Advisor Equity
There will always be debate about whether advisors actually help startups. Just as much of Silicon Valley holds disdain for MBAs (while quietly holding them), the same skepticism follows startup advisors. And yet many of the best angel and venture investors I know got their start as advisors to early-stage companies. Both sides benefited. I also know that more often than not, when I see an advisor list in a slide deck, I roll my eyes.
There are no universal truths here. The key, in my opinion, is alignment: trading equity on market-standard terms for clearly defined contributions, the advisor’s actual jobs to be done. Most of this piece is about advising companies, where the advisor receives equity in the startup. A fund advisor or venture partner is different: they generally receive a percentage of the GP’s carry pool. I cover both below.
Alignment is everything
Advisors usually get involved early, filling gaps in knowledge or relationships. A great one helps founders see around corners and surface the unknown unknowns: introductions to capital and customers, or rolling up their sleeves in a hard skill area. Seth Levine has a good post on the role of company advisors.
A successful advisor relationship comes down to founders and advisors aligning on four things:
- Role & expectations: the advisor’s jobs to be done
- Structure: equity grant and vesting schedule
- Communication: how the two parties will engage
- Evolution: companies change, needs shift, priorities move
The most aligned relationships I’ve seen are the ones where the advisor is also an angel investor. A few notes that follow from that:
- True advisors don’t ask for “free” equity.
- Bias toward advisors with real startup experience, not academia.
- Bias toward advisors with hard skills: help you’d otherwise pay cash for, if you could afford it.
How startup advisor equity works
There are two main forms of equity comp for advisors: restricted stock awards (RSAs) and stock options. Startup advisor agreements typically use a two-year vest, usually vesting monthly. The current FAST Agreement includes a three-month cliff, so no equity vests if the relationship ends during that period.
Two ways to structure it
I’ve seen successful advisor relationships structured two ways: the traditional single-agreement approach, and a more scalable micro-equity approach.
Traditional approach. The most straightforward way is a simple contract. The FAST Agreement is close to an industry standard. Much like a SAFE, it was designed to be boilerplate and simple to implement, while offering transparency on standard equity amounts. It covers the services expected, the amount and type of shares, the vesting schedule, the mechanism for receiving shares, and the notice period for ending the engagement. FAST is what I recommend to most founders.
Micro-equity approach. Cabal helps founders build more scalable advisor programs by increasing the share count (a stock split) so equity can incentivize smaller, more frequent contributions: scaling to 100+ advisors instead of one or two. Cabal implements and tracks micro-grants tied to specific contributions like investor or customer intros, and can even facilitate founder “asks” through LinkedIn contact sharing. As part of this, Cabal recommends committing 1-1.5% of the fully diluted share count, then creating advisor tiers based on expected contribution (e.g., Gold = 0.25%, Silver = 0.02%, Bronze = 0.0001%).
How much equity should a startup advisor receive?
With a standard two-year vest, most startup advisors should receive no more than 0.50% of the company, with 0.25% being more common. Carta’s H1 2024 data shows that actual median grants are lower:
| Company stage | Median advisor grant |
|---|---|
| Pre-seed | 0.21% |
| Seed | 0.12% |
| Series A | 0.05% |
Only 10% of pre-seed advisors received 1% or more.
The pattern is intuitive: the earlier and riskier the company, the larger the grant, because early advisors take on more uncertainty, and there’s more they can shape.
How much carry should a venture partner (fund advisor) receive?
A fund advisor, usually called a venture partner, is compensated in carry rather than company equity. VC Lab’s framework ranges from 0.1% to 10% of the GP’s carry pool, depending on the role and time commitment. Portfolio support sits at the low end; daily executive involvement sits at the high end.
VC Lab publishes a venture partner agreement with a useful framework. It sorts venture partners into five roles by what they actually do, and guides carry by role and level of commitment:
| Role | Base | Middle | Advanced |
|---|---|---|---|
| Executive | 3% | 5% | 10% |
| Fundraising | 2% | 4% | 6% |
| Strategic | 1% | 2% | 4% |
| Operating | 1% | 2% | 4% |
| Portfolio | 0.1% | 0.5% | 1.0% |
To make the economics tangible, assume 20% carry after returning capital and a venture partner receiving 1% of the GP carry pool:
| Fund size | At 1x | At 1.2x | At 3x |
|---|---|---|---|
| $10M | $0 | $4K | $40K |
| $50M | $0 | $20K | $200K |
| $100M | $0 | $40K | $400K |
These are directional examples. Carry may take years to realize and can easily be worth zero.
Base means monthly help, Middle weekly help, and Advanced daily help. VC Lab says four years with a one-year cliff is typical, although the schedule should match the anticipated role.
One caution worth flagging, because most first-time GPs miss it: fundraising is the trickiest role to compensate. Paying someone transaction-based compensation for bringing in LPs can trigger broker-dealer registration rules under securities law. It’s a real legal line, not a technicality, so talk to counsel before you structure any carry around fundraising activity.
Resources
A few of the best things I’ve read on advisors and advisory equity:
- Advisory Shares: What Startups Need to Know (Carta)
- Startup Advisor Equity (Y Combinator, Eric Migicovsky)
- Building Your Startup Advisory Board (Silicon Valley Bank)
- “Date” Advisers, “Marry” Board Members (WSJ)
- Mentor Whiplash About Early Board Members (Brad Feld)
- How to strategically manage your advisor’s compensation (TechCrunch)
- True “Advisors” Don’t Ask for Free Equity (Jordan Cooper)