Start up advisory board role

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
User avatar
Topic Author
simplesimon
Posts: 4197
Joined: Mon Feb 25, 2008 8:53 pm

Start up advisory board role

Post by simplesimon »

Someone asked me to join a board of advisors for a start up. I have no experience in this type of role but have industry experience that the founder wants. It seems like an interesting opportunity and wanted to see if I could message any Bogleheads that had advice to share. Thank you in advance!
Last edited by simplesimon on Sat Aug 06, 2022 5:46 am, edited 1 time in total.
User avatar
AnnetteLouisan
Posts: 4367
Joined: Sat Sep 18, 2021 10:16 pm
Location: New York, NY

Re: Start up advisory board role

Post by AnnetteLouisan »

Depends on the industry. Is it in a highly regulated industry?
User avatar
Topic Author
simplesimon
Posts: 4197
Joined: Mon Feb 25, 2008 8:53 pm

Re: Start up advisory board role

Post by simplesimon »

The company’s in software while the customers would be in a regulated industry.
psteinx
Posts: 4717
Joined: Tue Mar 13, 2007 2:24 pm

Re: Start up advisory board role

Post by psteinx »

Depending on how formalized the role is, you may want to enquire about D&O (Directors and Officer Insurance), and generally being careful about being on the hook if things go south.
User avatar
NewMoneyMustBeSmart
Posts: 686
Joined: Sat Jun 01, 2019 10:28 pm
Location: Midwest

Re: Start up advisory board role

Post by NewMoneyMustBeSmart »

simplesimon wrote: Fri Aug 05, 2022 4:11 pm Someone asked me to join a board of advisors for a start up. I have no experience in this type of role but have industry experience that the founder wants. It seems like an interesting opportunity and wanted to see if any Bogleheads had advice that I could message. Thank you in advance!
This information below is based on my subjective perspective. I'm crazy, I recognize you ignore me.

Companies form advisory boards for one or more of four reasons:

1. To influence other buyers to buy their products
2. To encourage investors to invest in their company
3. To bribe the advisory board member to encourage their own company to buy things
4. To solicit useful information to help the company make good decisions

You probably should do this, and you should tell them you won't do #3.

You probably should only do this if you think the company COULD make the world a better place.

I've been on about 20 advisory boards in the last 25 years and made about $3M from the activities.

BTW, whatever they offered you in stock, ask for 50-100% more.
-- | Few are those who see with their own eyes and feel with their own hearts - Einstein | *Everything I write here is an unreliable opinion*
User avatar
Topic Author
simplesimon
Posts: 4197
Joined: Mon Feb 25, 2008 8:53 pm

Re: Start up advisory board role

Post by simplesimon »

NewMoneyMustBeSmart wrote: Fri Aug 05, 2022 5:15 pm
simplesimon wrote: Fri Aug 05, 2022 4:11 pm Someone asked me to join a board of advisors for a start up. I have no experience in this type of role but have industry experience that the founder wants. It seems like an interesting opportunity and wanted to see if any Bogleheads had advice that I could message. Thank you in advance!
This information below is based on my subjective perspective. I'm crazy, I recognize you ignore me.
Non monetary benefits of doing this? Would you do it again if you made nothing?

They offered stock, cash, or a combination of both.
psteinx
Posts: 4717
Joined: Tue Mar 13, 2007 2:24 pm

Re: Start up advisory board role

Post by psteinx »

NewMoneyMustBeSmart wrote: Fri Aug 05, 2022 5:15 pmI've been on about 20 advisory boards in the last 25 years and made about $3M from the activities.
Ooh, nice.

Was that $3M reasonably spread out among several of the 20, or did 1 or 2 hit big?

Was it reasonably foreseeable - significant Angel/VC funding and/or founders who clearly had it on the ball/had the right experience/product, etc?
CFOKevin
Posts: 162
Joined: Sat Jan 04, 2014 4:07 pm

Re: Start up advisory board role

Post by CFOKevin »

To be clear, an Advisory Board is different from the Board of Directors and I don't think you need to be worried about D&O coverage.

For Board roles, I'm a proponent of taking a modest amount of cash to compensate you at a reasonable rate for time spent. I'd suggest asking them for the expected number of hours they'll use you over the course of a year, then multiply by $200 and divide by 4 and bill that amount at the beginning of each quarter. Ask them for 0.25% in options if they have VC investors already or 0.5% of shares if they don't.

