How big a carrot?

November 27, 2007 1:39 PM

What's an appropriate share percentage to give to someone on a Board of Advisors?

Our dream evangelist has been hinting that he'd like to be a part of the (not-yet-formed) Board of Advisors of our baby web-startup. He's already quite successful, and could be a huge benefit to our company. What's an appropriate percentage of shares to give him?

posted by dentata to Work & Money (4 answers total)

1% of net profits, for the period they sit on the board, is standard.
posted by torpark at 4:02 PM on November 27, 2007

I do not have any useful answer to provide, but I just wanted to wish you luck!
posted by chrisalbon at 4:19 PM on November 27, 2007

Best answer: It really depends on where you are, but I don't think torpark is correct for a typical west coast startup. This blog post is more in line with what I have seen.

Also, as a principle, I agree with the statement in the linked blog post that cash comp for members of a board of advisors to a startup is inappropriate. Advisory board members aren't giving the same level of help and aren't taking on the same level of responsibilities that directors do, and (again, for a west coast startup) directors don't even generally get cash comp. Startups need to keep the cash burn rate to a minimum, and good directors and advisors know that.
posted by odin53 at 5:49 PM on November 27, 2007

A quite successful person may be happy to advise for free. I know of a number of older and/or retired company executives that help out start-ups for free. Presumably because they thrive on the excitement of business and don't at all need the money? Or they are charitable. Either way, perhaps he is not expecting much or any compensation.
posted by mbatch at 8:57 AM on November 28, 2007