Now that I’m a founder, I have put some thought into bringing on official advisors to help the company. Michael and I are clearly not experts in many parts of company-building and having a few good people help out is tantamount to success.
At the same time I’m in the middle of becoming an official advisor to one or two companies and have some thoughts on that.
1) Don’t have too many advisors
Too many cooks in the kitchen syndrome can happen very quickly when having too many advisors. If you have a lot of advisors, make sure they each help you with one specific task (i.e. press, fund-raising, product, design, clients, etc.) and that is all.
2) Make sure they prove themselves first
If you have one or two conversations with someone you want to bring on as an advisor and they haven’t done anything to help your company, hold off from making them an official advisors. Wait till they actually help you with whatever their specialty is. Be very upfront about the fact that you want to start dating before you get married (euphemism) and if they have a problem with that, then they probably won’t be very good advisors.
3) Advisor compensation
From friends I’ve heard that 0.1-0.25% in terms of stock options is appropriate for an advisor. I’ve also heard that you should give someone as much as you want them to be involved (this can go from 0.5-1%). If someone is looking to be your advisor and wants 5% of your company, don’t do it, they clearly are out of touch with proper advisor grants.
4) On becoming an advisor
There are two companies I’m helping out more than the just occasional intro or product feedback. I don’t think I have enough time to help any more than one or two companies at this time. The two companies need help in understanding and executing on building out a killer API platform strategy (something I’ve done for the past four years at Dwolla and Aviary). I’m at the stage with them right now that I am just trying to show value by helping them with hiring, raising, product, partners, etc.
All of these points are simple and maybe even obvious. I think they are important things to stop and think about when becoming an advisor or bringing on an advisor to your company.