Equity for Board Member/Advisor/River Guide

July 12, 2022

by a searcher from Rice University - Jesse H. Jones Graduate School of Business in Houston, TX, USA

Hi All,

We're planning to bring on a board member who will play a critical role in industry advisory and deal evaluation. Effectively, a river guide. What type of equity compensation is standard?

Also, if anyone happens to have a legal agreement they wouldn't mind sharing, it would be much appreciated!

Thanks!

Adam

Update: Found a document from Stanford's search fund starter kit (exhibit 14). It's for an advisory fee, and not equity. But happy to email it to you send a direct message or email me at redacted Otherwise, you can fill out a form on the Stanford GSB website and it will be emailed to you. https://www.gsb.stanford.edu/experience/about/centers-institutes/ces/research/search-funds/primer

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Reply by a searcher
from University of Maryland at College Park in Annapolis, MD, USA

This is not a simple question and there are many relevant factors. First and foremost is an honest appraisal of the actual role, responsibilities and time commitment required from the team member, whether board member or advisor. This is directly related to the skillset and experience that the searcher brings to the endeavor, and what the rest of the team looks like. Carefully consider whether you need a relatively low level of strategic advice, or someone to lead/manage transaction execution, or active due diligence support, or a 24/7/365 business advisor and mentor? Will there be fixed or guaranteed cash compensation, whether transaction bonuses, board retainers, or meeting fees? As ^redacted‌ suggested, I often see board and advisor engagements in the 1-3% range, but equity is (or can be) only a piece of total compensation package. I have also seen board members receive as high as 19% equity (as a percentage of the founding team). Lastly, I have seen advisory board members receive no equity but specific cash compensation including annual retainer, meeting fees, and both hourly fees and success fees when drawn into consulting engagements. Feel free to contact me for any additional information.

Reply by a professional
from Dartmouth College in Los Angeles, CA, USA

Founders Institute has the standard advisor doc, including suggested % based on stage. This is the standard for startups but I think the comp largely works, or at least is useful data, though each company is different. Can be found here: https://fi.co/fast

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