editione2.1.1
Updated September 12, 2022βDefinitionβ Advisors are people with extensive or unique experience who help a company in a formal or informal capacity. It is common for startups to bring on advisors with a recognized name, specific background or skills, or access to a network. Sometimes advisors act as mentors to founders.*
Startup advisor compensation is usually partly or entirely via equity. Typical equity levels vary depending on the value the advisor brings, the maturity of the company, and the level of their involvement, which can vary from occasional phone-calls or introductions all the way up to being a kind of part-time, hands-on member of the team.
Because advisors may not add value for as many years as an employee, a common vesting schedule for an advisor is two years with a three-month cliff. Advisor grants also typically have a longer exercise window post termination of service, and will usually have single trigger acceleration on an acquisition, because no one expects advisors to stay on with a company once itβs acquired.
One commonly used framework for compensation for advisors is the FAST Agreement from the Founder Institute, an accelerator thatβs been involved with over 4500 companies. Their approach is to recommend compensation based on the level of engagement (from monthly meetings to hands-on projects and help with networking) and the maturity of the company (from just an idea to growth stage, which would likely mean post-Series A):
| Idea Stage | Startup Stage | Growth Stage | |
|---|---|---|---|
| Standard (Monthly Meetings) | 0.25% | 0.20% | 0.15% |
| Strategic (Add Recruiting) | 0.50% | 0.40% | 0.30% |
| Expert (Add Contacts and Projects) | 1.00% | 0.80% | 0.60% |
Source: The Founder Instituteβs FAST equity compensation framework
Another source is Cartaβs guide to advisor shares, which similarly shows most grants in the 0.2β1.0% range.
Both the Founder Institute and Cartaβs guide offer legal templates. Founders and advisors should consult a template and a lawyer before committing to an agreement, but these levels are reasonable reference points for both sides in negotiating fair advisor compensation.
When negotiating a job offer, companies will always ask you what you want for compensation, and you should always be cautious about answering.
If you name the lowest number youβll accept, you can be pretty sure the companyβs not going to exceed it, at least not by much.