How to Compensate Startup Advisors?

Startups need advisors. There are many roles advisors play but they usually come down to the four M's: help with making and designing the product, management or strategy advice, marketing or business development help, or finding money.

Compensating advisors varies from company to company, but it is usually done in some form of cash, equity, tradeouts or a combination of all 3. When hiring advisors or accepting an advisory role, the expectations should be clear.

1. How much time and effort do you expect advisors to contribute?

2. What are the deliverables and what is your next critical success factor you are asking them to help achieve?

3. How much will you compensate them?

4. What kind of compensation are you offering and what are the tax and liability implications for both parties?

5. When does it vest if equity?

6. How long are you expected to serve on the advisory committee?

7. Are there conflicts of interest that need to be mitigated, managed, or eliminated?

8. Are you a good fit?

9. What are the non-disclosure requirements?

10. What are the separation arrangements?

Serving on an advisory committee is a great way to get your physician entrepreneurial feet wet. But, before you decide to test the waters, be sure you understand whether you are getting in over your head, whether you will sink or swim and where the life preservers are if you are underwater.