Some founders give advisors ridiculous amounts of equity — 5% or more. This is a huge mistake. Here’s how to do it right… 

Pick the Right Advisors

You want advisors with real expertise in what your startup is doing. Avoid people whose value add is unclear. 

Say you have a SaaS company that sells to homebuilders. Bringing on an advisor with decades of experience in the industry could make a lot of sense. 

He knows what homebuilders need. He also has a lot of connections that could help you in sales. 

Limit The Roster

You don’t need 10 or 20 advisors. 2 to 5 is plenty.

You only have time for regular calls with so many advisors anyway!

A long list of advisors is not going to impress investors. I skip right past the Advisors slide. 

Focus only on the advisors you truly need to make your startup a success. And don’t forget, you don’t have to have any advisors at all! 

Keep Equity Reasonable

Typical equity for an advisor is 0.25% to 0.5%. Definitely don’t give more than 1%.

Some rookie founders give away huge slugs of equity. This leaves less equity for you, your co-founders, your team, and future investors. 

An advisor is probably only spending a few hours a month on your company, at most. That isn’t worth 5%. 

Get It in Writing

You need a written agreement, signed by both parties. The agreement should specify how much equity the advisor is getting and what you expect in return.

Say you bring me on as an advisor to your startup… 

My expertise is primarily in fundraising. Maybe you give me 0.25% for two hour-long calls per month. At those calls, we’ll look over your deck and discuss your fundraising strategy. 

Vest the equity monthly over two years. If I’m not performing, you can cut me loose and keep your equity. 

Many founders use the FAST Agreement as an easy way to bring on an advisor. This is a solid approach. 

Wrap-Up

Advisors should be a small part of your startup, if you have them at all. Pick a couple experts, give them modest equity and clear tasks to complete. 

And don’t forget, advisors aren’t going to make or break your startup. 

Treat them as a useful add-on. Nothing more. 

More on tech: 

Your Deck Probably Sucks. Here’s How to Fix It.

How to Run a Pitch Meeting

How to Tell If Investors Are Really Interested

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