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I've been thinking about this quite a bit lately. If you give up typical mentor equity - ~0.5% in exchange for someone who can open doors and quickly make conne

I've been thinking about this quite a bit lately. If you give up typical mentor equity - ~0.5% in exchange for someone who can open doors and quickly make connections for you, payable upon company exit, this can end up being a pretty good deal. Consider this, many of the things mentors can do for a startup are things that could be done by a high level employee, but could take up lots of time - sourcing talent, getting intros, removing roadblocks, etc. If you hire someone to help with these things, it costs you $100,000+/year in your prime growth stage where working capital is vital. If you have a mentor who can do these things in a fraction of the time because of his or her network and experience, if you have a $100mm exit, this ends up costing you $500,000 somewhere between 5 and 10 years later. It also frees up that salary which can then be used to finance growth in operations or some other vital need. Of all the financing and investment options a founder has available, if you have access to good mentors, this seems like one of, if not the, best option to help with the growth of your company.

sytelus 12y ago
There are too many things wrong with your calculation. First, you need mentor exactly because you can't replace that role with your high level employee. Mentors are typically a successful founders themselves and have enough cash in bank not to worry about employment. Good mentor don't help startups because they are getting 0.5% equity but rather because they see new founder as image of themselves, huge promise in their approach and yeah, may be a big bucks they can generate one day. If your mentor is haggling about equity% then you are probably talking to wrong guy. Also it's hilarious to me that you think $100K salary can buy a person who can do the job of a mentor. The role of mentor works exactly because they are not your employee and they can tell you to your face that your suck at XYZ. It also works because mentor typically has seen the movie dozen times and can compare and contrast in their past experiences.
- bsbechtel 12y ago
  Keep in mind the fact that lots of high level employees play the role of mentor on the side for other start ups, and at the same time, many high level employees are individuals who have started their own successful ventures at one time or another, and now prefer to work for someone else for various reasons. These two roles are far from mutually exclusive. I also never stated anywhere that it would be acceptable for a mentor to haggle about his equity stake. ~0.5% is a rough estimate of what most mentors receive in exchange for their advice and help. Frankly, you're right that most mentors do it out of a desire to help and their equity position should be just enough to have some skin in the game. However, those mentors also have a responsibility to help you. That help comes in many different sizes and shapes. My point was that some of the things a mentor does to help is to make connections that can take lots of time to otherwise make, and to help overcome hurdles that otherwise would likely prevent success. As far as their role, if you need a mentor to tell you that you suck at XYZ, you're probably not ready to run your own company yet. A great founder knows his weaknesses and surrounds himself with people who fill those gaps and raise the bar for the entire team. Sure, there are inexperienced founders who need to be told this, but if that's the mentor's main job then that start up is going to have bigger problems than the equity stake of the mentor vs a high level employee. I think you might've misunderstood my point. I wasn't saying that $100K will buy you someone who can do what a mentor can do. I was saying that a mentor can help do many of the things that a $100K employee would otherwise need to do, at a fraction of the cost and much more efficiently. This is of course dependent on a founder making a prudent choice of mentor(s), which if he was the type of founder described above, he will have done.

sytelus 12y ago

There are too many things wrong with your calculation. First, you need mentor exactly because you can't replace that role with your high level employee. Mentors are typically a successful founders themselves and have enough cash in bank not to worry about employment. Good mentor don't help startups because they are getting 0.5% equity but rather because they see new founder as image of themselves, huge promise in their approach and yeah, may be a big bucks they can generate one day. If your mentor is haggling about equity% then you are probably talking to wrong guy. Also it's hilarious to me that you think $100K salary can buy a person who can do the job of a mentor. The role of mentor works exactly because they are not your employee and they can tell you to your face that your suck at XYZ. It also works because mentor typically has seen the movie dozen times and can compare and contrast in their past experiences.

bsbechtel 12y ago
Keep in mind the fact that lots of high level employees play the role of mentor on the side for other start ups, and at the same time, many high level employees are individuals who have started their own successful ventures at one time or another, and now prefer to work for someone else for various reasons. These two roles are far from mutually exclusive. I also never stated anywhere that it would be acceptable for a mentor to haggle about his equity stake. ~0.5% is a rough estimate of what most mentors receive in exchange for their advice and help. Frankly, you're right that most mentors do it out of a desire to help and their equity position should be just enough to have some skin in the game. However, those mentors also have a responsibility to help you. That help comes in many different sizes and shapes. My point was that some of the things a mentor does to help is to make connections that can take lots of time to otherwise make, and to help overcome hurdles that otherwise would likely prevent success. As far as their role, if you need a mentor to tell you that you suck at XYZ, you're probably not ready to run your own company yet. A great founder knows his weaknesses and surrounds himself with people who fill those gaps and raise the bar for the entire team. Sure, there are inexperienced founders who need to be told this, but if that's the mentor's main job then that start up is going to have bigger problems than the equity stake of the mentor vs a high level employee. I think you might've misunderstood my point. I wasn't saying that $100K will buy you someone who can do what a mentor can do. I was saying that a mentor can help do many of the things that a $100K employee would otherwise need to do, at a fraction of the cost and much more efficiently. This is of course dependent on a founder making a prudent choice of mentor(s), which if he was the type of founder described above, he will have done.