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What startup advisors do and how to manage them!- Jason Calacanis
Advisors typically have some combination of great networks, great reputations, and serious skills. If you are doing a enterprise software company, having someone like David Sacks (Yammer, PayPal) would be a huge win because he is respected and has a huge network. Of course, he has money as well, so having him as just an advisor would negative signal that he doesn't think highly of your company's ability to return capital - so be careful! There is nothing wrong with having an advisor, but I suggest you do the following in the agreement so that there are no hard feelings:
1. Vest the shares the advisor will receive over two years (you won't need them longer than that).
2. Typically they get .25 to .50 points in a startup - one point is they are a complete hero.
3. Put a dollar value on that equity. If you give .50 in a company worth $10m that's $50,000 - not a ton of money depending on what they do.
4. Write a letter of agreement for what they will do for that equity. This should be as detailed as possible: e.g., the advisor will meet with the founder at the HQ 4x per year for two hours each time, be available for weekly phone calls, and help design and hire the sales team (if they are a sales expert).
5. Make sure the terms of these options are clear: strike price, how long they have to execute the options if you fire them, 12-month cliff, etc.
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