Deal Terms
Advisory Shares
Equity granted to advisors in exchange for guidance, introductions, or strategic support.
Advisory shares are equity grants — typically stock options — given to advisors who provide strategic guidance, industry introductions, technical expertise, or credibility to a startup. Standard advisory grants range from 0.1% to 1.0% of a company's equity, vesting over 1-2 years (shorter than employee vesting). The FAST Agreement (Founder/Advisor Standard Template) from the Founder Institute provides common benchmarks: an advisor providing occasional help might receive 0.25%, while one deeply involved in strategy and introductions might receive 0.5-1.0%. Advisory shares are almost always stock options (not restricted stock) with vesting tied to continued engagement. The key tension: advisory equity is cheap for startups to grant but can add up quickly — 5 advisors at 0.5% each consumes 2.5% of the cap table before any institutional investor arrives.
In Practice
A pre-seed SaaS startup brings on a former VP of Sales at Salesforce as an advisor. They agree to 0.5% equity vesting monthly over 2 years, with a 1-month cliff. The advisor commits to two 1-hour calls per month and making 3-5 warm introductions to enterprise buyers per quarter. If the advisor stops engaging, unvested shares are forfeited. This structure aligns incentives: the advisor earns equity proportional to ongoing contribution, and the startup gets high-value guidance without cash outlay.
Why It Matters
For founders, advisory shares are a powerful tool for accessing expertise and networks without spending cash — which is critical at the earliest stages. For VCs evaluating a startup, the advisor roster signals credibility and access: a company with relevant, high-quality advisors (who are actually engaged, not just names on a website) demonstrates founder resourcefulness. However, VCs also scrutinize total advisory equity — if 5-10% of the cap table is allocated to advisors before a seed round, that's a yellow flag about founder equity discipline.
VC Beast Take
The dirty secret of startup advisors: most provide very little value. The best advisors make 2-3 introductions that genuinely change a company's trajectory. The worst collect equity for attending a monthly call where they half-listen. Founders should structure advisory agreements with clear deliverables and short vesting periods. And VCs should ask: which of your advisors actually moved the needle, and how? If a founder can't name specific outcomes, the advisory shares were probably wasted.
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