Finally, for startups in sectors that need in-depth expertise, the right advisor can be invaluable. “For a biotechnology company, it could really change a company to bring on board someone who is a doctor or researcher with solid knowledge,” says Ash Rust, managing partner at Sterling Road, a Bay Area venture capital firm that invests in and advises start-up startups. Another thing: the needs of startups can change quickly, so don`t hesitate to replace consultants when priorities change. In fact, you can review your advisory board every six months to determine if a member is no longer needed. “As a founder, it`s easy to get involved in this idea of your loyalty to your advisors,” she says. “But if you have to drive someone, you just have to do it.” If you hire top-notch people, they might even help with the process, like the best known advisors when resigning. The FAST agreement recommends standard capital grants for an individual advisor. It is not uncommon for a technology startup to award a 5% capital pool to a group of strategic advisors or an advisory committee. Consultants are a valuable resource that can provide the right help at the right time for your start-up. But don`t forget that an advisory board is not meant to brag about rights. It`s about finding dedicated allies with specific skills that can help you accomplish a clearly defined task.
Some startups may want to hire consultants to face different challenges. For example, an electric scooter company trying to break up in a new city may need an expert who knows how to navigate through regulatory roadblocks in its target market. Or a medical device manufacturer could benefit from a consultant who has links to leading academic institutions and government regulators. Depending on the start-up phase and the type of advice, a consultant can receive between 0.25% and 1% of the shares. There are ways to structure such compensation to ensure that founders receive value for these actions while retaining the flexibility to replace consultants without losing equity. Sign agreements with startups that indicate their roles; 2. Compensation. In return for the services provided by the consultant and other obligations, the entity compensates the advisor with equity funds as defined in Schedule A, subject to a blocking plan defined in Appendix A and the agreement to grant or issue equity to the advisor. Once you have identified an advisor, you will need a detailed agreement containing a carefully crafted capital compensation agreement. Whether your lawyer is designing this agreement or using a template, the document should contain the following: The Standard Founder/Consultant Model (“FAST”) was developed by the founding institute to assist future entrepreneurs in the launch programs we implement and implement around the world and interact with the mentors with whom they interact throughout the program. In 2011, the founding institute published the public FAST agreement, and we have since undergone gradual updates to version 1 of the agreement. On August 1, 2017, the founding institute released a preview version of Version 2, which contains a number of improvements: one of the most important parts of any consulting agreement – and the other that will affect the future of your business – is the compensation component.
This can be difficult because you essentially attribute part of your startup to a consultant who has yet to prove its worth. “You can`t always tell who has enough time and won`t be a flake and will work for the company in exchange for the potential equity they will receive,” Szymanski says.