Technology Advisors<\/strong> can help the company with broad knowledge of the state of the tech sector, implementing technology best practices (Scrum, Agile), system architecture (SaaS, scaling, blockchain), or even code themselves. They are often there to shape the longer term tech vision and roadmap in a way that would be too time consuming for a CTO who ends up getting consumed by the daily task of delivering an amazing product.\u200d<\/p>\n General Advisors <\/strong>are similar to Board Advisors, but do not sit on the board of a company. This does not indicate that they have less experience, but simply that they have less input over the strategic direction of the company. For example, an ex- Chief Marketing Officer from a different industry to the startup might be an invaluable General Advisor.<\/p>\n Our analysis shows that the type of advisor being hired influences their compensation:<\/p>\n \u200d<\/p>\n Choosing to compensate an advisor with salary, equity, both, or neither will often come down to the preference of the individual in question. Yet that doesn\u2019t mean there aren\u2019t striking differences in the way in which the different advisor roles are compensated.<\/p>\n For example, General Advisors are overwhelmingly compensated only with equity (81% of the time), whereas the advisor types get more of a mix between cash and equity. Tech Advisors are the most likely to be compensated with both cash and equity (18% of the time), and Board Advisors are the most likely not to be compensated at all (36%).<\/p>\n We then took a deeper dive into the 48% of Advisors who receive just equity as compensation. We broke down the amount of compensation that they receive with respect to company valuation, days worked per year and advisor type to provide further insights.<\/p>\n \u200d<\/p>\n As would be expected, the higher the valuation, the lower the amount of equity an advisor should expect to receive. However, the fact that the median value is the same at 1% for both categories indicates that 1% is the most popular (modal) amount of equity to be given to advisors across a wide range of company valuations.<\/p>\n \u200d<\/p>\n Now this one surprised us! It seems that there is a very clear separation in the compensation for advisors who work more than two days a month and those who work less. Two days a month seems a tipping point – fewer than 2 days a month commitment may indicate an advisor being hired as a figurehead, someone to impressing on the company pitch deck or web site, someone who will actually contribute little real time (and in our view, little real value) to the company, whereas above 2 days a month indicate a \u2018real\u2019 time commitment – and as can be seen this commitment is suitably rewarded.<\/p>\n \u200d<\/p>\n The result observed here is that General Advisors get less equity than Board or Technology Advisors. This may be because Board Advisors have a defined director position with corporate and legal obligations, and Tech Advisors work more days (on average 43 days a year) than the other advisor roles. Or, it may be simply that General Advisors are more often chosen as figureheads for the pitch deck and web site.<\/p>\n \u200d<\/p>\n We hope that these insights will allow founders to make a more informed decision when deciding on the level of compensation for the next advisor they hire, and potentially advisors to realise whether or not they are being compensated appropriately.<\/p>\n If you have any questions about advisor or other hiring agreements (all included in the SeedLegals Start Plan<\/a>) just hit the chat button, or book some time with a member of the team<\/a>.<\/p>\n Startups commonly give 1% equity to General Advisors paid only in equity, who work less than 2 days a month.\u200d Discover more insights from SeedLegals data.<\/p>\n","protected":false},"author":3,"featured_media":400414,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[100,102,105],"tags":[],"event_tags":[],"class_list":["post-18231","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-share-option-schemes-ie","category-deal-data-ie","category-startup-guides-ie"],"acf":{"hero_image":400411,"post_content":[{"acf_fc_layout":"text","text":" 1%<\/strong> is the most popular amount of equity for startups to give a General Advisor who works less than two days a month and is paid only in equity.