Typically it is not wise for a start up to pay cash to an advisor, especially if that cash is coming from a costly equity investment or if it could be used to generate or increase revenue. Most good advisors who I know and work with are willing (actually prefer) to work for a small equity participation. But be careful - I recently ran into a startup that had given an advisor a 20% ownership for his contributions! That was way too much based on the value provided. In my past experience, advisors should be compensated similarly to an outside board member - something closer to 2% or less of the company. Also, always tie any equity compensation to a vesting schedule either based on the passage of time or, preferably, based on the value provided.
Answers
Company: Advanced CFO Solutions
Typically it is not wise for a start up to pay cash to an advisor, especially if that cash is coming from a costly equity investment or if it could be used to generate or increase revenue. Most good advisors who I know and work with are willing (actually prefer) to work for a small equity participation. But be careful - I recently ran into a startup that had given an advisor a 20% ownership for his contributions! That was way too much based on the value provided. In my past experience, advisors should be compensated similarly to an outside board member - something closer to 2% or less of the company. Also, always tie any equity compensation to a vesting schedule either based on the passage of time or, preferably, based on the value provided.
Good Luck!