Dear SaaStr: How Much Equity Should I Give A Key Startup Advisor?

Here’s one way to think about it:

  • Give them shares worth 1.5x-2x the amount of cash their time is worth … vesting over the time they deliver the help.

Why 1.5x? Well, any valuation for a start-up is a bit artificial in the early days. And the shares are also illiquid, maybe for a very very long time. So 1.5x seems fair in the early days.

So let’s do some rough math:

  • Assume you ask a well-established CRO to be “Chief Sales Advisor”
  • She makes $500k OTE today. That’s $250 an hour or so.
  • You want her to help 4 hours a month, for 24 months.
  • 24 x 4 x 250 = $24,000 in equity.
  • Now multiply by 1.5-2x, and convert to shares.

If your valuation is too low, that may lead to too high a equity stake.

But it’s at least a place to start.

A related post here:

On “Paying” Your Mentors and Advisors: The 2.5x Rule

Related Posts

Pin It on Pinterest

Share This