A fair advisor agreement creates clarity and prevents misunderstandings. It defines the relationship, sets expectations, and outlines obligations for both sides.
To have a good advisor agreement, one must have an understanding of the role of the advisor. This includes the areas in which the advisor is going to be helpful and the kind of assistance he is going to be giving. It is very important to have an understanding of whether the advisor is going to be helpful in terms of product feedback, strategic introductions, and fundraising.
Equity percentage is another essential element. The figure should depend on the advisor’s expertise, level of involvement, and the startup’s stage. Founders should also refrain from giving too much too soon. Less equity means that there will be room for further incentives if the advisor turns out to be particularly valuable.
The agreement should also specify the vesting structure. Most startups choose vesting periods of one to two years. Clear vesting terms prevent disputes and ensure ongoing participation.
Confidentiality guidelines must be included. The advisors may have access to internal information, financial information, product plans, and customer information, among other details. Such information needs to be protected. Advisors also need to know about any restrictions that might come about due to a conflict of interest, especially if they are working with more than one company in the same industry.
Meeting cadence is another area that should be spelled out clearly. Some advisors expect informal check-ins, while others assume structured monthly sessions. Setting clear expectations helps avoid assumptions.
Lastly, it should be agreed upon how termination will occur. If the advisor decides to stop working with the company, then vesting will stop. If things change and the advisor becomes more involved in the business, then the equity can be re-discussed.
Credit Source: https://bit.ly/4qfA2aR
Sign in to leave a comment.