How to pay advisors? That is the question!

In a recent exchange with a few founders we heard the following sound bites:

I need to have the best sales and business development people but can not afford to pay them

I need great sales people but full time skilled sales people cost a lot!

Never considered fractional sales people

The bottom line is everyone wants the very best, but early in a startups journey the “best” might not be affordable. As full time employees. But can you experiment with the best “fractional” resources until you build greater revenue and scale prior to making full time hires? We are betting on the answer “yes”.

Let’s revisit how some of the startup worlds thinking is being shaped. Today a large number of people go through Accelerators and incubators. Many of those have mentors. Often these 3 month or so programmes do not pay these mentors but do provide a way for startups to access their networks and ask for favours for a period of time. Then the programme ends. And with it ends a sustainable engagement model for startups and those mentors. Why because the long term incentive is not there. Unless offcourse their name is on the cap table or they own some equity. We see that as a sure fire way to have long term alignment with startup founders.

How can you make that happen on AstraNova? Simple by using our partner Vestd we can ensure that the rules of engagement for you are codified. This is between you as a mentor/advisor and the startup. But we can help a little with pointing out what feels fair and what feels like you don’t have a fair deal! For the most part the equity you are offered is governed by a few variables:

The impact your work makes
The deliverables you are on the hook for
The period of time you are involved for
What stage the company is at (very early, early or late stage; yes that has a lot to do with how long they have been running and how much they have raised)

There are multiple models for engagement with startups as an advisors:

Get paid in cash
Get paid in equity
Get paid in a mix of cash and equity

We feel that model 3 probably leads to the best balance between long term incentives for both founders and advisors. The advisors get some liquid comp and may be able to enjoy a little uplift based on the fruits of their Labour and because their is equity involved the founder feels that the cash component can be lower thereby not impacting very early stage businesses too much.

There is no one size fits all but we would encourage you to consider the many variables and also the human motivations and needs of your sales, business development, partnerships and international growth and expansion advisors.

Leveraging Vestd may allow you to utilise a technology product to build confidence for your advisors that they will be rewarded fairly. Way better to focus on the real value, their skills rather than constantly being on shaky ground with respect to compensation and rewards.

Many of the advisors that are listed on AstraNova may be open to receiving some component of equity as part of the core compensation as well as for bonus compensation should you be in the fortunate position that your advisor smashes their target!

Have a look at these numbers below to give you an idea of how others are compensating advisors. This is not legal or financial advice but it’s great to understand what’s happening in the market. Over the course of the following year we will be asking our community to share their own compensations stories and examples anon offcourse! And look forward to getting your feedback on how the community is helping your business grow. Now stop reading and start hiring 😀