« The Re-emergence of Venture Debt | How To Start A Company Like Schilling Pitches »

Board Member / Advisory Member Compensation

How much should you pay board members and advisors to your company? If your board members are VC investors, the answer is simple: nothing. They are on your board to help maximize the value of your company and their investment. If you have a VC that wants to invest and wants to be paid (in either cash or equity) for his / her board service, then find another VC; these folks aren’t legit.

One caveat to this: Venture Partners. If you read our post on different roles and titles in the VC world, you know that Venture Partners can have a range of compensation packages depending on how the VC firm they are a part of is set up. There are some firms that, in exchange for funding, want the company to issue their venture partner on the deal some piece of equity. This is simply because the venture partner doesn’t have a piece of the fund carry and therefore they want him to have some skin in the game. This is rare, but not unheard of.

As for outside board members, generally you don’t see cash comp given in startups, but you do see equity grants. A normal range for a good outside board member is an option grant worth 0.25-1.0% of the company, normally vested over 2 to 4 years depending on desired length of service.

When looking at Advisory board compensation, it ranges from nothing to small grants (usually less than 0.1% of the company.) Cash comp is not appropriate.

In all cases you should be willing to cover reasonable expenses for board member and advisors to come to your meetings if they have to travel. They key word is reasonable – you get to define this. For example, I once sat on a board where the CEO insisted that she choose the hotel we stay at and book the reservation (fortunately she had frugal but good taste.)

If you really want to drill down into the bowels of board compensation, check out Brad’s prior posts on the subject:

Compensation of Board Members 

Compensation of Outside Board Members

How Many Stock Options Should I Give To An Advisor?

June 12th, 2007 by     Categories: Compensation    
  • http://venturehacks.com Nivi

    Another data point: In my experience, Advisors who join early (pre-financing) and kick ass can get .5% or more of the post-money.

  • http://blog.tomevslin.com Tom Evslin

    Agree with all EXCEPT think that outside directors should be paid in restricted stock rather then options. Keeps them around when things to south and better aligns their interests with the company. Expanded on this in an answering post.

  • Anonymous

    I’ve read a few places that advisory board members should be compensated with equity and that they should not receive cash.  But elsewhere, people recommend annual stipends or fees per meeting.  I want to create an advisory board for a specific project we’re working on but not for our company in general.  The project will not be a separate corporation, so there will be no stock.  Isn’t it appropriate in that case to pay cash?  I was thinking of something like a percent of revenue from the specific project or a payment per meeting attended.  We can’t offer an annual stipend until the project starts to make us money.

    • http://www.feld.com bfeld

      It depends on your specific goals. In general, I don’t value “advisory boards” very highly and as a result anyone who needs cash comp to be on an “advisory board” is probably not that qualified for it. People do this for either a little bit of stock or good karma to help an entrepreneur they like.