Here are more frequently asked questions about advisors. See Part 1 for the rest. If you have more questions, email us at ask venturehacks. Nothing—get them to pay you.

Ask advisors to invest. The normal advisor gets 0. For example, they introduce the company to a key customer or investor. Normal advisors are also assembled by naive entrepreneurs who think the mere presence of an advisory board will create social proof and help them raise money. The super advisor can get as much stock as a board member: Super advisors help make your company happen. They know all your prospective customers intimately.

Or they raise your money for you.

How Should I Compensate an Advisory Board? | anajevopule.web.fc2.com

Or they bring you a handful of great employees. If you find a super advisor, you want to incent him as much as possible and push him to help make the company happen. They can be much more effective than 5 or 10 normal advisors. Most super advisors are unique and Y Combinator is a great example.

Finally, there is a beauty to paying in equity rather than an equivalent amount of cash. If you pay for a service in cash and you want that service again, you have to pay again.

If you pay in equity, you pay once and keep getting served ad infinitum. Equity is the gift that keeps on giving. Your shareholders own you, but you also own them. Advisory shares are normal common stock.

The Supreme Court has never heard a case regarding advisory shares. If someone helps your company succeed, it is only fair to share that success with them.

If you want to do repeat business with people, you need to treat them right the first time around. Equity also keeps advisors on the hook: If they were helpful once, they can probably be helpful again. And people with a financial interest in your future tend to return your calls. Equity also incents advisors to keep working for you in the background whether or not you ask them to. The opportunity cost is probably too high.

You want to get paid so 1 you can own a little piece of the company in case it happens to be the next Google and 2 so the company signals that it values your time and contribution. Angels or seed investors may ask for advisory shares. They might argue that they will be more helpful than the other investors, so they should get advisory shares.

But every investor thinks he will add more value than the other investors.

First, determine how many shares you would give him if he were just an advisor. Then subtract the number of shares he is buying with his investment.

This is why you never give advisory shares to venture capitalists nor do they ask for them: If I gave you advisory shares, I would have to give them to all the investors. But if the balance is significant, you need an argument that makes sense to the other investors or they will also ask for advisory shares and lower your effective valuation:.

And in relationships, words are not enough. You need an agreement from day one that protects the company by: An advisor is offering help on fund raising, corporate, business strategy front in lieu of stake.

Out of these, only fund raising is critical for us. You say upto 2. Advisory Board Compensation for your Startup: This article is simply great and I am glad I chanced upon it. This gives me a great framework to decide in my current situation where I am thinking of signing up an advisor.

Awesome post, keep such things coming! Venture Hacks Good advice for startups. Everything you ever wanted to know about advisors, Part 2.

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After dealing with these items, you can throw the option grant into the agreement. Thanks for your help! Venture Hacks on Facebook. Browse startup jobs from over 5, of the world's best startups on AngelList.