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 structure your board?

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
Who You Want On Your Board – AVC

One of the guys who taught me the venture capital business used to say “success is in inverse proportion to the number of VCs you have on your board.” He was right. For a few reasons. First of all, most VCs get on your board by virtue of financing rounds you do. If you do a lot of financing rounds, you will collect enough VCs on your board to field a basketball team. And that sucks. And it means you had to raise too much money too. All of which a… (read more)

What’s the best way to structure your board?

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
Who You Want On Your Board – AVC

If I could construct the perfect Board for the companies I am invested in, it would be the CEO, me, and three CEOs who have built and/or run one or more tech companies of scale. If you have a very experienced VC on your board, you really don’t need more of them. But you can never have enough peers on your board who have been where you are before. That is invaluable.

What’s the best way to structure your board?

Ryan Howard (Founder @ Practice Fusion)
Transcript: Protecting yourself as the founder; Ryan Howard | VatorNews

When you actually incorporate a company, one thing you can do and that I highly recommend is putting together three to four common board seats upfront. This is critical, maintain control of your company as long as you can. At the board level is where it’s most critical. Many founders, including myself, actually lose control of their company after the Series A financing. When Practice Fusion closed its original Series A financing with Morgan Taylo… (read more)

What’s the best way to structure your board?

Sam Altman (President at Y Combinator)
Board Members – Sam Altman

Personally, I think the ideal board structure for most early-stage companies is a 5-member board with 2 founders, 2 investors, and one outsider. I think a 4-member board with 2 founders, 1 investor and 1 outsider is also good (in practice, the even number is almost never a problem).

What’s the best way to structure your board?

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
The Perfect Board – AVC

I’ve been serving on boards for 25 years. I’ve been in every conceivable configuration. To my mind, the perfect board is either five or seven and it looks like this: Founder CEO, Two Independents, Two Investors . Founder CEO, Three Independents, Three Investors. If the Founder is no longer the CEO, then I like this configuration: CEO, Founder, Two Independents, Three Investors

What’s the best way to structure your board?

Fred Wilson (Co-Founder and Partner at Union Square Ventures)
Independent Directors – AVC

The biggest piece of advice I give to entrepreneurs on the topic of boards is to get some independent directors on their board. Ideally these would be peer CEOs who have a lot of experience building and managing companies. Recruiting board members takes time. Most entrepreneurs prefer to recruit people who work for them and can impact the day to day effectiveness of their organizations. And so they prioritize that.

What’s the best way to structure your board?

Ryan Howard (Founder @ Practice Fusion)
Transcript: Protecting yourself as the founder; Ryan Howard | VatorNews

If someone’s’ that valuable to help you or wants to be in the board that bad, put an advisory board together. Give them the same equity, give them a great title, but why make them your boss? Totally unnecessary. I recommend don’t adding board members unless you absolutely have to. Again, the board’s role is hiring and firing you so why create additional overhead, and again, to maintain control of the board as long as you can as a founder.