Ask HN: Advisor shares for an early collaborator? | Hacker News Reader

Ask HN: Advisor shares for an early collaborator?

1 pointsuperplussed3 comments

I have a video-based language learning site that requires content to get off the ground. I have started working with probably the best possible person who currently is involved with teaching German on Youtube. Her involvement will only be a matter of a few hours a week, but she will be invaluable with the content as well as with promoting the site on her channel.

In my mind a fair compensation is to give the same profit sharing that we will offer all of our future content creators: some XX% of the revenue split according to which video content is being watched. But in her case because she is the first content creator, and she's collaborating with me creatively, that I could also give her something like 3% in advisor shares.

But I don't know how this works, I've seen some tables online that show that the max you should give with advisor shares is like 1%. Would a VC down the road think it's strange to see a number higher on the cap table? And if I do go higher should I put in some vesting terms?

My random advice:

1. Structure the business soundly in terms of incorporation and shares and vesting and such.

2. Do what you think is right by people.

3. If the business is successful, experienced Silicon Valley style venture capital (as opposed to local yokel type) will make it work unless it is unworkable.

4. Keep in mind that all the work is in front of you when dividing equity: https://blog.ycombinator.com/splitting-equity-among-founders...

Good luck.

Thanks for the advice brudgers, I agree with everything you said. The tricky thing regarding the last point is that this is not a co-founder and I haven't heard the topic of equity shares among non-co-founders or even non-employees discussed much before. But you are right to just do what is right by people, and the rest will work itself out.

If someone owns part of the company, then they are a business partner. Depending on the jurisdictions in which the company is incorporated and runs and probably some other things, a person with stock may have rights that give them leverage if things go south. Which is my main point: you are in business with anyone who has stock in the company.

The reason I pointed to the founder's article is largely because it emphasizes that equity may be used to reward long term contribution versus relative contribution at the time the company is formed. In the context of doing what is right, it is still probably the case that 60% of the current value probably is not worth 60% of the long term value. Particularly for someone who will not be contributing long term.

Generally, the rule is to pay people in cash rather than equity if they are non-employees or not cash investors. Partially because of legal complications that come with barter, partially because amateur investors, like amateur anything, can create problems.

In the Silicon Valley investor model (as opposed to the local yokel), advisor shares are increasingly less common. The advisors come with cash and are angel investors. The reason that it is tricky and there isn't much about advisor shares is because it is not really a part of the Silicon Valley investor model. That's probably worth consideration if the business is intended to be a startup in the Silicon Valley sense rather than the buzzword for any new business including Mexican bistros, one truck lawn care services, and blogs with adword ads and Amazon affiliate links.

My bottom line advice is don't do anything tricky with equity because it will be hard to get right.

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