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The question that I most frequently get asked about advisory
boards is: "How much equity should I give to a member of my
advisory board?" The answer is very little, almost certainly
less than the entrepreneur is thinking about. Perhaps some numbers
would be useful here. How about .1% (that is a tenth of a percent)
to perhaps .5% -- depending upon the value to be provided. By the
way there should be vesting involved. The vesting period should be
long enough to cover the period in which you expect to be getting
value from the advisor.
Having now answered (to the extent I am comfortable doing so in
the absence of any specific knowledge or facts of any particular
case) the only question any client ever asks about advisory boards,
I hasten to note that there are a lot of other – far far
better – questions that could be asked about advisory
boards. Here are a couple: What value can I reasonably expect from
a member of my advisory board? How do I get that value? Why do I
need an advisory board at all? How do I find good advisors?
I don't have any objective or quantifiable information
around whether and how much value start-ups derive from their
advisory boards. My gut sense, based only on my law practice, is
not much. Mostly, what start-ups get is the opportunity to name a
few luminaries on a slide towards the back of their deck. The
second thing they probably get is some introductions, probably to
investors.
I am sure there are some companies and entrepreneurs that have
benefited greatly from advisory boards, but I have to believe this
is a small number. Below are a couple of links to blog posts on the
subject of advisory boards. The one from venture hacks seems to me
to be particularly good in that it covers a lot more than just
compensation, although it also covers comp.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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