Before you start giving away your startup equity goodies, here is some food for thought startups should keep in mind when it comes to compensating a startups advisor.
If you decide to bring on an advisor to assist with market traction (and overall success) it is common to have a written agreement in place to protect both the startup and the advisor. This agreement is typically called an “Advisor Agreement” or an “Advisor Letter” and works great in managing expectation on all sides.
The Agreement speaks to things like advisor compensation like incentive equity and vesting schedule, and manages expectations by way of clearly defined Terms and Conditions. Other important matters, like intellectual property protection and ‘idea protection’ (confidential information clause) should also be discussed and included in the Agreement. Even though most VCs and Advisor may balk at the thought of an NDA clause, having an Agreement that generally protects your startup’s confidential information is great in any worst case scenario.
Bottom line: Remember, an Advisor should like what your company is doing and believe in its success. If they do, they will likely entertain your Advisor Agreement and be open to signing on the dotted line when it matters- so protect your startup!
Disclaimer: Remember, this is not legal advice! This is for general information and educational purposes only. This does not create an attorney-client relationship, nor does this substitute for attorney advice, so please do not rely on this for anything but a conversation starter.