The guide to advisor shares - Carta

The guide to advisor shares - Carta

When it comes to building a successful company, having the right advisors can make all the difference. But how do you go about finding the right advisors and ensuring that they are invested in your company's success? The answer lies in advisor shares and creating a vesting schedule that aligns both parties' interests.

A vesting schedule for advisors, similar to what you have for yourself and your employees, is crucial. These agreements often have a two-year schedule, vesting monthly, with no cliff. This ensures that the advisor is committed to the long-term success of the company and incentivizes them to stay engaged.

Before promising equity to an advisor, it's worth considering if they would be willing to invest in your company instead. By investing directly, they have more skin in the game and it sends a valuable signal to future investors as well. This approach not only aligns the advisor's interests with yours but also shows their commitment to the company's success.

It's important to pick your advisors like you would a co-founder. An advisor can either be critical to your success or a distraction and waste of time. Take the time to carefully evaluate potential advisors and assess how they can compensate for your weaknesses. Look for someone who can bring expertise and experience that complements your own skill set.

There are different types of advisors, each offering unique benefits. The name advisor provides value through association, while the practical advisor serves as a sounding board for your ideas and decisions. Some advisors may even be willing to invest their own money in your company, further demonstrating their commitment.

Once you have identified the right advisor, it's important to establish a formal relationship. This includes putting together a signed agreement that outlines the advisor's domain of expertise, what they will help you with, and what compensation they will receive. Documentation is crucial, especially if equity is involved.

In terms of equity distribution, it's important to consider the advisor's contribution and the stage at which they join the company. Advisors who join early on may receive a higher percentage of equity, while those who join later may receive less. Avoid a four-year vesting schedule for advisors, as they typically deliver most of their value upfront.

In order to ensure a successful relationship with your advisor, communication is key. As the founder, you should drive the cadence of communication and set expectations. Regularly interact with your advisor and seek their input on important decisions. Remember, they are there to help guide you and provide valuable insights.

Now, let's shift our focus to Clayton Christensen, a renowned Harvard Business School professor and author. In his talk at Google, he discusses the different types of innovation and the concept of "jobs to be done." Christensen explains that growth comes from understanding the needs and desires of customers, rather than demographics.

He introduces the idea of a causal relationship, where companies must understand the functional, emotional, and social aspects of a job to be done. This includes providing a seamless experience, integrating various elements, and applying the right branding. By focusing on the job to be done, companies can better meet the needs of their customers and drive growth.

Christensen also highlights the importance of business models in driving disruption. Often, it is not about developing the best technology but rather about rethinking the entire business model. Disruption is built within the business model itself, not just through technological advancements.

In his talk, Christensen also touches on the topic of measuring one's life. He challenges the idea that achievement is the sole metric for happiness and encourages individuals to consider the long-term effects of their actions. Immediate evidence of success may not always lead to long-term fulfillment. It's important to seek a balance and find meaning in the work we do.

In conclusion, the guide to advisor shares highlights the importance of aligning interests and creating formal agreements with advisors. Choose advisors wisely, considering their expertise and how they complement your own skills. Communicate effectively and regularly with your advisor to maximize the value of their guidance.

As for Clayton Christensen's insights, understanding the needs of customers and focusing on the job to be done is crucial for driving growth. Disruption often lies within the business model itself, and measuring one's life goes beyond immediate achievements. Seek a balance and find fulfillment in the long run.

Actionable advice:

1. Carefully assess potential advisors and choose those who can compensate for your weaknesses.
2. Consider asking potential advisors if they would be willing to invest directly in your company instead of taking equity.
3. Regularly communicate with your advisor and seek their input on important decisions. Drive the cadence of communication and set expectations.

By following these actionable advice and incorporating the insights from both the guide to advisor shares and Clayton Christensen's talk, you can build strong relationships with advisors and drive growth in your company. Remember to document agreements and always prioritize the long-term success and alignment of interests.