Good question. I would be interested to hear what responses this generates

Interesting question! Tagging some startup founders and advisors who might be able to offer some insight – Ben Legg, Paul David Mather, Zarir 'Zed' Vakil, Cristian Oancea, Nathan Wilson, Yigit Senkardes, Niall Brady, Philipp von Bieberstein, Nikhil, Dimitris Protogirou, Stuart Prestedge, @rumkea, Kevin Withane, Ryan McGee, Natalie Tucker, Katie Muldoon, Anna Zuccarini

Hi David – equity payments are higher variable. In general, I’ve seen them a lot more commonly in very early-stage venture (pre-funding/pre-seed). Once sophisticated angels or VCs get involved, they often only allow equity options for key employees and star board members (e.g. bringing on a chairperson or board member with decades of experience in the industry where the startup is operating).

In the pre-funding days, it’s a bit of a wild-wild West. It mostly depends on the amount of value you bring to the venture and the sophistication of the other founders. If you work with founders who understand the value of the equity, they will likely want to tie any equity they provide to time spent and outcomes (i.e. vesting or reverse vesting). But I’ve also seen startups give 5%-10% equity to advisors/very part-time co-founders.

I’m not aware of any benchmarks on pre-funding/pre-seed startups, but my suggestion is to always be fair and forward-thinking about this. The main goal is to make sure that your relationship with the other founders stays positive and that the venture remains fundable. In my opinion, if you’re measuring your involvement in hours rather than days/week, I would keep any equity stake in the low single digits and add some performance milestones. Anything more than that will start raising eyebrows from sophisticated angels and institutional investors. However, if you’re considering joining as a co-founder with a significant time investment and staying onboard for longer, you can start discussing a larger stake, commensurate with your experience and involvement.

Great question David Worrall. We have an article on how much to charge here: http://staging.the-portfolio-collective.com/insights/how-much-should-you-charge-for-portfolio-work

It’s a good primer, though doesn’t go into detail re stock options. My normal rule of thumb is to work out the time that you will commit to a client/ job, then convert that into what you would charge at your standard hourly/ daily rate. Once you have that number, ask for enough stock options that should pay you 3-5 times that amount – to account for 1) the delay in getting paid, and 2) the fact that many startup stock options won’t end up paying out.

Does that help?

It varies in my experience. I’ve seen founders allocate a % pool of sweat options for advisors. For example, 1% of company at seed stage, split 5 ways i.e. 0.2% per advisor, vesting over time based on a commitment of x days per month. I’ve also seen founders pay sweat equity by calculating the number of days an advisor contributes e.g. day rate of £750 * 2 days last quarter = £1500 of shares granted at current valuation. I’m sure there’s plenty of other potential models.

I can echo Cristian Oancea feedback. All the early stage ventures where I received equity were pre-seed and before they had investors. A good friend who is a very successful VC once told me that (to VC’s) sweat equity is worth nothing! There really is no standard rule as far as I know, and for me it varied based on the value the founders believed I could bring, my relationship with them and their level of startup experience. A first-time founder I worked with agreed to 8% – 10% equity but founders who were on their 2nd/3rd startup never agreed to more than 1% – 2.5%. I like Ben Legg idea because at this stage it is impossible to value the company.

I don’t think I can add any more valuable insights to the ones already given and I think very much it is horses for courses. I think a combo of Cristian’s philosophy on this and Ben’s abacus probably gives you a base to work from. Paul and Nikhil have offered up come real world examples. I think protecting founders who have not been through this before is important and I think there is a very different situation for advisory sweat (much less) and real co-founder (cash and sweat) much more.