Startup Advisor Equity: How Much to Give, and How to Structure It
The short answer
Startup advisors typically receive 0.1% to 1.0% of equity, vesting monthly over two years with a three-month cliff. The percentage should be derived from the hours committed and the company stage, not from the advisor's reputation. Pay cash instead when the engagement is bounded or the advisor cannot accept equity from their employer.
Key takeaways
- Size the grant from committed hours and stage, not from how impressive the name is. A logo on your website is not worth 1% of your company.
- The working benchmark is 0.1-1.0%, with most early-stage grants landing between 0.25% and 0.5%.
- Monthly vesting over 24 months with a 3-month cliff is the structure that prevents dead equity. Annual cliffs make no sense for advisors.
- Cash is the right instrument for bounded work and for advisors whose employer forbids equity. It is not a downgrade.
- Four or five advisor grants at 0.5% each is 2-2.5% of the company gone before your first employee option pool is fully allocated. Budget it as a pool.
Advisor equity is one of the few early-stage decisions where founders routinely give away more than they meant to, because each individual grant looks small. Half a percent feels like nothing. Five of them, plus the two you granted before you had a policy, is three percent of the company committed to people whose engagement you have not measured.
This article sets out the ranges I see in practice, the arithmetic behind them, and the terms that determine whether the grant produces value or simply vests.
Derive the number, do not guess it
The cleanest way to size an advisor grant is to work out what the commitment is worth in cash, then convert. Take the advisor's realistic consulting rate, multiply by the hours they have actually agreed to, and express the result as a share of the company at your current or expected valuation.
A worked example. An operator whose consulting rate would be 300 per hour, committing to two hours a month for twenty-four months, is contributing roughly 14,400 of value. At a 6 million valuation that is 0.24% before any risk premium. Advisors take risk and illiquidity, so a multiple of two to three is normal, giving a range of roughly 0.5% to 0.7%.
| Hours per month | Rate | 24-month value | At 3M valuation | At 8M valuation |
|---|---|---|---|---|
| 1 | 200 | 4,800 | 0.40% | 0.15% |
| 2 | 300 | 14,400 | 1.20% | 0.45% |
| 4 | 300 | 28,800 | 2.40% | 0.90% |
| 2 | 500 | 24,000 | 2.00% | 0.75% |
Two things fall out of this table immediately. First, the earlier and cheaper your company, the more expensive advisors are in percentage terms, which is exactly when founders are most tempted to hand out grants casually. Second, four hours a month is not an advisory relationship. It is part-time work, and it should be structured and compensated as such.
Benchmark ranges by stage and engagement
| Company stage | Standard | Strategic | Expert |
|---|---|---|---|
| Idea or pre-product | 0.25% | 0.50% | 1.00% |
| Pre-seed or seed, product live | 0.15% | 0.30% | 0.60% |
| Post-Series A | 0.05% | 0.10% | 0.25% |
| Growth stage | 0.02% | 0.05% | 0.10% |
This shape mirrors the Founder / Advisor Standard Template, usually shortened to the FAST agreement, published by the Founder Institute. FAST maps three engagement levels onto three company stages and produces a percentage, with vesting and termination built in. It is a reasonable default document to start from, and using a recognised template shortens the negotiation considerably. Check the current version on the Founder Institute site rather than relying on a figure quoted second-hand.
Vesting: the term that actually decides whether the grant works
Advisor vesting differs from employee vesting in two ways that matter. The term is shorter, because advisory needs change faster than roles do. And the cliff is much shorter, because the failure mode you are protecting against is different.
| Term | Employee | Advisor | Why |
|---|---|---|---|
| Total period | 4 years | 2 years | Advisory value decays as the company outgrows the advice |
| Cliff | 12 months | 3 months | You will know within three months whether this relationship works |
| Frequency | Monthly after cliff | Monthly after cliff | Matches the monthly rhythm of the engagement |
| Acceleration on acquisition | Usually double trigger | Usually full acceleration | The advisory relationship ends at acquisition regardless |
| Termination | Employment terms | 30 days' notice either side, unvested returns | Keeps the exit clean and unemotional |
The three-month cliff is the single most important term. It converts a decision you have to make once and live with into a decision you can review. An advisor who is delivering will not notice the cliff exists; one who has gone quiet will lapse without either party having to hold a difficult conversation.
Equity or cash?
