Advisors are an integral part of any successful startup. They provide invaluable guidance, insight, and connections that can help accelerate growth and increase the chances of success. But when it comes to equity, how much should you offer an advisor?
Depends on Value
There is no one-size-fits-all answer to this question. The amount of equity you should offer an advisor depends on a number of factors, including the advisor's level of involvement, expertise, and the stage of your startup.
1% is Most Common
Generally, the equity offered to advisors ranges from 0.25% to 2%, with 1% being the most common. However, some advisors may request a higher percentage if they are providing significant value and expertise.
Depends on Involvement
Before determining the equity percentage, it's important to consider the advisor's level of involvement. For example, if the advisor is providing occasional advice and connections, a lower equity percentage may be appropriate. Conversely, if the advisor is actively working with the startup and providing ongoing guidance, a higher equity percentage may be justified.
Depends on Expertise
Expertise is another important factor to consider. If the advisor is a well-respected industry expert with a strong track record of success, they may be able to command a higher equity percentage. Conversely, if the advisor is less experienced, a lower equity percentage may be more appropriate.
Depends on Startup Stage
The stage of your startup is also a crucial factor. For early-stage startups, advisors may be willing to accept a lower equity percentage in exchange for the potential for significant growth and success down the line. However, for more mature startups that have already achieved significant success, advisors may expect a higher equity percentage in exchange for their expertise and connections.
When deciding how much equity to offer an advisor, it's important to be transparent and communicative about the terms of the agreement. This includes the equity percentage, the vesting period, and any other relevant details. It's also important to ensure that the equity agreement is structured in a way that aligns the advisor's interests with those of the startup.
Hire a Startup Advisor
The equity offered to advisors varies based on a number of factors, including level of involvement, expertise, and the stage of the startup. While there is no one-size-fits-all answer, offering between 0.25% to 2% equity is common, with 1% being the most common. Ultimately, the equity agreement should be structured in a way that aligns the advisor's interests with those of the startup and is transparent and communicative about the terms of the agreement.
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