Advice About Advisory Boards
April 29, 2012
The question that I most frequently get asked about advisory boards is: “How much equity should I give to a member of my advisory board?” The answer is very little, almost certainly less than the entrepreneur is thinking about. Perhaps some numbers would be useful here. How about .1% (that is a tenth of a percent) to perhaps .5% -- depending upon the value to be provided. By the way there should be vesting involved. The vesting period should be long enough to cover the period in which you expect to be getting value from the advisor.
Having now answered (to the extent I am comfortable doing so in the absence of any specific knowledge or facts of any particular case) the only question any client ever asks about advisory boards, I hasten to note that there are a lot of other – far far better – questions that could be asked about advisory boards. Here are a couple: What value can I reasonably expect from a member of my advisory board? How do I get that value? Why do I need an advisory board at all? How do I find good advisors?
I don’t have any objective or quantifiable information around whether and how much value start-ups derive from their advisory boards. My gut sense, based only on my law practice, is not much. Mostly, what start-ups get is the opportunity to name a few luminaries on a slide towards the back of their deck. The second thing they probably get is some introductions, probably to investors.
I am sure there are some companies and entrepreneurs that have benefited greatly from advisory boards, but I have to believe this is a small number. Below are a couple of links to blog posts on the subject of advisory boards. The one from venture hacks seems to me to be particularly good in that it covers a lot more than just compensation, although it also covers comp.
Venture Hacks - “Everything you ever wanted to know about advisors”
Ask the VC - “Are Advisory Boards Helpful?”
Ask the VC - “Advisory Board Compensation”