I'm being asked to join a startup's Board of Directors. Compensation model?

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February 24, 2021

by a searcher from The University of Chicago - Booth School of Business in Denver, CO, USA

There is a two-year old startup in the restaurant industry that I have started working with, and they have asked me to participate in their board and to serve as an advisor. They have a clever, scalable thesis, and I expect them to do well if they can achieve traction quickly. Does anyone here have experience in a similar situation, and guidance on what to ask for from a cash and/or equity standpoint? They currently have two employees, and are just starting to collect any revenue.

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Reply by an investor
from University of Wollongong in Sydney NSW, Australia
Are they revenue generating?

We know that 43% of startups fail because they are building something nobody wants.

So I would ensure the business model is understood, its assumptions are all defined, particularly assumptions around desirability (does someone want it), feasibility (can their resources build it), viability (will it make money).

Then ensure they have appropriate testing lined up to test the most risky assumptions.

Happy to have a chat if it helps.
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Reply by a searcher
in Bern, Switzerland
My experience is that I confirm the equity component in what Ben is proposing for an A-series and I always ask for a small cash component (even a symbolic amount for board meetings and fees), in order to validate the startup's willingness to collaborate.
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