Choosing Between the Advisory Board and the Core Team in Startups: A Guide for Investors and Entrepreneurs

When joining a startup, many wonder whether they should be part of the advisory board or the core team. This decision is often accompanied by significant considerations regarding compensation, workload, and potential future rewards. In this article, we will explore the pros and cons of each option, helping you decide which path is best for your situation.

The Equally Complicated Journey: Being an Advisor or Part of the Core Team

Juggling the roles of an advisor and a member of the core team requires a delicate balance between commitment and flexibility. My experience spans both scenarios, and I have found that there is no one-size-fits-all solution. Typically, individuals with substantial equity stakes in a funded company are seen as the preferred profiles for advisory roles, while individuals who are integral to the day-to-day operations of the company are more likely to be part of the core team.

Equity Compensation: The Preferred Option for Funded Startups

For funded startups, equity compensation is the most common and preferred option for advisors. This approach not only aligns the interests of the advisor with the company's objectives but also provides a potential financial benefit if the company achieves significant success. However, this arrangement is typically reserved for companies that have already secured funding, as the funding process often indicates a level of maturity and stability that makes equity a viable form of compensation.

When the Core Team Is the Best Option

The core team of a startup, on the other hand, faces a different set of challenges. It is a labor-intensive role that often requires more than a full-time commitment, with high levels of stress and uncertainty. As Jack Welch, the legendary CEO of GE, once said, 'We spend more time and treasure on hiring than anyone else on the planet, and we only get it right half the time. We SUCK at HR!' This statement underscores the difficulty of finding the right people for the core team, even for a company that bills itself as the best in the industry.

For the core team, the rewards can be substantial. If your startup achieves a billion-dollar IPO or acquisition, your equity will be worth millions, if not tens of millions, depending on the size of your stake. Additionally, being part of the core team offers unparalleled experiences, valuable networking opportunities, and a wealth of knowledge to draw upon for future endeavors. However, the role demands significant dedication and a high tolerance for risk and uncertainty.

Advisory Board Compensation: A Less Intensive Role

Advisory board members, by contrast, typically have already achieved significant success and are leveraging their experience to help new startups. This role is less intensive, requiring fewer hours and lower stress levels. However, it does not offer the same financial rewards as being part of the core team. Most advisory board members can expect to earn a significantly smaller sum, typically ranging from hundreds of thousands to a million dollars if the startup becomes a unicorn.

When It Might Be Better to Join the Core Team

There are situations where joining the core team might be a better option. If you are ready to work extremely hard, and if the company has the potential to succeed, then being part of the core team is often the best choice. Success in a startup can be incredibly rewarding, and your equity stakes can provide substantial financial benefits if the company achieves its goals. Moreover, the experiences and connections you gain will be invaluable in your future career.

When Joining the Advisory Board Is Preferable

There are also instances where joining the advisory board is more advantageous. If you have already made a significant impact in your field and are looking to remain relevant by lending your expertise to new ventures, the advisory board can be a suitable option. This role requires less commitment and still provides opportunities to stay engaged with the startup community while earning a solid return on your investment.

Conclusion

The decision between joining the advisory board and the core team in a startup depends on various factors, including your readiness to commit, the potential for the company to succeed, and your preferred level of involvement. While equity compensation often aligns best with the risks and rewards of a funded startup, the core team offers the highest potential for financial gain and professional fulfillment. Advisory board members, on the other hand, can enjoy a more relaxed role with substantial financial rewards for helping startups thrive.