This is a post that really should be a comment on Brad Feld’s blog entry on How Much Equity Should I Give An Advisor? The reason it’s on my blog and is a trackback is that I tried and failed twice to post a comment to Brad’s blog. I’m blaming co-comment right now for that mishap. It’s the first time I had to add more information in a form to post a comment – c’mon guys, this is supposed to be make it easier. Anyway, on to the topic at hand.
**UPDATE** See comment #2 below. Plus, apparently Co-comment did get my comment (actually both tries) but the comment was never posted to Brad’s blog. Comment threading and tracking really needs to get better /**
Read Brad’s post if you’re interested in the broad topic. It’s a good post. My addition is on how much I’ve comped advisors in the past.
I typically provide about 0.2% per advisor in fully-diluted post Series A stock. Sometimes I’ll do more – like 0.3% – if the advisor has exceptional experience and/or network related to the business/market opportunity. Sometimes I do less if the advisor is serving in a niche capacity. These are non-qual options (again see Brad’s post) and vest over 3 years – providing the advisor the benefit of the low early strike price.
The other thing I do – recently – is construct a one-page letter outlining expectations on the relationship. This states what the advisor will provide and their time commitment expected. It also states how to work with them so that we respect their time and relationships. I review this letter prior to finalizing any deal. It’s one of the best control mechanisms that I’ve used on ad boards. It makes conflicts easy to broach and it also sets expectations for results from the get-go.
My ad board size has varied from 2 to 5 members from startup to startup.