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May 17th, 2013

Advisor Compensation

Here’s some practical advice: From time to time I get asked how you properly compensate advisors and/or board members. Usually the preconceived notion when it comes to equity compensation is way, way of the chart: I regularly hear people throw out numbers in the 1% to 5% range.

So let’s set this straight (and hopefully save you some pain).

With the classic caveat that this should be taken as a starting point for a discussion and that “it depends” typically you give someone who works with you as an engaged advisor or board member somewhere in the 0.1 to 0.25% range equity in your organization. The further developed your organization is the less of a stake you hand out — simply because the valuation of your company increased over time.

And remember: EVERY TIME you hand out equity tie it to a vesting clause — NOBODY (that includes your co-founders) should get stock without working for it. And be greedy about your equity — it’s all you have. I wrote about this in more detail here and here.

Bonus: The Founders Institute published a great advisor agreement template.

And just to say: If you ask you’ll find that quite a few people are also happy to just help you (without any compensation). Just don’t forget to say thank you from time to time and show your gratitude. :)

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