I thought it was relevant enough to post it as a complete post by itself. The comment.
Here you go.
Despite equity being seen as the ‘right’ reward, my experience has been that the startups i know in india had a very hard time (compared to silicon valley) attracting people to the mission+equity at 25% or more cut from market salary. In the valley, it is common to see early core employees work at 50% of market even. If you can get the *right* employee in india for mostly equity – great but be prepared to fish with cash. This is not inherently an attribute of us Indians – I dont think India has seen many (any?) virtuous venture cycles where an independent founder raises seed or bootstraps, then raises A/B/C/.. grows + returns money to common + preferred in a profitable and large exit. Once several of these cycles complete, there would be ‘existence proof’ of common equity == much higher value than cash.
Also, “quality” advisors are rare in India at this point – there are several that promise “intros” to VCs or customers. Carefully evaluate their resume + past successes + references *before* you sign up any advisors. If they claim they connected XYZ company to potential customers, call them and confirm – not just the top level details but some working level truth to the claim.
If you find the right person for your startup – sign them up and just like signing up early stage core employees, do not optimize for lower-dilution – offer what you have to. A thinner slice of a bigger pie goes the thinking vs. hoarding a whole lotta equity for nothing.
Carefully consider the ‘term’ of the relationship. Does the advisor want the equity to vest immediately? Or over 1 year? or over 2/3 years? In the valley, common to have 1 year terms and equity vests monthly. Remember it would be hard (impossible?) for you to gracefully fire your advisor in the event things are not what they were promised to be. So 1 year terms may be best.
And just like hiring a key employee, try before you buy – spend as much time as possible *prior* to committing to figure out if this is someone who will be genuinely helpful. Establish some bounds – # of hours per week/month + get in to detail of the promised “intro”. i.e. will it be an email ? a phone number? an in-person meeting with advisor present? if things dont move forward (to a POC/trial/contract) with the customer in question, would the advisor try and open alternative channels for you? How well do they know their contacts – do they just know them (socially – weak for business) or did they work together (strong / trusted axis) or did business together (separate companies – may or may not be strong). The more specifics you can get out of them, the more ‘data’ you will have to back up your instincts.
No lawyer I know in India (From Amarchand to local firms) has taken equity as compensation. Vague claims of “not being allowed” by firm etc abound. Not sure where the truth lies. If you succeed in getting good legal work for equity – let me know ! In the valley, good lawyers will often defer fees till financing (very common), or give you an implicit discount (vs. hourly billing) and would often offer to invest to get some preferred as well as take some common. All equity goes in to an arms length Partners Fund for most law firms. Individuals are known to work for common just like advisors.