How much equity should you give to a valuable advisor?

There are no hard and fast rules about assigning advisor equity, but there are some guidelines that show an average range of 0.2% to 1%.

When assessing how much equity to allocate to an advisor consider two primary questions.

First, evaluate the advisor’s experience. It’s helpful to consider whether they have first, second or third tier experience. Think about it this way: a first tier advisor has an established track record of successfully launching startups; a second tier advisor has a decent amount of experience in the advisory role, but they’re still building their portfolio; a third tier advisor is one who is fairly new to your industry or the role.

Second, think about which stage you’re in: Pre-launch, Seed, Series A or Series B.

Also, keep in mind vesting and cliff periods to ensure that your advisor doesn’t unfairly benefit in the event of an early exit. Vesting periods are typically four years, with rights accruing only after one year. If your advisor departs within the first year and your agreement doesn’t specify a vesting cliff, s/he will potentially reap the financial benefits without delivering the value promised to facilitate your company’s growth.

If you need help figuring out how much equity to give your advisor or need an advisor agreement drafted by an experienced startup attorney, feel free to check out LawTrades. I’m also happy to answer any further questions you have, so don’t hesitate to message me.

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