What's the difference between early-stage and late-stage advisors?

Early-stage advisors are useful for recent, anecdotal experiences and specific problem-solving. Late-stage advisors are better suited for broader strategic thinking and feedback on ideas.

How much equity should I offer startup advisors?

A common setup is an option grant of around 0.25% to 0.75% of equity, typically vesting monthly over two years without a cliff.

Should advisors receive equity compensation?

Yes, it's common to offer compensation, often in the form of equity, especially for advisors who will help over a longer period. This aligns their interests with the company's success.

How can I ensure advisors actively contribute if they receive equity?

You can make advisors work for their equity by establishing regular calls or structured check-ins, ensuring consistent engagement and value delivery.

Is it okay to outsource decision-making to advisors?

No, while advisors provide valuable input and perspectives, the ultimate decision-making responsibility lies with the CEO. You need to integrate their advice into your own judgment.

Key Moments

Startup Advisor Equity? - Pebble Watch Founder Eric Migicovsky

Y Combinator

Science & Technology4 min read4 min video

Apr 30, 2019|35,904 views|661|23

YC Y Combinator Advisors Advice Startup Eric Migicovsky Pebble Mentor Mentee Startup Advisor What do startup advisors do How much equity should I give my advisor

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Key Moments

TL;DR

Offering startup advisors 0.25%-0.75% equity vesting over two years is common, but ensure they actively contribute and make their own decisions.

Key Insights

Advisors who are 3-5 years ahead in the same domain offer the most relevant, fresh anecdotal advice.

Later-stage advisors are better for strategic thinking and idea feedback, not tactical hiring recommendations.

A common compensation for startup advisors is an option grant of 0.25% to 0.75% equity, typically vesting monthly over two years.

Founders should schedule regular calls with equity-compensated advisors to ensure active engagement, such as a weekly 15-20 minute marketing mentor call.

As CEO, you can't outsource decision-making; advisors provide input, but the final choices are yours.

It's crucial to have a broad set of advisors to incorporate diverse experiences and perspectives into your own decision-making process.

Proximity in experience yields the most actionable advice

For early-stage founders, especially those new to the startup world, building a network of advisors is crucial. Eric Migicovsky, founder of Pebble Watch, found significant success by engaging advisors who were approximately three to five years ahead of him in the same industry. Specifically, when building a consumer electronics company, he sought out CEOs who had navigated the complexities of launching similar hardware products. The key benefit of this 'slightly ahead' cohort was the freshness and relevance of their experiences. They could recall specific problems they encountered, the solutions they attempted (both successful and unsuccessful), and the exact steps they took. This anecdotal evidence, rooted in recent memory, proved far more valuable for immediate problem-solving than advice from individuals much further along in their careers whose experiences might be outdated or less directly applicable to current challenges.

Strategic thinkers versus tactical mentors

Advisors can serve different functions depending on their experience level. Migicovsky distinguishes between those who were a few years ahead and those much further along. The 'later-stage' advisors were more useful for high-level strategic thinking. Founders can use these individuals to brainstorm ideas, get feedback on broad concepts, and explore future directions for the company. However, he notes that these mentors were less effective for immediate, tactical needs, such as needing recommendations for specific hires in a niche domain. This highlights the importance of identifying what kind of support you need from an advisor before seeking them out, and selecting individuals whose experience aligns with those specific needs.

Common equity compensation structures for advisors

Offering compensation to advisors, particularly those who provide ongoing support over a significant period, is a common practice. A widely adopted model involves granting startup advisor option pools. The typical range for this equity compensation is between a quarter of a percent (0.25%) and three-quarters of a percent (0.75%) of the company's stock. This equity is usually subject to a vesting schedule, most commonly vesting monthly over a two-year period. While some arrangements might include a cliff period (where no equity vests until a certain milestone is met or time has passed), it's more frequent for the equity to vest steadily over the two years. This structure incentivizes advisors to remain engaged and supportive throughout a critical phase of the startup's growth.

Making advisors earn their equity

Beyond simply granting equity, Migicovsky emphasizes the importance of ensuring advisors actively contribute and 'earn' their stake. One method he employs is establishing structured, regular interactions. For instance, he set up a weekly 15-20 minute call with a marketing mentor. This consistent engagement ensures that the advisor is actively involved, providing timely advice and staying updated on the company's progress. This cadence allows for focused discussions without becoming an excessive burden, fostering a productive working relationship where both parties are invested in specific, actionable outcomes.

The CEO's ultimate decision-making role

Despite the invaluable input from advisors, it's critical for founders to remember that the CEO is ultimately responsible for all decisions. You cannot offload the entirety of your decision-making process onto advisors. Instead, the CEO's job is to gather diverse perspectives, experiences, and advice from multiple sources. It's then the founder's own responsibility to synthesize this input, weigh the different viewpoints, and make the final call. This requires critical thinking and the ability to integrate external insights into one's own judgment, recognizing that no single advisor has all the answers.

The necessity of a broad advisory network

To effectively navigate the complexities of building a startup, a diverse range of advisors is essential. Relying on just one or two individuals, even if they are highly experienced, can lead to a narrow perspective. A multi-faceted advisory board allows founders to tap into a wider spectrum of knowledge, skills, and experiences. This breadth helps mitigate biases, uncover blind spots, and ensures that decisions are informed by a variety of viewpoints, ultimately leading to more robust and well-rounded strategic choices for the company's future.

Mentioned in This Episode

●Products

●People Referenced

Startup Advisor Best Practices

Practical takeaways from this episode

Do This

Seek advisors 3-5 years ahead of you in the same domain for fresh, relevant experience.

Engage later-stage advisors for strategic thinking and idea feedback.

Have a broad set of advisors, not just one or two.

Incorporate advice into your decision-making, but remember the buck stops with you.

Offer advisors equity grants ranging from 0.25% to 0.75%, vesting monthly over two years.

Consider structured engagement, like weekly calls, for advisors receiving equity.

Avoid This

Don't expect advisors to outsource your decision-making.

Don't assume an advisor's past experience will directly apply to your company without adaptation.

Don't rely on a single advisor for all types of guidance.

Common Questions

Reach out to CEOs of companies in a similar domain who are about 3-5 years ahead in their startup lifecycle. Their experiences will be fresh and relevant.