The guide to advisor shares - Carta

The guide to advisor shares - Carta

In the world of startups and entrepreneurship, having advisors can be crucial to the success of a company. However, it's important to approach the process of selecting and compensating advisors with careful consideration. This guide aims to provide insights and actionable advice on advisor shares and how to make the most of this relationship.

When it comes to advisor shares, a vesting schedule is essential. Just like you have vesting schedules for yourself and your employees, it's important to have one for advisors as well. These agreements typically span over two years, with monthly vesting and no cliff. This ensures that advisors are committed to the long-term success of the company.

Before promising equity to advisors, it's worth considering if they would be willing to invest in your company instead. By investing directly, advisors have more skin in the game and it also sends a valuable signal to future investors. This approach aligns the interests of the advisor with the company's success.

The process of selecting advisors should be approached with the same level of scrutiny as selecting a co-founder. Advisors can either be critical to the success of the company or become a distraction and waste of time. It's important to choose advisors who complement your weaknesses and can provide valuable insights and guidance.

There are different types of advisors, each serving a specific purpose. The first type is the advisor who brings value through association. This advisor's main benefit is the credibility and network they bring to the table. The second type is the practical advisor who serves as a sounding board for ideas and provides guidance based on their expertise. They may even invest directly in the company, further aligning their interests.

When establishing a relationship with an advisor, it's important to have a clear understanding of expectations and compensation. A signed agreement outlining the advisor's domain of expertise, the areas they will help with, and the percentage of equity or other compensation they will receive is crucial. This helps both parties align their goals and expectations.

It's also important to document the agreement, especially if equity is involved. Seeking legal advice and working closely with the potential advisor to create an agreement that works for everyone is recommended. Founders are responsible for driving the cadence of communication and building agendas for interactions with advisors.

When it comes to determining the equity percentage for advisors, it's helpful to look at industry benchmarks. In 2019, advisor RSAs ranged from 0.2% to 1% of a company, while advisor NSOs ranged from 0.1% to 0.5%. The earlier an advisor joins a company, the higher the fully-diluted amount they are usually granted. It's important to avoid a four-year schedule, as most advisors deliver the majority of their value upfront. Revisiting the relationship after a year or two can help determine if it should continue.

Fighting Infomania: Why 80% of Your Reading is a Waste of Time - Nat Eliason

In today's digital age, we are bombarded with an overwhelming amount of information. From industry news to how-to guides and everything in between, it's easy to get caught up in the noise. However, it's important to recognize that not all information is created equal and that a significant portion of what we consume is a waste of time.

Toyota realized the importance of creating cars just in time, allowing them to respond quickly to market changes and only produce what they knew they needed. This concept can be applied to our consumption of information as well. We need to focus on acquiring tactical knowledge that directly impacts our goals and strategies, rather than getting caught up in the constant stream of information.

There is a distinction between tactical knowledge and philosophical knowledge. Tactical knowledge refers to specific strategies and tactics relevant to our industry or field, while philosophical knowledge relates to broader concepts and understanding. It's important to strike a balance between the two, but overdosing on tactical knowledge can be counterproductive.

Conventional wisdom suggests that we should follow what people in our industry are talking about tactics-wise. However, this often leads to information overload and noise. The key is to identify a few high-quality resources or articles that provide valuable insights and focus on those instead of consuming information from multiple sources.

The Lindy Rule can be a helpful guide when determining the staying power of information. Anything that has been around for 50 years is likely to be around for another 50 years, while something that is new has no proof of staying power. Prioritizing content that has stood the test of time can help filter out the noise and focus on what truly matters.

It's important to be mindful of our time and avoid engaging in fauxductive activities. Fauxductive activities are tasks that feel productive but don't directly impact our most important goals. This includes bingeing on just-in-case knowledge, constantly checking email, reading the news, and trying out various productivity tools. If an activity doesn't answer a specific question, cover philosophical knowledge, or entertain us, it's best to avoid it.

When consuming information, it's important to have a specific outcome or goal in mind. Output-driven actions that involve applying what we learn immediately tend to have a higher return on investment than just-in-case learning. However, just-in-case knowledge can still be valuable in providing new ideas and perspectives, even if we don't remember the details. Our subconscious mind retains the information, which may resurface when needed.

In conclusion, selecting and compensating advisors should be approached with careful consideration. Vesting schedules, clear agreements, and aligning interests are essential for a successful advisor relationship. Additionally, being mindful of the information we consume and focusing on what truly matters can help us overcome infomania and make the most of our time.