As an example, the startup can offer: 1) 5% equity ownership. 2) Discount in the next round. What could be some other examples? The responsibility of the advisor is to help raise $100k.
Advisor compensation is variable. It is as variable as the different kinds of new ventures in existence.
The company's strategic plans and their funding approach are important considerations. Consider that 99% of companies do not raise venture capital - popular media would have us believe it is the only way to build a company, and it is actually a very small number that go that route (by design or default).
The fundamental considerations are the design of the advisory board, it's mission, goals, meeting schedules, lengths of term, caliber of the advisor and ultimately the companies expectations of its advisors. The compensation needs to be commensurate with those plans and expectations.
Compensation considerations include: retainers, fees for each meeting attended, lodging and travel costs.
Forms of compensation include: cash, options, warrants, phantom stock or value participation rights which may have a predefined payout with change of control or significant funding event or etc. And they may include a combination of any of these forms.
Compensation value ranges from $2500 to $10,000 per quarter ($10,000 to $40,000 per year) and may be distributed with a mix of cash and equity forms. Cash is a scarce resource in most startups and therefore deferred compensation and/or equity become most popular or most heavily weighted in the mix.
Side note: NACD publishes annual survey results of Board of Director (as opposed to advisory board) compensation packages. They are much higher, because of the fiduciary responsibility of serving on a BOD, that is not present in the advisory board. Still it helps serve as a benchmark of sorts.
At the end of the day as an entrepreneur, CEO, or founder that is planning to establish an advisory board, you need to realize that you are seeking wisdom, network, time and resources from a person having some sort of domain expertise.
What you really hope for, is to develop a long term relationship with that person and it all begins with a well thought out and well designed advisory board program.
I'm happy to discuss further >>
Answered 9 years ago
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