Re: [newtech-1] Advisor Compensation
| From: | user 1. |
| Sent on: | Tuesday, March 12, 2013, 3:20 PM |
People tend to use the word "advisor" to represent varying levels of commitment. Many people have advisors that just help out of the goodness of their hearts and get no real compensation. I personally do not see advisors as sales people. They may open doors, but closing a sale is not the responsibility (or upside) of an advisor.
My personal belief is that for *world-class*, fully committed advisors, you can go to 2%. And yes, vesting is critical.
You should set, in writing, performance expectations with your advisors. Having a good honest discussion about what they can deliver and how you can appropriate use them (including their referencing their involvement, reputation, contacts, etc) sets the rules for both parties. If at a later date they are not meeting those pre-agreed expectations, you have every right to stop their vesting.
I would not incentivize with upside but instead set their equity on the basis that they will do all they can (within reason) to help you. Set the bar high out of the gate. If they claim they can make 1 intro a quarter, agree to that upfront - along with a once a month coffee or phone call, and the privilege to use their names in cold emails, etc. If they fail in these expectations, communicate it via email as a concern as you consider whether or not they should continue to vest. If they over committed, but are still doing the best they can, super, you can keep them on schedule.
Formal advisors tend to either be awesome or start awesome and then suck. If they start strong but suck soon thereafter, get rid of them. If they continue to deliver or at least try their best, you simply want to make sure that you can rely on them when you need them. And BTW, awesome typically means that as you earn their trust, the value of the relationship grows even more. When good advisors see you doing well and coming through with your commitments, their comfort level grows.
Don't underestimate, or under value, what a really good advisor brings to the table. They might have the business, vertical or product experience you could never afford as an early stage startup. Augmenting your team with this expertise can be incredibly valuable if managed correctly.
On Tue, Mar 12, 2013 at 3:14 PM, Cristian Sepulveda <[address removed]> wrote:
You must find an advisor that make you feel that 2% for siting in the board is too low for you, in other words, if you do not feel ok giving 2% then he is not a good advisor.
If he lead a sale I will be happy to pay up to 70% of the margin for the first sales (early sales are very important), moving down to something between 10-30% for each sale.
If someone only give you an introduction to a key executive and you have to lead the sale, I should only give him back a big THAX.
Cristian.
El 12/03/[masked]:36, "Klaus Sonnenleiter" <[address removed]> escribió:Kshitij,Commissions are generally used to compensate for sales related activities. So if you have advisor with a sales background who can open the door for your sales people so that they can generate a large sale, they'd expect to receive a small part of the commission you reserve for this sale. But as long as the activity is to give an opinion once a month (or whenever asked) and establish key contacts with people who would otherwise not listen to a startup company, the equity based compensation is the going rate.KlausThis message was sent by Klaus Sonnenleiter ([address removed]) from NY Tech Meetup.On Mar 12, 2013, at 2:08 PM, Kshitij wrote:KshitijBest,For those on this list, who are working on start-ups, I wanted to know what kind of compensation are you offering to your advisors. I know the usual compensation, depending on the level of involvement, is 1% (or lesser) of the equity. But, I wanted to know if any of you guys are also offering commission-based compensation for introduction to key clients/customers. If so, what are the typical/fair numbers for this kind of compensation.Hello all,
We have very recently started working with some advisors with domain expertise in our targeted customer markets; their main job other than the usual advising will be to help our company with their contacts.
PS: I understand that performance-based pay is not always the best when looking for real feedback or advise, but I feel it might be worth it to incentivize the advisors.
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