Ask HN: how to reward advisers in a revenue (vs exit) oriented startup
I have a startup in the revenue oriented (saas util) space. I am not against selling it, but it is less likely to happen (because of location where I live for one). I am getting 3 advisers and am looking for cooperation on execution side with few people.
Since it's not certain that the startup will be ever sold and advisers/co-ops are active people (not already $loaded guys that just want to help) it became apparent that the share should also be turned into some concrete revenue based reward.
If someone here has more experience (or feel) about this. Please comment on my hypotheses below:
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- reward should NOT be based on net profit of company, since that is not related to how the company is doing. And it's close to 0 for companies that want to use their money for future growth, and pay less taxes.
- a valid parameter on which reward should be based seems Gross Margin (since it is reflecting to how the company is doing in global, not internal decisions(salary, advertising,office space). As example: advisers should not get punished (get less reward) if you are doing so well that you increased salaries, or moved to new office, etc..
- The big question was then how should for example 2% promised equity = ?% GM (x% EQ = K * x% GM). This K must be determined since we want to give them an option of deciding how they want to split their reward between EQ and GM.
- After thinking about it seems K could just be 1. Does this makes sense?
- Should / Can the adviser agreements be limited in time (with an option for extending them). We were thinking about 2 years.
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I hope post wasn't too long. I will greatly appreciate any information or opinions you can give me.
Janko