Ask HN: How much equity is a good advisor worth? | Hacker News Reader

Ask HN: How much equity is a good advisor worth?

16 pointsthrowaway69 comments

Hi Guys,

Long time HN'er here. I'm using a throwaway for this post.

Here's the deal: We have a solid advisor looking to join our startup. His connections and involvement will have a strong positive impact on our company and it's a legitimate possibility that he might invest later in the game.

He's offering 3-4 hours a week of his time and to help us build an advisory board.

How much equity is that worth?

In advance, thanks for your time!

(I know it's a bit of a broad question, but any help the HN community would be highly appreciated)

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I'm in a similar situation, and am struggling with the same question. From some desktop research and talking to investors/other startups, it seems like "0.1% - 2% of post-Series A stock" is a reasonable range depending on the results an advisor might bring about. (http://venturehacks.com/articles/advisors-part-2)

Are you planning to draft a legal agreement of sorts with this person? If yes, it may be helpful to tie in dollar amounts with milestones to determine equity percentages, I think. Personally I find it hard to quantify how much connections and a couple of hours a week are worth in terms of dollars. If it's possible to put a revenue amount to what s/he is bringing to the table, either in a strategic "$X in the first N years" or "$X from this release within N years" kind of way, that may help to crystallize the equity percentage somewhat.

The answer lies in one of my favorite pg's essays: 1/(1 - n)

<pg> You should give up n% of your company if what you trade it for improves your average outcome enough that the (100 - n)% you have left is worth more than the whole company was before. </pg>

http://www.paulgraham.com/equity.html

But isn't "what is the value of n?" just a rephrasing of the OP's question?

Yes, indeed. But IMO this is the way to see this problem. A "typical" range answer (eg .1% to .5%) is not very useful in this case. Alas! I would give Jobs half of my company to have him in my board of advisors.

Check out this video of Travis Kalanick, angel investor and entrepreneur. It's a video of his entire talk at a TechCocktail event so you might have to jump around if you're not interested in the whole thing, but he does address how much a good advisor is worth.

http://techcocktail.com/hustle-is-the-antidote-startup-busin...

Travis is an interesting guy but caveat emptor.

Hard to say without more specifics. Generic answer would be maybe a quarter of a percent.

Ask him to invest now. Even $10. And to help you raise capital (telling other people "yes, I put money into them" lends credibility if the guy does in fact have credibility to lend).

Not much. I've seen advisor equity in the .1-.25% range. Advisors aren't founders, nor are they taking any risk (as a director would). The important part is to vest it.

A good advisor's worth is based on how many valuable connections he has in the industry.

If your advisor has some serious silicon valley connections that he can get on the phone whenever he wants, then he's worth a good percent of equity.

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