How Much Equity Should You Give Startup Advisors? - 5/7/26

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📰 Today's Edition: How Much Equity Should You Give Startup Advisors?

Let me tell you about a founder who had seven advisors on her cap table. Seven people, each with 0.5% to 1% equity, all supposedly helping her build.

When I asked what each advisor actually did, she got quiet.

Unfortunately, this is all too common. Most founders either give away too much equity to advisors or structure deals that create problems down the line.

Do you actually need advisors?

Before we talk about equity, let's talk about whether you need advisors at all.

Advisors make sense when they can do things you genuinely cannot do yourself. Good advisors:

• Have deep domain knowledge to provide you with insights that you don't have or have access to 

• Can make introductions to key people - Either in your industry for partnerships or distribution, or maybe for fundraising

In addition, you should have something specific in mind that you want your advisor to do over time. Is there a scoped engagement that you have in mind? 

If potential advisors don’t meet those bullet points and you don't have anything for them to do, they're probably not worth bringing on.

In addition, you should consider whether they are: 

• Famous advisors whose names carry weight with massive social followings or well-known industry leaders and can open doors

• Hands-on advisors who are experienced operators and can actively work through specific challenges with you. 

You should understand what you're getting from your advisors and what the expectations are. 

Should you test relationships before offering equity?

You wouldn't hire a co-founder after one coffee chat. Why would you give equity to an advisor you've never worked with?

Before offering any equity, work with potential advisors briefly with no economic agreement. See if you're aligned on values and working style. Do they respond to your messages? Is their advice actually useful? Do they follow through on promises?

Most founders skip this step because they're excited that someone successful wants to help. Then six months later, they realize that person hasn't actually done anything.

How much equity should advisors get?

The standard range for advisor equity is 0.1% to 2%, vested over two years.

That's a huge range. Here's how to think about it:

At 0.1% equity, you're getting someone strategic but not famous. An operator in your space who you talk with about once per month for an hour. Someone to bounce ideas off who can make some introductions.

At 0.25% to 1% equity, you're getting someone actively helpful making meaningful introductions and providing specific domain expertise. The amount of work here should probably be a few hours a month. Most advisors fit into this.

At 1.5% to 2% equity, you're likely getting famous people who will actively promote you and intro you to stellar potential partnerships. Celebrities with large social media followings or newsletter writers with hundreds of thousands of subscribers. Or enterprise contacts that can lead to 7+ figures in revenue.

If you're giving someone 2% equity, that rivals what you'd give an early employee who vests over four years. You need concrete deliverables like "will feature the product on their podcast three times in year one" or "will post about the company to their 500k Instagram followers quarterly." Obviously, you're not paying an advisor with cash, unlike a full-time employee, but you should think about them as similar weight. 

Fame alone isn't valuable. Distribution and credibility are valuable. If someone is famous but won't use that fame to help your company, that  doesn't help you. 

How should you structure advisor agreements?

Always use a vesting schedule for advisors. The standard is two years. However, if you have a very scoped project that will take a lot less than two years, then don't be afraid to shorten that scope. 

Vesting protects you if the advisor stops being helpful after six months. If they ghost you or don't deliver value, they don't get the full equity grant.

The easiest way to formalize advisor relationships is using the FAST agreement. FAST stands for Founder/Advisor Standard Template, and it's a free template created by the Founder Institute that thousands of startups use every year.

The FAST agreement is basically a fill-in-the-blank document. You check a few boxes for the equity amount and commitment level, both parties sign, and you're done. No expensive lawyers required. No lengthy negotiations about terms. It can grant equity based on milestones as well. 

But don't rely solely on vague language in the FAST agreement. Treat advisor relationships like hiring. When you hire an employee, you define the role and set expectations. Do the same with advisors.

How many advisors should you have?

Keep your advisor roster small. Probably just one to three people maximum.

Think of advisors like your founding team. You want diversity of skills and networks. You don't need three business strategists or five people who "know investors."

Your advisors should complement each other, not overlap. Maybe you need one person who deeply understands your target industry and can open doors to enterprise customers, and one who knows the investor landscape.

Do advisors help your  fundraise?

Putting advisors on your fundraising deck usually doesn't help.

Investors don't care that you have advisors unless those advisors are genuinely exceptional. Your advisors aren't running the business. You are.

The only times advisors actually impress investors are when they're super famous people actively distributing your product or when they're key connections in your specific industry.

If you're selling software to hotels and you have the CEO of every major hotel chain as an advisor, that shows real access and credibility. (Assuming they are all customers.)

Everyone else is just taking up space on your deck.

Until next time,

Dunky, the "cap-table-protecting" hippocorn

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