The Guide to Advisor Shares: Minimizing Time to Product/Market Fit

The Guide to Advisor Shares: Minimizing Time to Product/Market Fit

Introduction:
When building a startup, having a vesting schedule for advisors is crucial, just like you would have for yourself and your employees. But before promising equity, it's important to consider alternative options and choose advisors wisely. In this article, we will explore the importance of advisor shares and how they can contribute to the success of your company. Additionally, we will discuss strategies to minimize your time to product/market fit, a key factor in the survival and growth of tech companies.

Choosing the Right Advisors:
Selecting advisors should be approached with the same level of consideration as choosing a co-founder. Advisors can either be instrumental to your success or become a hindrance and waste valuable time. It is crucial to find individuals who can compensate for your weaknesses and add value to your company. Additionally, consider if they would be willing to invest directly in your company instead of taking equity, as this demonstrates their commitment and sends a positive signal to future investors.

Establishing the Advisor Relationship:
Once you have identified potential advisors, it's essential to establish a formal relationship to ensure clarity and alignment. This can be achieved through a signed agreement that outlines the advisor's domain of expertise, the specific areas they will assist you with, and the compensation they will receive, whether it be equity or other forms of remuneration. Documenting the agreement is particularly important when equity is involved, and it is advisable to seek legal counsel to ensure all parties are satisfied.

Determining Equity Allocation:
When it comes to allocating equity to advisors, it is crucial to consider their contribution and the stage at which they join your company. Generally, advisors who join earlier in the process are granted a higher percentage of equity. However, it is advisable to avoid a four-year vesting schedule, as most advisors provide the majority of their value upfront. After a year or two, it is essential to reassess the relationship and decide whether to continue moving forward.

Actionable Advice:

1. Choose advisors who can complement your weaknesses and add value to your company. Consider their willingness to invest directly in your company instead of taking equity.
2. Establish a formal relationship with your advisor through a signed agreement that clearly defines their role, compensation, and equity allocation if applicable.