Paul Graham thinks having an advisor as a pre-seed startup is a red flag 🚩
(See attached snapshot from X in a longer comment thread around red flags for super-early companies.)
So, is he right? Obviously both of these gents run accelerators, which provide advice in exchange for equity...maybe they're just talking their own book, I get it.
But advisors gotta make a strong case for significant equity these days.
Data in the graphic reflects the full option grant % given to advisors by pre-seed startups. Split into low (25th pct), medium (50th pct), high (75th pct) and super high (90th pct).
Please make sure these advisors have a vesting schedule. Typically 2-years with a short cliff or you can set specific performance milestones (eg Advisor A gets 0.1% equity after they complete the following tasks for the business).
There are two broad reasons to add an advisor to your company:
1) They are bringing technical expertise you desperately need. 2) They are introducing you to customers that sign up.
A zoom every once in awhile to discuss strategy? Not gunna cut it.
𝗢𝘁𝗵𝗲𝗿 𝗔𝗱𝘃𝗶𝘀𝗼𝗿 𝗗𝗮𝘁𝗮
The median pre-priced round startup on Carta has 1 advisor. A growing percentage have none.
There is a small but growing cohort of startups that have many advisors (in the 10-15 range). Those folks are getting tiny slices of equity - not sure if this is a new strategy or just a quirk of the moment.
We see many people start out as advisors and then become strategic investors (typically with a smaller check) into the same company. That's a great strategy to bolster the value of said advisors as a signal to potential VCs.
The most common template for advisor equity docs and agreements is the FAST (Founder/Advisor Standard Template). I think it's a great and highly recommend it to early founders.
The data below covers startups of all kinds. Those building in life sciences and technical hardware do tend to see larger advisor equity grants at the early stages.
#startups #preseed #advisors #advisorequity
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