Jun 15 2008

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.