For early-stage founders, surrounding yourself with experienced advisors can be a catalyst for growth. But compensating advisors—especially when your startup is still pre-revenue or operating lean—typically comes in the form of equity, not cash. The challenge? Structuring that equity in a way that’s fair, defensible, and scalable.
This article breaks down what startup founders need to know about advisor equity grants: when to issue them, how much to grant, what vesting to use, and how to avoid common pitfalls. Whether you’re building your first advisory board or fine-tuning existing arrangements, these insights can help you set up advisor relationships for long-term success.
What Is Advisor Equity?
Advisor equity is the ownership interest you grant to individuals who provide high-value expertise, mentorship, or connections to your company but who are not employees, contractors, or directors. These grants are often formalized through option agreements or restricted stock awards.
Unlike full-time employees, advisors typically commit limited time (e.g., 2–4 hours per month) but can offer valuable guidance in areas such as:
- Fundraising and investor relations
- Product development or GTM strategy
- Strategic partnerships
- Talent hiring and culture
Because advisors often come in early and take some reputational risk to support your company, their equity should be meaningful—but also tied to deliverables and vesting milestones.
When Should You Grant Equity to Advisors?
Equity should only be granted after a clear understanding of the advisor’s expected contributions, availability, and alignment with your vision. Ideally, a formal Advisor Agreement should:
- Define the scope of work
- Set expectations on meeting cadence and availability
- Address confidentiality and IP assignment
- Outline equity terms and vesting
Founder Tip: Don’t issue equity just because someone offers to “open doors.” Issue it when there’s a sustained relationship with measurable impact.
How Much Equity Should You Grant?
Advisor equity grants typically range from 0.1% to 1.0% of fully diluted capitalization, depending on:
- Stage of your company (e.g., pre-seed vs. post-Series A)
- Advisor’s level of involvement and expertise
- How hard it would be to replace them
Here’s a rough framework:
| Advisor Type | Typical Equity Range |
|---|---|
| General Advisor | 0.1% – 0.25% |
| Functional Expert | 0.25% – 0.5% |
| Strategic Operator | 0.5% – 0.75% |
| High-Profile Industry Leader | 0.75% – 1.0% |
This equity is usually granted as non-qualified stock options (NSOs) if the advisor is not employed by the company.
esting Terms for Advisor Grants
Most advisor equity grants should vest over 12–24 months, with either:
- Monthly vesting without a cliff (e.g., 1/24th each month)
- Quarterly vesting to match cadence of contributions
Some founders use performance-based vesting or milestone triggers (e.g., introductions that lead to capital raised), but these can become complex to track and enforce.
Best Practice: Use time-based vesting for simplicity and include a termination clause (e.g., equity stops vesting if advisor disengages).
Should Advisors Sign Standard Option Agreements?
Advisors should sign a tailored Advisor Option Agreement that reflects their role and clarifies:
- Type of option (NSO)
- Number of shares or percentage of equity
- Exercise price (typically FMV based on latest 409A)
- Vesting schedule
- Expiration (often 10 years, or 90 days post-separation)
- Confidentiality and IP ownership
For many early-stage companies, this document will closely mirror your employee option agreement, but stripped of employment terms.
Founder Tip: Always tie your advisor grant to a Board resolution and 409A valuation for defensibility.
Equity vs. Cash vs. Hybrid Structures
In some cases, advisors are willing to defer compensation in exchange for equity. Others may prefer a small cash stipend (e.g., $500–$2,000/month) alongside equity. Choose a structure that reflects:
- Your current runway
- Advisor expectations
- The strategic value of the relationship
There’s no one-size-fits-all approach—but clarity is key.
Final Thoughts
Advisor equity grants are a powerful tool to bring seasoned insight to your startup without burning precious cash. But to be effective, they must be structured with intention—balancing fairness, simplicity, and alignment.
At Veritas Global, we help founders navigate equity structuring, cap table impact, and advisor negotiations with clarity and precision. Whether you’re issuing your first equity grant or refreshing advisor agreements post-funding, we provide tailored legal and strategic support.
Need help structuring advisor equity or updating your cap table? Contact us today to ensure your agreements align with your growth strategy and fundraising roadmap.
📘 Explore more: SAFE vs. Convertible Note: Structuring Early-Stage Financing.
