A question that comes up with some frequency is how many options to grant to an advisory board member. One of my partners advises his start up clients not to issue more than 1% of a company’s equity to the entire advisory board. I think this is a pretty good goal. My experience, however, is that some advisory board members should be paid more than others because they ad more value, either because they undertake to do more than others or because they bring more visibility and credibility than others. One advisory board member that I know insists on half of a percent for her commitment, but she is a rock star in her industry and agrees to make phone calls and provide introductions. In effect, she adds more value than simply her good advice. So, those are some guideposts, but when considering a new advisory board member you should consider the contribution that is expected as well as the dilutive effect of the option grant.

11/04/08 update -- One of my start-up clients just faced this issue and settled on a pool of 1.5% for all advisory board options.