A broad network of advisors can help early stage companies go to the distance.
Key considerations in forming formal advisor relationships:
Formal advisors typically receive equity in the company to compensate for their time and effort. Depending on the advisor’s level of active contribution (i.e. introductions to talent pool, target customers, etc.), time commitment, and stage of the business, equity allocation can range from 0.15% to 1.00%. An example based on time commitment: between 0.1% (quarterly) and 0.25% (monthly), and up to 0.5% if weekly meetings.
Other potential structures:
Founder Institute’s FAST (Founder Advisor Standard Template)
| Standard Performance | Time Commitment: 5 hours/mo Meetings: Quarterly strategy meetings, scheduled Advisory Board meetings Responsiveness: Reasonable to email | **Actively introduce to general contacts in network Forward materials at company request | 0.25% for Idea stage 0.20% for Startup stage 0.15% for Growth stage | | --- | --- | --- | --- | | Strategic Performance | Time Commitment: 10 hours/mo Meetings: Monthly strategy meetings, scheduled Advisory Board meetings, at least one meeting with partners, customers, vendors, or employees Responsiveness: Quick to email for those in or associated with company | ***Actively introduce to general contacts in network Forward materials at company request Assist in finding team members and employees | 0.50% for Idea stage 0.40% for Startup stage 0.30% for Growth stage | | Expert Performance | Time Commitment: 20 hours/mo Meetings: Bi-monthly strategy meetings, scheduled Advisory Board meetings, internal project related meetings, meetings with partners, customers, vendors, and employees Responsiveness: Quick to email or phone for those in or associated with company | ***Actively introduce to general contacts in network *Forward materials at company request Make key introductions to partners, customers, vendors, and employees and join meetings Assist on at least one strategic project | 1.00% for Idea stage 0.80% for Startup stage 0.60% for Growth stage |
| Team | Customers | Revenue | Investors | Product | |
|---|---|---|---|---|---|
| Idea | Only part-time founders | In discussion with potential customers to determine market, pricing/revenue developed but needs validation | None | At least one, usually the founder or their friends or family | Minimum viable product specifications - wireframes, system designs |
| Startup | Full time, hiring initial employees | Letters of intent or customer commitments, validated market | Might be collecting revenue | Might have friends and family or professional investors | Launch of minimum viable product imminent |
| Growth | Full time, hiring initial employees | Significant traction and user based growth | Is collecting revenue | Prior investment may have been raised or prepared to raise | Product launched and periodically refined with customer feedback |
OCV recommends 4-year (monthly) vesting for advisors.
Advisor compensation and scope of services should be outlined clearly in the Advisor Agreement. Each OCV company will receive its own Advisor Agreement templates from legal counsel.
https://www.ycombinator.com/library/7E-startup-advisor-equity