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:
