Pick your advisors like you would a co-founder. At best, an advisor can be critical to your success as a company; at worst, they can be a distraction and waste of precious time, or even a liability.

The name advisor. Your main benefit from this type of advisor is through association.

The practical advisor. Think of this advisor as your sounding board.

It’s also not uncommon for advisors to ask about following-on future financing rounds with their own money, investing directly in the company.

First, figure out what you want in an advisor. You want someone who can help compensate for a weakness you have.

Before promising equity, it’s worth asking a potential advisor if they would invest in your company instead of taking equity. Investing directly gives them more skin in the game and sends a valuable signal to future investors as well.

it only makes sense to give equity “because of how helpful somebody has been or the founder feels like they’re going to be demanding on somebody’s time.” That’s the time to formally establish the relationship.

Help you and your advisor get aligned by putting together a signed agreement

The advisor’s domain of expertise
What they’re going to help you with
What percentage of equity (if any) they’ll get, or other compensation

Whatever decision you come to with your advisor, make sure to document the agreement. Especially if equity is involved or promised. We recommend you talk to a lawyer and work with your potential advisor on an agreement that works for everyone.

“Founders are the ones driving the cadence [of communication].” says Clayton, “They’re the ones building the agendas and holding the expectations in terms of interacting with that advisor.”

we looked at advisor shares issued in 2019 for companies that have raised under $2 million.

Advisor RSAs: From 0.2% to 1% of a company
Advisor NSOs: From 0.1% to 0.5% of a company

The earlier an advisor joins a company, the higher the fully-diluted amount they’ll usually be granted.

A vesting schedule for advisors, just like you have for yourself and your employees, is crucial. These agreements often have a two year schedule, vesting monthly, with no cliff.

Avoid a four year schedule because most advisors are going to deliver most of their value up front. You can always re-visit the relationship after a year or two and see if you want to keep going forward.