Bringing on an Advisor can materially improve how your company operates. Bringing on external advice can help you achieve so much more, so much faster, by leveraging the experience of others. However, as with any new relationship, it’s best for everyone if the nature of the relationship is formalized so that expectations are met.
As part of our ongoing initiative to reduce the level of work and legal documentation that founders have to pay for and draft, we are posting this new document to help streamline this process.
Previously we posted some guidance on issuing the right number of shares/options to employees and advisors. As discussed in that post, sharing equity with employees and advisors is often used as a motivational tool and a way to develop a company’s relationship with that individual.
But before thinking about numbers of shares or options to issue an advisor, there are a number of points to hammer out. What is the advisor’s role? Will she be providing marketing insights or board-level guidance? How much time will she be expected to commit each month and for how long? What will she be paid? Establishing these points will help determine the right amount of equity to issue, as well as making sure everyone is on the same page in terms of expectations and responsibilities.
For US startups, the Founder Institute offers some guidance on numbers as well as a free template agreement to help get the formal framework for the relationship out of the way quickly and without the legal headaches. You can read their guidance and get the US template here.
To complement the Founder Institute’s resource on this discussion, we have launched the Advisor Agreement. This free template agreement is UK-friendly and covers the standard big issues – appointment and termination, time commitment, roles and duties, fees, conflicts of interests and confidentiality. Of course as you discuss the arrangement, you may come across other points to include (exclude) or make other alterations.
For Hong Kong based startups, we have mapped the Advisor Agreement to a version suitable for use by startups based in Hong Kong. See the link on the right hand side to access the document.
How to Use
As with our other Seedsummit documents, the Advisor Agreement is meant to be a template on which to tailor the bespoke agreement that works best for you, or to use it as is.