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How much equity to advisor who will bring investment too?

We are early stage, pre-revenue but with a live product. Great team with industry-specific experience in-house. Solid 5 year plan.

Potential advisor will bring capital but also other services: grooming us for (and sourcing) Series A investment, big business thinking, etc. So they would be a pretty hands-on advisor.

Should it be performanced-based and should it be vested… if so how… and big question:

HOW MUCH EQUITY?

  • I say yes and yes. I paid someone recently to do the same. Gave him $30K to work with us for 6 months, and 3% equity. Big mistake. While he put some effort in, his supposed contacts were a lot fewer than he said. Make it performance based and vest him over 1-2 years.

    There are lots of people out there claiming to do the same. Few deliver.

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  • My starting point is that shareholder advise should always be free,. If that shareholder is bringing in big bucks, the extra equity (warrant) is basically a large investor discount. If he is angling for an advisory role also, then separate that role, treat him like any other employee – performance-based and vesting period.

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  • Definitly no equity beyond what they invest for. Any more would be vested ove two to three years based in “makin rain”. All Angels who are worth a damn help their investmets trrive because it hedges against loss on their capital, not for more equity. @kaffegeek

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  • There is no easy answer. Although the feedback has been negative here so far, there are indeed examples of brokers / advisors who bring capital to the table (make it rain) and thus justify their retainers and commissions and equity grants.

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  • Standard advisor pay: 0.5-2% max, on vested schedule.
    Standard advisor acquisition procedure: Ideally, in the beginning, advisors do not collect equity, they give input because they want to help. After sometime (eg regular help over a couple months), if the founders find advisor useful, then they propose a permanent arrangement with equity.
    Standard advisor duties: advice company on any/all aspects, depending on advisor expertise, make intros to potential partners/investors/employees, etc.

    UNLESS advisor is investing some money themselves, no additional equity. And if they invest, then no founder equity for them, only the equity from their investment. Likewise, $$ compensation is only for actual employees.

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  • OP here… if the advisor/potential partner is our pipeline to finance and can secure seed and series A money (which is f-ing hard to do as we’re first-timers) then hell, we could go as high as 10% !!

    Purely performance-based of course. If they don’t bring it it, or deliver on their ‘advice’, then they don’t get it?

    Do first-timers need to take such a risk to get going if they have a chance to secure finance… I say HELL-YES !!

    Who agrees? Please +1 me.

    Reply

    • Dumb is as dumb does. Any investor who sees e.g. 50k (10%) of 500k investment going to pay for some advisor will yank their money back and you’ll end up branded as a fool. And you know word gets around, so don’t become that person.

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