How much equity should advisors to startups receive?
Key pointers & the agreement format.
The major issue is that there isn't any data available regarding this in India or Asia.
But in the US, thanks to Carta, there is some hard data:
Besides this chart, here are some key pointers shared by Peter Walker from Carta👇:
The average startup with pre-priced rounds on Carta typically has between one and two advisors.
There is a small but increasing number of startups with significantly more advisors (around 10-15). These individuals are receiving much smaller portions of equity; it remains uncertain whether this represents a new approach or merely a fleeting trend.
It is common to see individuals begin as advisors and later move into strategic investing (usually with a smaller financial stake) in the same company. This strategy is effective in boosting the perceived value of those advisors as a signal to potential venture capitalists.
Generally, a two-year commitment with a brief cliff is typical, or you may establish certain performance milestones.
So, when it comes to India, the approach should be different.
While I have typically focused on hard cash, I believe in the principle of "never say never."
If I were to consider equity, my approach in India or Asia would be as follows:
Split compensation into cash and equity, ensuring at least 25% is received in cash.
For the stock percentage, I would multiply the cash component I would charge by 4-5 times for very early-stage ventures and by 2-4 times for seed-stage companies. Even for Series B or C, there will be a multiple, albeit lower.
Utilize a standard agreement—a modified SAFE for advisors. I will share one on my Substack in the next 10 days with options for different geographies.
The most widely used template for advisor equity agreements is the FAST template.
By - Saurabh
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