Questions

What are the best strategies for a company to attract & compensate formal advisors on a board? What normal? Is it money, or equity - etc?

We know how useful advisory board members can be when you plan on expanding your business, what are some of the ways you can compensate such experienced individuals. I am looking for common ways and contract/deals done between the company and the advisory board members.

4answers

Mark is correct that the best advisors should have skin in the game but that advice is applicable only when you and your business are obviously investable. I've engaged advisors at times when I knew I wasn't ready to ask for their money and I've often begun advisory relationships in the earliest of stages where I like in and believe in the entrepreneur and the idea but they don't yet meet my investment criteria.

Also, the old adage is true: Ask for advice, and you might just end-up with the person offering or even asking to invest. This has happened to me again on both sides of the table.

In terms of compensation, I have a chart that spells out specific advisor expectations and stage-appropriate equity based compensation that I can email anyone who DM's me here through Clarity. Mark's answer is lower than I would accept for a start-up that isn't well funded. But anything above 1% would be really unusual and would have to be a really, really hands-on advisor or partial contributor as a team member.

It should never be money on a retainer basis. I now have several people who call me regularly through Clarity to talk through specific things but other than that, it wouldn't be reasonable to expect cash compensation in a formal advisory role. And I would personally be vary of that because if they're not taking equity, then they really, much to Mark's point, have any skin in the game.

I have a standard template that I use as an advisor (it was originally given to me by a company I advise) and I know use it with my own advisors, so happy to pass a stripped version of that agreement as it's the best one I've seen and is clearest for both parties.

Just DM here via Clarity if you want it.


Answered 6 years ago

I have always used the guidance provided by the Founder Institute. They "open sourced" thier advisor agreement. Don't forget to read the addendum for explanations on % depending on involvement and company stage.

Check it out http://fi.co/contents/206


Answered 6 years ago

Ask 100 people to go to lunch to get their opinions on something. Tell them about your thoughts of the future and then ask lots of questions. The right advisers will volunteer.

This way works great - there are a few other ways if you want to discuss.

Cheers!


Answered 6 years ago

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