The term “startup advisor” is a vestige of the 2000s that hasn’t kept up. Back then there were fewer resources at a founder’s disposal. Today there are more accelerators, incubators, funds, tools, and resources than founders know what to do with.
Instead of doling out 0.25–1% for advice, founders should think of advisors as external contributors and calibrate equity grants to the expected value of their contributions.
With a little planning, founders can upgrade their advisor program from a haphazard sideshow to a competitive advantage.
Here’s how to do it:
Set an equity budget for your advisor program just like you do for your employee option pool. We recommend committing 1-1.5% of your fully diluted share count.
Create advisor tiers based on expected contributions (e.g., Gold = 0.25%, Silver = 0.02%, Bronze = 0.0001%). Tiers make it easier to stay within your budget and simplifies new advisor onboarding.
Grant TypeAdvisors typically get shares of common stock, just like employees, which are subject to vesting. This common stock is usually either Non-Qualified Stock Options (NSOs) or Restricted Stock Agreements (RSAs). Check with your attorney to determine which type of stock to grant your advisors.
Vesting PeriodThe length of the vesting period determines the rate at which advisors earn equity. A 10,000 share grant vesting over 2 years pays out at double the rate of a 10,000 share grant vesting over 4 years. We recommend 2 or 3 year vesting periods for advisors.
Advisor AgreementThere are plenty of boilerplate advisor agreement templates online. Cabal has a built in template or you can import and map your own agreement. The "FAST” agreement developed by the Founder Institute is another great option. We recommend your advisor agreement allows either party to terminate the agreement at any time for any reason.
Share countMost corporations start with 10 million shares. Consider performing a 10:1 stock split to increase your share count to 100 million. Having more shares allows you to be more precise with your advisor and employee grants. Further, there is a psychological benefit to giving someone 5,000 shares vs 500. Talk to your attorney about conducting a split.
Now that you have a budget and established advisor tiers, think through the types of advisors you want to recruit. Knowing the ideal breakdown between industry experts, influencers, customers, alumni, etc. makes your recruiting more intentional.
The best way to recruit new advisors is through your normal course of business. When you encounter someone who is sincerely interested in and can help your business, invite them to be an advisor. Your invitation should express admiration for their work and gratitude for their participation. Example:
It was great speaking with you today. I have an industry advisory group, and I'd love to have you join. In short, it's a group of people from various backgrounds; some are customers and some are industry thought leaders. There's no formal time commitment. I send out monthly updates which include company updates, a few questions, and a few optional asks. As a thank you, I'd give you some stock options for being a part of the group. If this sounds good to you, I'll send over an invitation to join our program.
Consider empowering your executives to independently recruit and engage advisors. This allows you to delegate the expansion of your advisor network and doubles as a powerful perk for key leaders.
Advisors are only useful if they’re engaged.
Send company updates on a regular cadence and in a consistent format. More importantly, frequently send asks to advisors and make it easy for them to contribute. Here are some tips to help your advisors help you:
Group your advisors to route asks with precision. Organize advisors into functional, geographic, or firmographic groups. Improve the signal:noise ratio and increase the likelihood of contribution by sending asks only to sub-groups of advisors who can fulfill the request.
Send one ask at a time. Don’t wait for your recurring updates to send out a laundry list of asks. Send them out as they arise to keep advisors focused on where they can make the greatest impact.
Do the hard work for them. Pre-process your requests so they are easy to fulfill. Send forwardable emails, pre-mine their LinkedIn graph, or draft social posts on their behalf. When a new prospect enters your sales pipeline, see which of your advisors are connected to employees at the prospect company. Ask those advisors to help you with relevant warm intros and referrals to those specific contacts to help you close the deal.There are countless ways to activate your advisors.See How to get more out of your shareholders for more examples.
If advisors are not helping as anticipated, don’t be shy to end the relationship - this is why mutual termination is an important term in the advisor agreement.
Cabal takes the friction out of advisor engagement by providing you with one solution to manage your program end-to-end: send and sign advisor agreements, keep advisors organized in a directory, trigger and route asks, deliver personalized updates, and cross reference your needs with their networks.