Asking for a Hustler

Should I give my startup advisors equity or profit share? Or something else?

Watch Elizabeth’s answer here 

Elizabeth wrestled with this question a lot back in 2008-09 with her own startup.

Cash was tight. They weren’t able to raise money and therefore didn’t have funds to pay people. But they were still able to find great people who could help them on an equity basis.  

Note: We are not lawyers. So you should definitely talk to a lawyer about this next part.

One thing Elizabeth did at her startup was give equity to people who contributed. They’re investing their time instead of investing cash… but time is money.

So what’s the dollar equivalent of their time? We didn’t have SAFEs back then, but she had convertible notes, so Elizabeth signed these convertible notes for the equivalent in equity on those notes. 

I know that’s a little confusing.

This basically means someone can “contribute” $50,000 in exchange for equity in Elizabeth’s startup. But that “$50,000” is valued in someone’s time, not actual capital. 

Elizabeth found that this was the simplest way to find high-quality advisor for little to no cash upfront. And frankly speaking, she didn’t give a lot of equity out in the grand scheme of things. It was equivalent to somebody coming in as an angel investor and contributing time + expertise instead of money. 

Don’t give up half your company or even a significant portion of your company doing this. Super active, hands-on advisors are typically granted < 5%. Non-active advisors are typically granted < 1%

Please check with a lawyer if you decide to go this route.