Equity in exchange for board membership?

July 09, 2020

by a searcher from Millersville University of Pennsylvania in Lancaster, PA, USA

I came across an article a few weeks ago suggesting issuing "free" equity to experts/leaders in your target industry in exchange for board membership###-###-#### hours per month). The goal was to create a well rounded board to advise on finding, vetting, funding and closing deals. Each board member was awarded 2-3% equity in exchange for their time.

What are your thoughts on this model?

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Reply by a searcher
from Harvard University in Texas, USA

It is reliant on your business strategy. I do not agree with any of the answers. Each business is built on different strategies. If you are a normal searchfund (assume so, that is why you are in this forum) then the equity to qualified board may be too much to give away because you will never build more than 1 business with an average revenue, but if you are following qla model which has zero resonance to what searchfund is, and it builds generational wealth, then it is an intense and different level of business strategy. I like to not read too many articles and occupy my mind in debating each strategy. I stay grounded on my abilities and know exactly what strategy we will use to compliment my abilities to accomplish the business goals.

Reply by a professional
from University of Rhode Island in Portland, OR, USA

While I think we're likely all in agreement that you have to be very careful with equity (even if you dilute, etc., you still only have 100% to work with at the end of the day!), I feel it does partially depend on the Board member candidate. For example, if you can get a huge influencer/big name on there, it could well be worth the percentages you are referencing (or even more for the right person).

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