Building a firm is often challenging, and business owners have to navigate countless obstacles, from operation to financial and governmental. To be on the safe side, start-ups need to get the support of a professional. One problem, however, many of these budding companies cannot afford these experienced individuals. On the other hand, the organization can offer advisory shares.
While this may seem like a straightforward solution, it is not as simple as it looks. There are certain factors that the founder must consider before taking this option. In this article, We will consider everything about working with advisors and offering them equity to enable people to make informed choices.
Advisory Shares are a non-financial form of compensation plan that involves a startup offering stock options to a mentor. This individual works for the company as a consultant rather than an employee. Considering that they get equity, these experienced professionals do not receive salaries or wages for their services.
Speaking of services, advisors do not undertake executive roles or make decisions directly. Like their name states, they offer advice, suggestions, and insights on various aspects of operations, compliance with the authorities, and the industry in general. For example, an advisor will give a company all the benefits and challenges of localizing their headquarters in a particular country.
With an advisor, the company can avoid some “baby errors” that may affect its growth. Instead of learning from your mistakes, this person will use their experience to help you avoid them.
To enable the crypto startup to decide if offering advisory shares to mentors is worth it, we will review the pros and cons of doing so.
Let’s start with the upsides:
On the other hand, the company has to understand the following downsides:
As shown above, there are benefits and drawbacks to offering advisory shares to mentors. Unlike a traditional organization, the stock option of a crypto start-up is its native cryptocurrency.
With blockchain tokens, the number of investors holding affects token value, resulting in negative price action from any form of sell-off. Considering this factor, crypto start-ups must take the following steps to ensure the project are never at risk for “fear uncertainty, doubt” (FUD):
Although this method is tricky, a crypto start-up can utilize the benefits of advisory shares to scale growth while protecting the company from unfortunate events in the future.
