This article will cover why you should stop giving shares to your startup advisors.
Sammy is a co-founder of Blossom Street Ventures. They invest in companies with run rate revenue of $2mm+ and year over year growth of 50%+. We can commit in 3 weeks and our check is $1mm. Email Sammy directly at sammy@blossomstreetventures.com.
A founder of a startup at the seed stage recently asked: “so what’s the right amount of equity to give to advisors?” The answer is none. Here is why.
No One Cares Who Your Startup Advisors Are
We’re a Series A investor and never have I ever asked: “so who are your advisors?” It’s just not important. What investors care about are the milestones you’ve achieved, your statistics and financials, valuation, and where you’re headed. Advisors mean nothing.
Advisors Fizzle Out
The vast majority of advisors we’ve seen want to be super helpful when you first meet them and many are, but then their utility fades. There is only so much even the best advisor can do for you. No one knows as much about your business as you’re about to learn, so by nature, an advisor’s value is capped.
Startup Advisors Are Expensive
Let’s say you have 5 advisors and you give each one 0.5% of the equity. Well, that’s 2.5% of the business once you add it up. That’s meaningful, especially if you believe your business will sell for $50mm+. Generally speaking, you should hoard your equity and give it to no one, not even independent board members if you can get away with it. Equity is for founders, investors who buy it, and employees who vest into it only.
The Best Startup Advisors Are Free
The best advisors you’re going to find are ones that talk to you for free. They’re motivated by seeing you succeed, not by taking your precious equity. If an advisor insists on equity, that tells you all you need to know about the person.
