Pre-Seed SaaS Advisors Are Getting Less Equity Over Time

Why are pre-seed SaaS founders giving less equity to advisors?

First, the data story is clear.

The median equity grant to pre-seed SaaS advisors has fallen from 0.26% in 2020 down to 0.2% in 2023. Pretty robust shift (with nearly 10,000 advisor grants in the data set - all US data).

3 theories as to why:

𝟭. 𝗣𝗿𝗼𝗹𝗶𝗳𝗲𝗿𝗮𝘁𝗶𝗼𝗻 𝗼𝗳 𝗦𝗮𝗮𝗦 𝗮𝗱𝘃𝗶𝗰𝗲

It could be that a lot of founders are discovering they can use free online resources for a lot of formerly "advisor" type learning. Benchmarks on company building, fundraising, and team building are more available than they've ever been.

Advisors adding specific, tangible value (industry knowledge, network, etc) can still supercharge a company - but that bar has been raised.

𝟮. 𝗘𝗾𝘂𝗶𝘁𝘆 𝗶𝘀 𝗯𝗲𝗶𝗻𝗴 𝗵𝗲𝗹𝗱 𝗺𝗼𝗿𝗲 𝗰𝗹𝗼𝘀𝗲𝗹𝘆

Equity is always a precious resource - but as we exited the boom times for startups, the value was only enhanced. Founders may be reticent to give out larger slices of the equity pie for uncertain value.

And pre-seed advisor grants (though 0.2% of a company feels like very little) are actually fairly robust when compared to early employee equity. The typical full-time Hire 10 receives essentially equal equity to a pre-seed advisor.

𝟯. 𝗚𝗲𝗼𝗴𝗿𝗮𝗽𝗵𝗶𝗰 𝗰𝗼𝗻𝘃𝗲𝗿𝗴𝗲𝗻𝗰𝗲

Advisors in non-mature tech ecosystems have seen their median equity drop fastest. Whereas in 2020, an advisor to SaaS startups in Dallas may have asked for 1% of the company, today that person is probably negotiating for 0.3% or so.

Generally a good thing! It's true that you can found a SaaS startup in any city in the US - and founders outside of Silicon Valley shouldn't have to pay more for good advice.

Of course a fantastic advisor remains a valuable asset to any company - particularly those that can meaningfully inflect the growth trajectory for the business. I'm thinking here of advisors with broad customer reach (can help the startup sell), amazing talent networks (can help the startup hire) or specialized industry knowledge (can help the startup build).

Also this pattern doesn't hold outside of SaaS. Biotech advisors, for instance, saw median equity increase from 2022 to 2023.

More data on equity for advisors and all sorts of compensation goodies in our State of Startup Compensation Report - head to the link in graphic for the full, free study.

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