What’s An Appropriate Equity Package For A Founding Board Member?

Q: I am trying to determine the appropriate equity position for my startup’s board members.  They are arguing that they are "founding" board members. They have put in a few hours a month of their time for around a year, have been very helpful with introductions, and have sat in on VC meetings.  We are seed stage (pre-A). Can you suggest a range of equity for a "founding" board member? While you referenced the concept in your "Compensation for Board Members" article, you did not detail any specific ranges.

A: (Brad) I think their equity as "founding board members" – given your description of what they have been doing for you – should map to the post Compensation for Board Members or Board Member / Advisory Member Compensation.  Specifically, you are in the 0.25-1.0% vesting over 2 to 4 years zone. 

I don’t really believe there is a "founding board member" construct.  The opportunity for these early board members – in addition to the options you will give them – is to be able to invest at a very low valuation ($1m to $2m pre-money).  You should give them this opportunity well in advance of approaching VCs.

  • David Ulevitch

    Indeed, the value of an active and appropriate board member does not decrease over time. The contributions of a board at your Series B, C and beyond are just as important as the contributions of your board Pre-A. Some might argue, more important as there is no shortage of people who “know the basics” when you are starting out.

  • Mark Paul

    A good discussion on this topic can be found, here: http://www.softwareceo.com/forums/showthread.php?…

    • Joshua Zhao

      I always enjoyed reading articles on AskTheVC. However, one thing has been puzzling me and I'm surprised that no one else has raised the question yet. Maybe I'm just missing on the very basics. When we talk about the equity percentage numbers for those directors and other early participants, are these numbers based on the total number of shares prior to a funding event or does the base share number include those allocated for investors as well? As the shares for future investors are hard to predict, I assumed that the percentage numbers we talk about here are before any dilutions, is that right?

      • samantha mungo

        Joshua i have exactly the same question. Did you ever get any insight into this question?

      • I'll write a longer post on this, but generally the numbers we are talking about are prior to the investor dilution. But – as you'll see in the post I write, it's not quite so straightforward.