\u200d<\/p>\n The amount of equity startups give individual advisors varies according to the advisor’s expertise, role in the company, and the stage of the company. In this post, when we refer to equity we\u2019re talking about ownership of your company as either shares or share options.<\/p>\n So how do you decide exactly what percentage of equity to give your<\/em> advisor? First, decide what type of advisor they are\u2026<\/p>\n We find that startups advisor roles usually fall into one of three categories:<\/p>\n Advisory shares, or advisor shares are shares (or stock, in US English) that you allocate as compensation to advisors in your startup. By giving an advisor shares, you\u2019re giving them equity in your company.<\/p>\n Normally, startups give advisors a salary, equity or both. (In this post, where we say ‘equity’, it’s either shares or share options<\/a>.)<\/p>\n Just as you wouldn\u2019t pay someone in cash upfront for an entire year of work, if you give shares or share options to an advisor, they should always have a vesting schedule<\/a>. This means that if your advisor leaves or is terminated early, they don’t get all their shares or options. With shares, the company has the right to buy back the unvested shares. With options, your advisor would only get the options that have vested up to that point.<\/p>\n Vesting is what makes advisory shares different from investor shares – investors put money into your company and immediately get their full allocation of shares.<\/p>\n Tax reasons, voting rights, shareholder approval, vesting – there are many factors to consider. To help you decide which type of equity to use, take a look which at our article: Shares vs options: what\u2019s the difference?<\/strong><\/a><\/p>\n <\/p>\n"},{"acf_fc_layout":"content_highlight","highlight_type":"link","background_colour":"blue","show_icon":true,"content":"","link":null},{"acf_fc_layout":"text","text":" Using the data we hold from tens of thousands of UK startups, our analysis shows that the type of advisor you hire influences their compensation:<\/p>\n"},{"acf_fc_layout":"image","image":false,"caption":"","width":100,"alignment":"left"},{"acf_fc_layout":"text","text":" Often how you decide to compensate an advisor – salary, equity or both – will come down to the preference of the advisor. But we\u2019ve noticed some striking differences in how different types of advisors are compensated:<\/p>\n Overall, 48% of all advisors in our data set are compensated with equity only. We took a closer look at this 48%…<\/p>\n For advisors who get equity only as compensation, as you might expect, the higher the valuation, the lower the percentage of equity an advisor should expect to receive – see chart below.<\/p>\n However, although the percentage given to advisors is lower on average for companies with a larger valuation, the median (the midpoint) is the same for both data sets: 1%. It seems the neat round number of 1% is a popular amount of equity to give advisors, regardless of your valuation.\u200d<\/p>\n <\/p>\n"},{"acf_fc_layout":"image","image":false,"caption":"","width":100,"alignment":"left"},{"acf_fc_layout":"text","text":" According to our data about advisors who get only equity as compensation, advisors who work more than two days a month get significantly more equity than those who work fewer than two days a month – see chart below.<\/p>\n If your advisor is working fewer than two days a month, it might be that they\u2019re more of a figurehead, someone who looks impressive on your pitch deck or website but who doesn\u2019t contribute much of their time to your company. Conversely, if your advisor is doing more than two days a month, this suggests a \u2018real\u2019 time commitment, worthy of suitable reimbursement.<\/p>\n <\/p>\n"},{"acf_fc_layout":"image","image":false,"caption":"","width":100,"alignment":"left"},{"acf_fc_layout":"text","text":" Again looking only at advisors who get only equity as compensation: companies on SeedLegals give General Advisors less equity than Board or Technology Advisors – see chart below.<\/p>\n This could be because Board Advisors have a defined position as a director, with corporate and legal obligations. And Tech Advisors work on average 43 days a year, which is more than the other advisor roles.<\/p>\n Or it could be that General Advisors are simply chosen as figureheads for the pitch deck and website, rather than truly ‘working’ for you.