Equity is the default because it aligns incentives and preserves cash. But there are three situations where cash is straightforwardly the better instrument, and founders often miss them because equity has become the reflex.
| Situation | Instrument | Reason |
|---|---|---|
| Ongoing general advice over 12+ months | Equity | Aligns incentives, preserves cash, matches an open-ended relationship |
| A bounded piece of work with a deliverable | Cash or a day rate | The work has a defined end, so open-ended equity is mispriced |
| Advisor is employed somewhere that forbids outside equity | Cash | Common for people at banks, hospitals, regulators and large corporates |
| Currently serving buyer-side insider | Cash, hourly | Preserves their independence and avoids a conflict of interest with their employer |
| Advisor is also an investor | Usually neither | Investors advising their own portfolio are normally uncompensated; a grant on top invites questions from other shareholders |
The customer-side insider case is worth dwelling on, because it is the most valuable and the most frequently mishandled. Paying a currently serving buyer for their time can create a genuine conflict with their employer's procurement rules. Check before you offer anything, keep the engagement to general industry education rather than anything touching a live purchase, and document it.
Budget advisor equity as a pool
Grant by grant, advisor equity is invisible. As a pool it is very visible, and investors will ask about it during diligence. Decide the total before you make the first grant.
- Set a ceiling. For most pre-seed companies, 1.0% to 2.0% in total for all advisors is a defensible budget.
- Count grants against it. Four advisors at 0.5% is 2.0% and you are done, regardless of how impressive the fifth person is.
- Model the dilution. A 2% advisor pool is diluted alongside everything else, so it costs less than 2% at exit, but it is 2% of the cap table that investors will scrutinise for whether the advisors are still active.
- Review annually. Advisors whose two-year term has ended should be renewed deliberately or allowed to lapse, not renewed by default.
- Keep the register current. Every grant, its vesting start date, term and current status in one document. This becomes a diligence item faster than founders expect.
The clauses that matter beyond the percentage
- 1A stated commitment. Hours per month and format, written down. Without it there is nothing to hold the relationship to and no basis for ending it.
- 2Termination on 30 days' notice by either party, with unvested equity returning to the company. Say this at the outset; it makes the whole arrangement easier for both sides.
- 3Confidentiality. Short and standard, but present. Advisors see your metrics, your pipeline and your problems.
- 4Conflict disclosure. A positive obligation to tell you if they take on a competing company. Ask the question at the start as well.
- 5IP assignment for anything created. If an advisor produces a pricing model, a regulatory strategy or a hiring framework for you, it should belong to the company.
- 6No implied authority. Advisors do not sign, commit or represent the company. Obvious until an advisor introduces themselves to a customer as part of the team.
- 7Tax treatment. Advisor grants are usually structured as options or restricted shares with different tax consequences by jurisdiction, and the advisor may face a charge on vesting. Flag it early and tell them to take their own advice.
A short decision procedure
- 1Agree the commitment in hours and format before discussing any number.
- 2Compute the cash value of that commitment over 24 months at the advisor's realistic rate.
- 3Convert at your current valuation, multiply by 2 to 3 for risk and illiquidity.
- 4Sanity-check against the benchmark table. If you are above 1%, restructure the role rather than the grant.
- 5Apply 24-month monthly vesting with a 3-month cliff, 30-day termination, and unvested equity returning.
- 6Record it against your advisor pool ceiling and diarise the twelve-month review.
If you have not yet identified who to make this offer to, the sourcing method is in How to find startup advisors, and the messages that convert a cold contact into a first conversation are in Cold outreach to co-founders and advisors.
Frequently asked questions
How much equity should a startup advisor get?
Between 0.1% and 1.0% in most cases, with the majority of early-stage grants landing between 0.25% and 0.5%. Size it from the hours committed and the company stage rather than from the advisor's reputation: compute what the committed hours are worth at their consulting rate over 24 months, convert at your valuation, and apply a 2-3x premium for risk and illiquidity.
What is a normal advisor vesting schedule?
Monthly vesting over 24 months with a 3-month cliff, and termination on 30 days' notice by either party with unvested equity returning to the company. Employee-style four-year schedules with twelve-month cliffs are the wrong shape for advisors, because advisory value decays as the company changes stage.
Should advisors be paid in cash or equity?
Equity for open-ended relationships lasting a year or more. Cash for bounded pieces of work with a deliverable, for advisors whose employer forbids outside equity, and for currently serving buyer-side insiders whose independence you want to preserve. Investors already on your cap table are usually uncompensated for advice.
What is the FAST agreement?
The Founder / Advisor Standard Template published by the Founder Institute. It maps three engagement levels onto three company stages to produce an equity percentage, with vesting and termination terms included. It is a sound default document; check the current version directly rather than relying on figures quoted second-hand.
How many advisors can a startup afford?
Budget a total advisor pool of 1.0% to 2.0% at pre-seed and count every grant against it. At 0.5% each that is two to four advisors. Investors in diligence care less about the total than about how many of those advisors you have actually spoken to in the last quarter.
Can I take back equity from an inactive advisor?
Only what has not yet vested, and only if the agreement provides for termination. This is exactly why the 3-month cliff and the 30-day notice clause matter: they let an unproductive relationship lapse without a negotiation. Vested equity stays with the advisor unless they agree otherwise.