A startup founder recently asked “so what’s the right amount of equity to give to advisors and board members?” The answer is none. Here’s why.
No one cares who your advisors are. We’re a Series A investor and never have I asked “so who are your advisors?” It’s just not important. What investors care about are the milestones you’ve achieved, your statistics and financials, valuation, and where you’re headed. Advisors mean nothing.
Advisors fizzle out. The vast majority of advisors want to be super helpful when you first meet them and many are, but then their utility fades. There is only so much even the best advisor can do for you. No one knows as much about your business as you’re about to learn, so by nature an advisor’s value is capped.
Advisors are expensive. Let’s say you have 5 advisors and you give each one 0.5% of the equity. Well, that’s 2.5% of the business once you add it up. That’s meaningful, especially if you believe your business will sell for $50mm+. Generally speaking, you should hoard your equity and give it to no one, not even independent board members if you can get away with it. Equity is for founders, investors who buy it, and employees who vest into it only.
The best advisors are free. The best advisors you’re going to find are ones that talk to you for free. They’re motivated by seeing you succeed, not by taking your precious equity. If an advisor insists on equity, that tells you all you need to know about the person.
Visit us at blossomstreetventures.com and email us directly with Series A or B opportunities at firstname.lastname@example.org. Connect on LI as well. We invest $1mm to $1.5mm in growth rounds, inside rounds, small rounds, cap table restructurings, note clean outs, and other ‘special situations’ all over the US & Canada.