<\/p>\n <\/p>\n"},{"acf_fc_layout":"image","image":false,"caption":"","width":100,"alignment":"left"},{"acf_fc_layout":"text","text":" With every advisor you appoint, you\u2019ll need to negotiate to find a compensation package that works for both of you. You could also suggest to your advisor that they invest in your company – with an experienced advisor as an investor, your startup will look more attractive to other investors.<\/p>\n As with any decision you make about giving away equity, it\u2019s important to discuss it with experts. Talk to our team about what\u2019s possible, and seek independent legal advice before you sign a contract.<\/p>\n We hope these data insights will help you make a more informed decision about what to offer or accept. And if you\u2019re an advisor, we hope this post helps you decide whether the compensation a startup is offering you is fair.<\/p>\n Got a question about hiring an advisor? Not sure how much equity to offer? Book a free call<\/a> with one of our experts.<\/p>\n"},{"acf_fc_layout":"cta","cta":{"type":"purple","subheading":"SeedLegals share option schemes","heading":"Reward your team with equity","content":"Create your option scheme on SeedLegals in just a few clicks, with support from your dedicated options expert.","bullet_points":false,"form":{"type":"none","hubspot_form":{"layout":"newsletter","hide_founderinvestor_toggle":false,"default_community":"founder","custom_form_id":"","gdpr_disclaimer":"By subscribing, you agree to receive information from SeedLegals. You can unsubscribe anytime. View our privacy policy<\/a>"},"custom":{"embed":""},"gtm_form_type":false,"gtm_form_location":false},"button":{"title":"Explore options","url":"https:\/\/seedlegals.com\/grow\/share-options-scheme\/","target":""},"image":false}}],"blog_layout":"v2"},"yoast_head":"\nCompensating advisors: Cash vs. Equity<\/h4>\n
![\"Advisor](\"https:\/\/uploads-ssl.webflow.com\/5a4d09f22b69220001d89be6\/5b89ceed8555846f5e7ae4ba_1.png\")
<\/div>\n<\/figure>\nAdvisor compensation vs company valuation<\/h4>\n
![\"Percent](\"https:\/\/uploads-ssl.webflow.com\/5a4d09f22b69220001d89be6\/5b89d52637ffb3fdf3a12dfb_2.png\")
<\/div>\n<\/figure>\nAdvisor compensation vs time commitment<\/h4>\n
![\"Percent](\"https:\/\/uploads-ssl.webflow.com\/5a4d09f22b69220001d89be6\/5b89d534d92ca0aec4b95916_3.png\")
<\/div>\n<\/figure>\nAdvisor compensation vs role<\/h4>\n
![\"Percent](\"https:\/\/uploads-ssl.webflow.com\/5a4d09f22b69220001d89be6\/5b89d53ed92ca0aaf8b95918_4.png\")
<\/div>\n<\/figure>\nBringing it all together<\/h4>\n
<\/h4>\n","protected":false},"excerpt":{"rendered":"
What\u2019s in this article<\/h3>\n
\n
<\/a>Who gets advisory shares? The three types of startup advisor<\/h2>\n
\n
\nThese advisors are usually experienced ex-founders or industry experts. You might seek their input on the strategic direction of the company. They are usually given a seat on your board of directors to help shape your strategy and influence decision-making.<\/li>\n
\nThese advisors help your company with their broad knowledge of the tech sector. They might implement technology best practices (Scrum, Agile, Lean etc), system architecture (SaaS, scaling, blockchain), or they might even roll up their sleeves and join your devs in coding. Often, these advisors help shape the longer term tech vision and roadmap in a way that would be too time-consuming for a CTO, whose focus can be entirely taken up by the daily tasks involved in delivering an amazing product.\u200d<\/li>\n
\nThese advisors are similar to Board Advisors but they don\u2019t sit on your board. This doesn\u2019t mean they have less experience but they have less input over the strategic direction of your company. For example, an ex-Chief Marketing Officer from a different industry to your startup might be an invaluable General Advisor.
\nIf your advisor doesn\u2019t fit any of these categories, they might be better categorised as a startup mentor or coach instead.<\/li>\n<\/ul>\n<\/a>What are advisory shares?<\/h2>\n
<\/a>Advisory shares or share options?<\/h2>\n
<\/a>Should I pay my advisor with a salary or equity?<\/h2>\n
\n
<\/a>Does how much equity I give my advisor depend on my company valuation?<\/h2>\n
<\/a>Does how much equity I give my advisor depend on how many days they work for us?<\/h2>\n
<\/a>Does how much equity I give my advisor depend on their role?<\/h2>\n
<\/a>Salary, advisory shares, or both? Negotiate to decide<\/h2>\n
<\/a>How to issue advisory shares? Talk to the experts<\/h2>\n