Standard Advisor Agreement Template for Startups
Posted by Jonathan Greechan on 2017–03–04
As the world’s largest entrepreneur training and startup launch program, the Founder Institute looks to help solve problems for entrepreneurs that threaten innovation.
One significant problem that faces the Founder Institute’s 2,000 Graduate companies and 7,500 Mentors is forming an advisor agreement. We have gotten literally hundreds of advisor agreements to review — and every one is different.
It shouldn’t be complicated to set-up a framework around a simple desire for Mentors to lend a hand, and for startups to get help.
As a result, we created “FAST” (Founder/ Advisor Standard Template), which outlines standard terms and allows an advisor agreement to be set by simply checking a few boxes and signing the dotted line. The goal is to encourage more collaboration between experienced and new Founders, both inside the Founder Institute and out.
Simply check the level of engagement, sign the agreement, and start the relationship. There is no longer the need for cumbersome negotiation, legal drafting and review.
The FAST Agreement
With just a signature and a checkbox on the FAST agreement, entrepreneurs and advisors can now agree in minutes on how to work together, on what to accomplish, and on the right amount of equity compensation.
Simply check the level of engagement, sign the agreement, and start the relationship. There is no longer the need for cumbersome negotiation, legal drafting and review.
How to Use “FAST”
There are three levels of company maturity that influence the equity compensation: idea, startup, or growth. There are also three levels of engagement for an advisor that also influence the compensation: standard, strategic, or expert. So, for example, if an advisor provides an early-stage startup with an expert level of help by meeting with the team monthly, recruiting some talent, and taking a customer call, then that advisor will earn 1% of the company in the form of restricted stock or options vesting over a two year time period; while a similar level of engagement for a growth stage company is compensated with just 0.6%. The FAST equity compensation framework is outlined below, and the full agreement explaining everything follows.
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 & Projects 1.00% 0.80% 0.60%
How to Engage an Advisor
Entrepreneurs should engage with advisors carefully. Just because someone has a good name or has domain expertise does not mean that they are a good advisor or that there is the necessary level of good chemistry. The Founder Institute recommends that an entrepreneur work with a potential advisor for at least one month and spend at least 8 hours together before discussing the FAST agreement.
A classic approach for an entrepreneur to engage an advisor might follow the following outline.
- Research: The entrepreneur identifies between 10 and 15 target advisors that could help their business grow exponentially.
- Contact: Using Linkedin and Crunchbase, the entrepreneur identifies people that are known in common and secures an introduction.
- Meeting: The entrepreneur sends a five sentence introduction and requests a call, coffee or lunch.
- Request: If the chemistry is good with the advisor, the entrepreneur makes a small request of the advisor to test out the working relationship.
- Opportunity: If the request leads to a successful relationship dynamic, the entrepreneur presents an opportunity for the advisor to engage more formally with the business without discussing compensation.
- FAST: If the advisor agrees to engage, the entrepreneur sends the advisor the FAST agreement.
- Compensation: The FAST Agreement recommends standard equity grants for an individual advisor. It is not uncommon for a technology startup to have a 5% pool of equity allocated to a group of strategic advisors or an advisory board.
Download and learn more about FAST at http://fi.co/contents/fast.
Originally published at fi.co.
