How much equity should a startup advisor get?

Advisor grants are commonly a small fraction of a percent of fully diluted equity, scaled to company stage, time commitment, and how scarce the expertise is. Templates such as the Founder Institute's FAST agreement frame size by stage and engagement level, which is a useful reference point for founders.

How should advisor equity vest?

Monthly over one to two years is common, often with a short cliff or none, because advisor relationships usually run shorter than employment. Vesting should stop when the relationship ends, and single-trigger acceleration on acquisition is reasonable to decline or limit for advisors.

What should an advisor agreement include?

The scope of help, a realistic time commitment, grant size and instrument, vesting and termination terms, confidentiality, assignment of intellectual property to the company, conflict disclosures, and confirmation that the advisor is an independent contractor rather than an employee of the company.

Can advisors receive incentive stock options?

Generally no. Incentive stock options are limited to employees, so advisors usually receive non-qualified options or restricted stock. Restricted stock with a timely 83(b) election can shift taxation to grant, while non-qualified options create ordinary income when exercised. Confirm the right instrument with counsel before granting.

Advisor Equity: How to Grant It Without Regretting It

Advisor equity is a stock or option grant made in exchange for ongoing advice or specific help. Grants are typically small fractions of a percent, vest monthly over one to two years, and are documented in an advisor agreement that defines the contribution, assigns IP, and forfeits unvested equity when the relationship ends.

What advisor equity pays for

An advisor is someone outside the company who contributes expertise, introductions, or credibility without being an employee or board member. Equity aligns them with the outcome when the company cannot pay cash.

The problem is that advisor value is uneven and hard to verify. One advisor makes the introduction that closes a round; another takes calls twice and disappears. Equity granted up front pays both the same.

So the first question is whether the relationship needs equity at all. Many experienced operators give occasional advice for free or for a modest cash fee. Equity makes sense when the advisor is committing sustained, specific help that would otherwise cost the company significantly more.

Signals a grant is justified: a defined area of contribution, a realistic time commitment, a track record in exactly that area, and willingness to sign an agreement that ties equity to continued involvement.

Signals it is not: a request for equity in exchange for being named on the pitch deck, vague offers of introductions, or reluctance to vest.

Structuring the grant

Size. Advisor grants are commonly a small fraction of a percent of fully diluted equity, scaled to stage, commitment, and how scarce the expertise is. Earlier-stage companies with less proven value tend to grant more per advisor; later-stage companies grant less. The Founder Institute's FAST agreement, a widely used advisor template, frames grant size by company stage and level of engagement, which is a useful starting reference.

Total pool. Decide in advance how much of the option pool advisors can take in aggregate. Several small grants compound, and investors read a crowded advisor list as a sign of undisciplined equity management.

Vesting. Monthly vesting over one to two years is common, often with a short cliff or none, because advisor relationships are expected to be shorter than employment. Vesting stops when the relationship ends.

Acceleration. Some advisors ask for acceleration on acquisition. Single-trigger acceleration for advisors is a reasonable ask to decline or limit, since the acquirer will not retain them.

Instrument. Restricted stock purchased at fair market value, or stock options. Restricted stock lets an advisor start the capital gains holding period and, with a timely 83(b) election, be taxed at grant rather than as it vests. Non-qualified options avoid upfront purchase but create ordinary income on exercise. Advisors are not employees, so incentive stock options are generally unavailable to them.

Board approval and the cap table

Every advisor grant should be approved by the board and recorded on the cap table at the time it is made. Promises made by email and never formalised are among the most common problems found in fundraising diligence, and cleaning them up during a round costs time and leverage.

The advisor agreement

A short written agreement prevents most advisor disputes. It should cover:

Scope. What the advisor is expected to do: specific areas of advice, introductions, availability for calls, and any deliverables.

Time commitment. A realistic expectation, such as a set number of hours per month.

Equity terms. Grant size, instrument, vesting schedule, and what happens to unvested equity on termination.

Confidentiality. Protection for information the advisor sees.

IP assignment. Anything the advisor creates for the company belongs to the company. Investors check this.

Termination. Either side can end the relationship on short notice, with vesting stopping at that date.

Conflicts. Disclosure of competing advisory roles or investments.

Independent contractor status. The advisor is not an employee and is responsible for their own taxes.

The agreement is also the tool for ending a relationship that is not working. Without one, reclaiming equity from an advisor who stopped contributing is difficult.

This page is general information, not legal, tax, or investment advice. Terms and rules vary by jurisdiction and deal; get advice from counsel on a specific decision.

This is general information, not legal advice, and reading it does not create an attorney-client relationship. Talk to a qualified attorney about your specific situation.

Advisors versus board members

Advisors have no fiduciary duty to the company and no governance role. Board members do. Granting board-level equity to someone functioning as an advisor, or expecting board-level commitment from an advisor, creates confusion. Keep the roles and their compensation distinct.

Frequently asked questions

How much equity should a startup advisor get?: Advisor grants are commonly a small fraction of a percent of fully diluted equity, scaled to company stage, time commitment, and how scarce the expertise is. Templates such as the Founder Institute's FAST agreement frame size by stage and engagement level, which is a useful reference point for founders.
How should advisor equity vest?: Monthly over one to two years is common, often with a short cliff or none, because advisor relationships usually run shorter than employment. Vesting should stop when the relationship ends, and single-trigger acceleration on acquisition is reasonable to decline or limit for advisors.
What should an advisor agreement include?: The scope of help, a realistic time commitment, grant size and instrument, vesting and termination terms, confidentiality, assignment of intellectual property to the company, conflict disclosures, and confirmation that the advisor is an independent contractor rather than an employee of the company.
Can advisors receive incentive stock options?: Generally no. Incentive stock options are limited to employees, so advisors usually receive non-qualified options or restricted stock. Restricted stock with a timely 83(b) election can shift taxation to grant, while non-qualified options create ordinary income when exercised. Confirm the right instrument with counsel before granting.