you everything about a business. That is very true. A P&L can only tell you so much about a business. It won’t tell you if the product is good and getting better. It won’t tell you how the morale of the company is. It won’t tell you if the management team is executing well. And it won’t tell you if the company has the right long term strategy. Actually it will tell you all of that but after it is too late to do anything about i… (read more)

What’s the best way to understand the differences between being public and private?

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
The Blurring Of The Public And Private Markets – AVC

Staying private won’t shield you from the pains of going public. Because the lines are blurring between the private and public markets and we are in for more blurring and it will come faster in the coming years.’

What’s the best way to understand the difference between CTO and VP of Engineering?

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
VP Engineering Vs CTO – AVC

A VP Engineering is ideally a great manager and a great team builder. He or she will be an excellent recruiter, a great communicator, and a great issue resolver. The VP Eng’s job is to make everyone in the engineering organization successful and he or she needs to fix the issues that are getting in the way of success.
A CTO is ideally the strongest technologist in the organization. He or she will be an architect, a thinker, a researcher, a teste… (read more)