How Much Stock Should Advisors Get in a Startup
I wanted to post a link to a Tech Crunch Interview that Rip Empson did with Adeo Ressi from The Founder Institute on How Much Stock to provide a Advisory Board Member for startups.
The Founder Institute uses a percentage of each participating company stock for a pool of shares. These shares are split with the Mentors for the Semester. So each Mentor owns a very small percentage of the FI Grad companies. I’ll come back to this topic later in the post…
Two specific things to note in the article:
- There is a great grid that lays out the Stage and the Expectation on roles and responsibilities.
- There is also a set of Free Documents in the post from Founder Advisory Standard Template (FAST), did I mention that they are free?
For Founders, there are three specific things to consider in recruiting and using your Advisory Board:
- Get the offer and documents done fast – out of courtesy to the Advisors, you can meet with them once or twice for free to interview and see if it’s a good fit. But when you start asking for advice you are simply taking advantage of their time. I have done advisory work for one early stage company that later sold and amazingly they forgot about my percentage… don’t be one of those founders.
- OK, your passionate about your startup, but please have a little self awareness. Your “generous” .5% offer doesn’t mean you get to abuse the relationship. I think they are great guideline and as mentioned in some of the comments in the post, it’s probably a little light for the idea phase. The reason I call that out is that I was asked in the Fall to join an advisory board in a company I knew was going to require more of my time then the .5% equity was going to be worth… It was early stage and still needed to pivot it’s go to market approach a couple of times. If your the Founder and You don’t get a reply to the offer in the time requested ASK…
- Specifically for FI Companies: If you want feedback from one of the semester Mentors don’t treat them like they owe you something or that they automatically signed up for an advisory board slot just because they were mentors. Your expectation is out of touch with reality. They have a company to run as well. I had that problem in the past where one of my FI Founders was asking “Why aren’t they returning my call”. Well, let’s look at the facts… they might have met you and realized your offer was less then then market given the amount of work? Or they could have just thought you were an ass?
Bill, great question…
I think quarterly over two years is great. Unlike an employee you don’t need to use a one year cliff vest. Advisor’s are normally a known commodity, so a cliff vest isn’t required.
However, it’s the Founder’s job to manage the relationship with the Advisor to get their moneys worth over the two years. What I normally see is that there is a great deal of enthusiasm to start then it wains as reality of the startup hits the founders. They should schedule regular meetings with the Advisors as a group or individually. The agenda should be about getting feedback, not selling the Advisor on the idea (again).
Good and thoughtful post. thank you Dave
Dave, do you recommend these vest in quarterly increments over two years? Bill