Good Luck,

Kevin
NorCal13
Posts: 58
Joined: Sat Jan 26, 2019 3:02 pm

Re: Start up advisory board role

Post by NorCal13 »

Kevin go ahead and PM me. Can give you the info you need. Cheers.
User avatar
Topic Author
simplesimon
Posts: 4197
Joined: Mon Feb 25, 2008 8:53 pm

Re: Start up advisory board role

Post by simplesimon »

Thank you, very helpful.
User avatar
NewMoneyMustBeSmart
Posts: 686
Joined: Sat Jun 01, 2019 10:28 pm
Location: Midwest

Re: Start up advisory board role

Post by NewMoneyMustBeSmart »

simplesimon wrote: Fri Aug 05, 2022 6:03 pm
NewMoneyMustBeSmart wrote: Fri Aug 05, 2022 5:15 pm
simplesimon wrote: Fri Aug 05, 2022 4:11 pm Someone asked me to join a board of advisors for a start up. I have no experience in this type of role but have industry experience that the founder wants. It seems like an interesting opportunity and wanted to see if any Bogleheads had advice that I could message. Thank you in advance!
This information below is based on my subjective perspective. I'm crazy, I recognize you ignore me.
Non monetary benefits of doing this? Would you do it again if you made nothing?

They offered stock, cash, or a combination of both.
All stock.

Non monetary benefits was contacts, friends, people on the advisory boards I later hired, one invested with me in something.

I'd do it again if I made nothing for the expected value.
-- | Few are those who see with their own eyes and feel with their own hearts - Einstein | *Everything I write here is an unreliable opinion*
User avatar
NewMoneyMustBeSmart
Posts: 686
Joined: Sat Jun 01, 2019 10:28 pm
Location: Midwest

Re: Start up advisory board role

Post by NewMoneyMustBeSmart »

psteinx wrote: Fri Aug 05, 2022 9:35 pm
NewMoneyMustBeSmart wrote: Fri Aug 05, 2022 5:15 pmI've been on about 20 advisory boards in the last 25 years and made about $3M from the activities.
Ooh, nice.

Was that $3M reasonably spread out among several of the 20, or did 1 or 2 hit big?

Was it reasonably foreseeable - significant Angel/VC funding and/or founders who clearly had it on the ball/had the right experience/product, etc?
3 big hits. 3 base hits. nothing from others.
-- | Few are those who see with their own eyes and feel with their own hearts - Einstein | *Everything I write here is an unreliable opinion*
User avatar
NewMoneyMustBeSmart
Posts: 686
Joined: Sat Jun 01, 2019 10:28 pm
Location: Midwest

Re: Start up advisory board role

Post by NewMoneyMustBeSmart »

CFOKevin wrote: Fri Aug 05, 2022 11:17 pm To be clear, an Advisory Board is different from the Board of Directors and I don't think you need to be worried about D&O coverage.

For Board roles, I'm a proponent of taking a modest amount of cash to compensate you at a reasonable rate for time spent. I'd suggest asking them for the expected number of hours they'll use you over the course of a year, then multiply by $200 and divide by 4 and bill that amount at the beginning of each quarter. Ask them for 0.25% in options if they have VC investors already or 0.5% of shares if they don't.

Good Luck,

Kevin
Agreed re: no D&O for advisory board.

For a different perspective, I'd NEVER do paid (cash) work for an advisory board. I want the equity upside. If the expected value isn't there, it's not worth my time (which is worth well over $200/hour).
-- | Few are those who see with their own eyes and feel with their own hearts - Einstein | *Everything I write here is an unreliable opinion*
User avatar
Topic Author
simplesimon
Posts: 4197
Joined: Mon Feb 25, 2008 8:53 pm

Re: Start up advisory board role

Post by simplesimon »

NewMoneyMustBeSmart wrote: Mon Aug 08, 2022 8:13 pm
CFOKevin wrote: Fri Aug 05, 2022 11:17 pm To be clear, an Advisory Board is different from the Board of Directors and I don't think you need to be worried about D&O coverage.

For Board roles, I'm a proponent of taking a modest amount of cash to compensate you at a reasonable rate for time spent. I'd suggest asking them for the expected number of hours they'll use you over the course of a year, then multiply by $200 and divide by 4 and bill that amount at the beginning of each quarter. Ask them for 0.25% in options if they have VC investors already or 0.5% of shares if they don't.

Good Luck,

Kevin
Agreed re: no D&O for advisory board.

For a different perspective, I'd NEVER do paid (cash) work for an advisory board. I want the equity upside. If the expected value isn't there, it's not worth my time (which is worth well over $200/hour).
What legal docs should be part of this arrangement?
Post Reply