Bringing on advisors can be a game-changer for your SaaS startup. They provide insights on scaling, hiring, fundraising, and strategy—without requiring a full-time role.
But should you pay them in cash?
Short answer: No.
Advisors are not employees or consultants. Unlike a consultant, who delivers measurable work for a set fee, an advisor shares knowledge based on their experiences. You can't easily tie their contributions to direct financial results.
If someone insists on cash, they likely see themselves as a consultant rather than an advisor. And that’s okay—just make sure you're clear on the difference.
For true advisors, equity is the best form of compensation because it aligns their success with yours. If your company grows in value, so does their stake. This creates a long-term incentive to help your business succeed.
One of the biggest questions founders ask is: How much equity should I give to an advisor?
The best way to start is by thinking about what the advisor would get if they were a full-time employee in a similar role.
For example, if you were hiring a VP of Sales, their typical equity range might be 0.5% to 0.75% of the company. But since an advisor isn’t full-time, you scale it down based on their level of involvement.
Use this rough formula to determine equity grants:
How often will you engage them?
Daily? (unlikely for an advisor)
What’s their role equivalent?
Here’s a quick breakdown:
| Advisor Role Equivalent | Full-Time Equity (%) | Advisor Equity (1/5th Time) (%) |
|---|---|---|
| VP of Sales | 0.5% - 0.75% | 0.1% - 0.15% |
| CMO | 1% - 2% | 0.2% - 0.4% |
| CTO | 1.5% - 3% | 0.3% - 0.6% |
💡 Pro Tip: Always start on the lower end of the range and adjust based on impact.
Employee stock options typically vest over four years, but for advisors, this is too long. You don’t know if you’ll need their help in four years, and their availability may change.
A simple structure:
✅ 0.1% equity grant vested over two years
✅ Monthly vesting (rather than yearly cliffs) to ensure continuous engagement
If the advisor is still adding value after the vesting period, you can issue a new grant to extend their involvement.
Let’s say you’re an early-stage SaaS founder who needs help closing enterprise deals and hiring sales reps. You connect with an experienced CRO from a successful SaaS company who agrees to be your advisor.
📌 0.1% equity vested monthly over 2 years
After two years, if they’re still actively helping, you can renew the agreement with another grant.
Not all advisors are worth compensating. A good advisor:
✔️ Believes in your mission—They genuinely want to see you succeed.
✔️ Shares insights, not just opinions—They offer actionable advice based on experience.
✔️ Invests time consistently—They check in regularly, not just when they need something.
✔️ Doesn’t negotiate purely for equity—They see equity as recognition, not a transaction.
If an advisor spends more time negotiating comp than offering insights, they’re probably not the right fit.
Your investors should also serve as key advisors. The best ones provide valuable growth strategies, connections, and mentorship—and they don’t require extra equity or cash.
Before giving away equity, make sure you're leveraging your investors' knowledge first.
Advisors can be a huge asset to your SaaS startup, but equity should be granted thoughtfully.
📌 Remember these key takeaways:
✅ Use equity, not cash—It aligns incentives.
✅ Adjust based on involvement—Start small, scale if needed.
✅ Vest over 1-2 years—Keep it flexible.
✅ Prioritize value over negotiations—Great advisors aren’t in it for the money.
By structuring equity the right way, you’ll build a strong support system without over-diluting your company.