What Is An Advisory Board Agreement

How much equity should I give? Okay, you`ve found an advisor, you`re ready to sign an agreement, and you`re ready to give equity. Well, how much should you give? The amount is usually between 0.2 and one percent, and it`s a good idea to consider the size and growth of your business and the consultant`s experience (both as a professional and specifically as a consultant). The FAST agreement recommends standard equity grants for a single consultant. It`s not uncommon for a tech startup to allocate a 5% share pool to a group of strategic advisors or an advisory board. 9.2. Non-lifting. During the term of this Agreement and for a period of twelve (12) months following the termination of this Agreement for any reason, the Consultant agrees not to attempt to distract or disrupt the development of the Company`s business through advertising, hiring, contracting and communication with the Company`s employees. Contractors must deal carefully with consultants. Just because someone has a good reputation or expertise doesn`t mean they`re a good consultant or that the necessary level of good chemistry is there. The Founder Institute recommends that an entrepreneur work with a potential advisor for at least a month and spend at least 8 hours together before discussing the FAST agreement. The FAST agreement includes a three-month „cliff“ in the admission of capital, which makes it possible to end an unproductive advisory relationship without the burden of allocating equity in the first three months.

Two months ago, we expanded FounderDating – a network of people for entrepreneurs – to connect entrepreneurs and consultants. My biggest shock in customer development has been the number of contractors and consultants working together „informally“. This is honestly the biggest mistake you can make in a consultant-consultant relationship. Once in a blue moon, everything might work out well, but in most cases, your relationship will die out or be inconsistent at best if you don`t have a consultation agreement. If you got away with it without formal relationships, you were lucky. But here`s how to get it right: The Founder/Advisor („FAST“) standard model was developed by the Founder Institute to help budding entrepreneurs in the startup launch programs we run globally and interact with the mentors they interact with throughout the program. In 2011, the Founder Institute made the FAST agreement public, and since then we have made gradual updates to version 1 of the agreement. On August 1, 2017, the Founder Institute released a draft version of version 2 that includes a number of improvements: Wait, what does „formalize“ mean? As a general rule, after a few meetings and working sessions together, you will want to formalize your consultant-consultant relationship.

This means signing a consultant contract: a legal document that briefly describes the consultant`s commitment to your business and gives them a small amount of equity. It is a short document, and there are several templates on the web. (Here`s one we created with the blessing of the two leading law firms, Orrick and Gunderson Dettmer.) Do not attempt to recreate the wheel with this Agreement. I would suggest using our model or another one that has been blessed. You don`t need to find a lawyer to make a new one for you. When do I need to formalize? While we can`t stress enough the importance of this process, bringing legal documents to your „first date“ is a pretty cumbersome solicitation strategy. While there is no exact benchmark, the right time usually comes between your third and fifth meetings. Once it`s clear that you want to continue working together, sign an agreement as soon as possible to make sure you`re both on the same page.