Expert Advisors; By Sutter Law a San Francisco Business Law Firm.
Who should be your Startup Advisor.
As a business, corporate and transactional law firm we get asked about when and who should be on the board of advisors for your startup. The short answer is your startup should get advisors early; a good advisor is worth their weight in gold. Typically you will want an advisor for technical know-how; you will want an advisor for legal structuring, a financial advisor, and marketing advisor. You generally don’t want redundant advisors since you will be paying them in equity.
Who should be an advisor: As a general rule you want Rock Stars. Its worth giving .5% – 1% to someone with industry contact, funding connections and the knowledge to save you from making the same mistakes that others have made.
How much equity should you give an advisor: This is a trick question and it depends on the stage your startup corporation. There are a few criteria that you should consider:
Standard advisor; someone with skill, knowledge but not many connections.
Idea State = .25%
Startup stage = .20%
Growth Stage =.15%
Strategic Advisor; someone who can intro you to angle investors and customers.
Idea State = .50%
Startup stage = .40%
Growth Stage =.30%
Expert Advisor: someone who has seen numerous exits, has been a big shot during an IPO.
Idea State = 1%
Startup stage = .80%
Growth Stage =.60%
These are only some guidelines to help you negotiate with your prospective advisors. If you need advice regarding your advisor or a template advisor agreement, please reach out to an experienced business law attorney at Sutter Law.