There’s a very broad range of conflicting opinions and preferences on advisors and their compensation including:

• They should only be paid consultants, never rewarded with equity
• They should only be people willing to invest, their reward is return on equity
• That angels should be value add by default and never be rewarded with additional equity or money
• That angels should expect to do some ad-hoc value add work but higher intensity work should be compensated separately
• That advisory work and board work is different. E.g. a 1hr 1-1 monthly advisory call is different than detailed, hands on work that requires independent outputs and should be compensated appropriately.

What’s most important is that the model you choose serves you and your business effectively, aligning interests and providing appropriate motivation and reward in both parties eyes.

Whatever model you choose, remember to try working together before you commit, equity is forever, and vesting equity is one good protection. Any credible advisor seeking equity reward should be happy to demonstrate their value before seeking a formal agreement.

Another perspective is, does this advisor provide money can’t buy advice, access or information? What would the market price be? Would it be better value to buy that input and benefit from the commercial control of the relationship? Or can this person provide benefits that would be impossible to buy (or afford) and I want to incentivise them long term for their input?

The FAST agreement below has some good starting points about how to quantify advisor input and reward, as with all relationships discussing and setting clear expectations is vital.

Further resources:

FAST (Founder Advisor Standard Template) includes suggested effort and equity compensation

SaaStr: The 2.5x rule

SeedLegals: How much equity for my advisor

Cabal: A modern advisor program