The Advisor Who Takes More Than They Give

A founder I invested in asked me to review his cap table last month. He had four advisors. Combined, they held 3.2% of the company. I asked him what each advisor had contributed in the last twelve months. He pulled up his calendar and scrolled through it for a while.

One advisor had attended two quarterly calls and sent three introductions that led nowhere. Another had reviewed the pitch deck once and suggested changes that the founder had already considered. The third had not responded to an email in four months. The fourth had been genuinely useful for the first six months and then disappeared entirely.

3.2% of his company. For that.

How it happens

The advisory trap is one of the most predictable patterns in early-stage startups and it follows the same script almost every time.

The founder is early. They lack experience in a specific area. They meet someone at an event or through a mutual connection who has credentials that look impressive. The person offers to advise. They seem generous, knowledgeable, connected. The founder, grateful for the attention from someone senior, agrees to an advisory arrangement with a standard equity grant. Usually 0.5% to 1%, vesting over two years.

The first month is active. A few calls, some introductions, maybe a review of the deck or the strategy. By month three, the calls are less frequent. By month six, the advisor is responding to emails in three to five business days. By month twelve, the relationship exists only on the cap table.

The equity continues to vest.

Why founders tolerate it

Founders tolerate bad advisors for the same reason they tolerate bad hires longer than they should. Confrontation is uncomfortable and the cost is invisible.

Unlike a bad hire, a bad advisor does not show up in your burn rate. The equity they hold is a deferred cost. It does not appear on the P&L. It does not reduce your runway. It sits quietly on the cap table, diluting you by fractions of a percent that feel inconsequential until you add them up across three or four advisors and realise you have given away more equity for advice than some early employees received for years of full-time work.

The other reason founders tolerate it is credibility signalling. Having a well-known name on your advisory board feels like it adds weight to the company. And in some cases it does, briefly, in the first few conversations with investors who recognise the name. But investors who have been doing this for more than a few years know exactly how advisory relationships work. They will ask what the advisor actually does. If the answer is vague, the name becomes a liability rather than an asset. It signals that the founder gives away equity without demanding value in return.

The three types of bad advisors

After thirty years I can categorise bad advisors into three distinct types.

The first is the collector. This person advises twelve to fifteen companies simultaneously. They enjoy the title, the association with startups, and the small equity positions that cost them nothing but their occasional attention. They are spread so thin that no single company receives anything meaningful. Their calendars are full of advisory calls that they treat as social engagements rather than working sessions.

The second is the has-been. This person had a successful career a decade ago and now trades on credentials that are increasingly disconnected from how the market actually works. Their advice is rooted in the landscape they navigated ten years ago, which bears limited resemblance to today. They speak with confidence about strategies that no longer apply and introduce founders to contacts who have moved on to different roles or industries.

The third is the extractor. This person is deliberate about the arrangement. They negotiate generous equity terms, deliver an intense burst of value in the first month to justify the grant, and then fade. They know the founder will not claw back the equity because the social cost of confronting an advisor is higher than the financial cost of letting the vesting continue. They have optimised the advisory model for their own benefit.

What a good advisor actually looks like

The best advisor I ever had was a man who refused to take equity. He told me he would help because he wanted to, and that if I ever felt the advice was worth compensating, I could figure that out later. He made himself available for one call per week, always prepared, always with specific questions about what had changed since the last conversation. He made four introductions over two years and every one of them converted into something material. A customer, an investor, a hire.

He was useful because he was accountable to the relationship rather than to a vesting schedule. The vesting schedule creates a perverse incentive. Once the equity is granted, the advisor’s economic outcome is the same whether they contribute ten hours a month or zero. The only thing keeping them engaged is personal integrity, and personal integrity is not a scalable screening mechanism.

How to structure it properly

If you are going to bring on an advisor, here is what I tell founders to do.

First, define the deliverables before you discuss equity. What specifically will this advisor do? How many hours per month? What introductions will they make? What decisions will they help with? If the advisor resists specificity, that tells you everything.

Second, use milestone-based vesting. Instead of monthly vesting over two years, tie the equity to specific outcomes. Introduce the founder to three qualified investor leads. Review and contribute to the go-to-market strategy. Attend monthly calls for twelve consecutive months. If the milestones are not hit, the equity does not vest.

Third, set a six-month review. At the six-month mark, both parties evaluate the relationship openly. Is it working? Has the advisor delivered? Has the founder made the advisor’s time worthwhile? If the answer is no on either side, the arrangement ends and unvested equity returns to the pool.

Fourth, cap the equity. No advisor should hold more than 0.25% to 0.5% unless they are contributing at a level equivalent to a part-time executive. If someone is asking for 1% for advisory work, they are pricing themselves like a co-founder and contributing like a LinkedIn connection.

The conversation worth having

If you currently have advisors on your cap table who are not earning their equity, have the conversation. It will be uncomfortable for about fifteen minutes. The alternative is carrying dead weight on your cap table for the life of the company, diluting yourself and your team for value that was promised and never delivered.

The best founders I know treat their cap table with the same discipline they apply to their bank account. Every percentage point represents real ownership, real value, real dilution. Giving it away without a clear return is not generosity. It is a failure of governance that compounds with every round you raise.

Your equity is the most valuable thing you have. Stop handing it to people who show up for the title and disappear before the work begins.