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What is the best way to include an advisor in the capital of a startup?

Plainmark needs to include a couple of advisors. What are the best practices to give them their shares? A stock option? Common stock? Some other way?

20 Replies

Gabriella Draney
0
0
Co-founder and Executive Director at Tech Wildcatters
Stock options with vesting, without a doubt.
Brett Fox
2
0
Brett Fox Advisor
Respected, Results-Oriented CEO, Entrepreneur, Author, and Coach
Advisors should be given stock options vesting over a four or five year time period with no cliff. In other words advisors should vest 1/48th or 1/60th of their options every month.

This is pretty standard, and this is what I have previously done.

Don Kingsborough
0
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VP Global Retail , BD and Corporate Development
You should give me stock options with a 4 year vest. If they are going to be more than just advisors you may have to pay them a daily fee.
Gabriel Berner
0
6
Gabriel Berner Entrepreneur
CEO, MANAGING PARTNER at THE INSIGHT TEAM, INC.
Talk to your CPA or your CFO who is best equipped by his total knowledge of the financial setup of the company.

All other suggestions are worthless.

Good Luck..
Jerry Kavesh
0
0
Jerry Kavesh Advisor
CEO 3P Marketplace Solutions
I've typically seen stock options with a 3 to 4 year vesting schedule. Additional monetary compensation has been dependent upon the unique situation. Since each company and advisor needs are different, best to consult with your financial advisor.
Thomas J. Kaled
1
0
Thomas J. Kaled Advisor
Business Development Consultant @ thomas.kaled@gmail.com
Are the advisors willing to accept stock? What advisors are needed? Are you asking about board members or business advisors? Do you have a Stock Option plan that creates the Class of Stock necessary for non employees and what will the exercise price be?

These are just some questions to answer before making a decision. Typically a stock option plan creates qualified and non-qualified classes. Qualified is typically granted to employees, has a holding period (option period), is treated differently by the IRS and if not public a buy-back clause. Non-qualified is for non-employees and has less (typically no) restrictions about holding etc.
Steven Rahseparian
3
1
Steven Rahseparian Entrepreneur
Founder & Chief Executive Officer at Secured Universe
0.10% - 1.00% common stock grant vesting over 24 months.

Advisor with no on-going duties = 0.10%

Advisor making valuable intros/connector, very active and one of your evangelist = 0.50%

Advisor that is actively helping the company on a weekly basis, helping you fundraise, bring in sales, etc = 1.0
Susannah D. Kirksey
1
0
Marketing, PR and Business Development Executive, Executive Coach and EMDR-Trained Psychotherapist
Done it many years! A mix of equity and cash optimally, an advisor who brings to the table for start-ups their time, network and expertise across major business functions from BD, Investor Funding, Software Development, Operations to Marketing/PR.

Vesting is important, but alas, if you've done it, not many start-ups and options/stock ever make it to vesting! Short-term vesting or stock, but the details are not as important as the broad split b/w equity and cash compensation.
Burke Franklin
0
0
Burke Franklin Advisor
Business Planning Expert, Accomplished Entrepreneur, International Keynote Speaker, Best-Selling Author, Coach to CEO's!
We agree with all of the advisors! If you want some templates to put your deal together, take a look at this software template: Stock Options Builder
Jackson Powell
0
1
Jackson Powell Advisor
UI/UX Designer & Front End Developer
Lots of great advice here.

If you have another question and want an answer from an advisor who's been in the trenches for 30+ years and is still cranking strong, check out Lonnie Sciambi on FounderDating and his site: http://www.thesmallbusinessforce.com/ask

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