Advisory Board Compensation for your Startup
September 9, 2008
We are working on building our advisory board for Big in Japan and one of the prospective directors asked about compensation. Before I responded I recalled I wrote a post on compensation for advisors, but after searching for it I couldn’t find it. I decided to check with Brad and Nivi for advice.
Brad’s advice was pretty straight forward suggesting that “1% is rich“. Nivi suggested there are two types of advisors ‘normal’ and ’super’: “The normal advisor gets 0.1%-0.25% of a company’s post-Series A stock. Normal advisors do something important for the company and aren’t expected to do much beyond that. For example, they introduce the company to a key customer or investor. Normal advisors are also assembled by naive entrepreneurs who think the mere presence of an advisory board will create social proof and help them raise money. But investors don’t take these mock advisory boards seriously. The super advisor can get as much stock as a board member: 1%-2% of a company’s post-Series A stock. Super advisors help make your company happen. They know all your prospective customers intimately. Or they raise your money for you. Or they bring you a handful of great employees. They can even add more value than an independent board member because they don’t have to deal with corporate governance. If you find a super advisor, you want to incent him as much as possible and push him to help make the company happen. They can be much more effective than 5 or 10 normal advisors.”
Based on their advice it would seem that ‘normal advisors’ should get around .15% of the deal and ’super advisors’ should get around 1.5%. What are you seeing in the market? Do you have an advisory board?
