What is the standard equity stake for an advisor of a pre-funded and pre-revenue mobile app startup?

Advisor would be helping with VC contacts, marketing strategy and overall business execution.


Standard here is 1% with a 12 month vest, assuming the kind of involvement you're describing. message me your email on Clarity and I'll send you the standard docs which also spell out involvement.

I've answered this exact question before so I would suggest to all new Clarity members that you use the search to see if the answer to your question already exists.

I would caution you that an advisor shouldn't be responsible for things that fall into the "execution" bucket.

Answered 9 years ago

There isn't really a standard. If you know what the advisor would normally bill for their time, I would start there. Determine how many hours they will put in and then what they would normally bill per hour. The next part is the hard part. What is the startup worth? We sometimes will wait until the first round of funding and extrapolate out the stake then based on the valuation, but we also normally insist on part of the payment in cash. You can also set and agree to a valuation at the time the work starts, but that could bog you down in a lot of negotiation.

Both sides need to agree on deliverables and value of the advisor to the startup getting off the ground.

Sometimes an advisor is so impactful, that it might make sense to offer closer to founders level shares, but that is all in the determination of value.

Answered 9 years ago

That's a good one! Very hard to answer question from both sides of the deal, the advisor and the company.
To help you decide maybe separate the work to two: general advisory/ business development and VC contacts (in that I guess you mean - "get me VC investments" - right?).
For the general work you need to estimate the amount of work that will be done by the advisor but keep in mind that most companies allocate 5%-10% of their equity for ESOP (Employees and consultants Shares Options Plan) and from what I've seen advisors usually take 1%-2%. However, for the VC contacts (and make sure he/she are not "brokers" if they are not licensed as such)you can offer a percentage (usually between 5% to 10%) from the investment or a percentage from the issued shares in such investment (again 5%-10%) or both.

Answered 9 years ago

It is a matter of figuring out how much his involvement is worth to you and how much the % of your company is worth to him taking risk in consideration. That being said, startups can get some advisor help for free though you cannot expect extensive involvement when it is free.

Answered 9 years ago

An advisor would advise you around "How to do" than "What to do". What to do is something that requires collective thinking, advisor included. You can't expect an advisor to help you with anything and everything i.e. VC (Investment). Marketing Strategy (Brand & Sales), and Overall Execution (Everything & Anything). Know that you're looking for an advisor, not establishing departments around one employee.

As far as equity stake is concerned, there's no rule of thumb for that and depends upon your business idea, risk involved with the same, and other critical parameters.

Answered 9 years ago

I work in the medtech and biotech spaces, but for reference, I've typically experienced 2% or less equity with a vesting schedule of up to 4 years for an advisory role. The more equity, the longer the vesting.

Answered 9 years ago

The answers so far are a great representation that it varies across all types of companies.

My recommendation is a range of $10,000 - $40,000 per advisor, per year (depending on board design, meeting freq, and advisor expectations. This may be translated to an equity participation (.25% - 3%/ea) or other deferred compensation method.

Vesting is definitely a good design element. Several answers mentioned the possibility of advisor drift. It is important that your advisory board is well designed and well run to ensure that you are able to extract great value from the advisory team. One of the intangible forms of compensation is the advisors sense of giving and contributing value. When Advisory Boards are poorly designed and/or poorly managed communication breaks down, relationships weaken or never get started, and the advisor may not feel they are appreciated or that they are able to make a meaningful contribution to the venture.

Your company's ability to cultivate those relationshipswith your advisors and create well prepared and engaging meetings will often be more important than a vesting schedule to the advisor's involvement. Nevertheless, always vest.

Lets discuss your venture >>

Answered 9 years ago

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