Advisory Shares
Definition
Advisory shares are equity a startup grants to an advisor in exchange for guidance, introductions or credibility instead of cash: usually 0.1 to 1 percent of the company, issued as stock options or restricted stock that vests monthly over one to two years, most often two.
How it comes up in fundraising
Founders use advisory shares to formalize a relationship with an experienced operator, investor or domain expert who helps a few hours a month without joining the company; the grant is signed as an advisor agreement, often the Founder Institute FAST template, and comes out of the option pool.
What advisory shares are, and what they are not
Advisory shares are not a separate class of stock. Per Carta's advisory shares guide, they are the same common stock or stock options a company grants to early employees; the label only records why the grant was made.
Three things set them apart:
- Versus employee options. An employee grant is larger, vests over four years with a one-year cliff (the market standard, per Orrick), and can be an incentive stock option. An advisor is not an employee, so per Carta they receive non-qualified stock options (NSOs) or restricted stock, on a shorter schedule.
- Versus sweat equity. Sweat equity is ownership earned in place of salary by someone doing the actual work. Advisory shares pay for outside guidance, not output, and the grant is far smaller.
- Versus an investor's stake. An advisor puts in no money. Carta suggests asking whether they would rather invest instead.
| Advisory shares | Employee equity | Sweat equity | |
|---|---|---|---|
| Who | Outside advisor, a few hours a month | Full-time employee | Founder, early hire or contractor on below-market pay |
| Typical size | 0.10% to 1.00% (FAST grid) | Set by role and stage | Negotiated, often a founder-level stake |
| Instrument | NSOs or restricted stock | ISOs, NSOs, later RSUs | Common stock or options |
| Vesting | Monthly, usually 2 years (FAST, Carta), no cliff or a 3-month cliff | 4 years, 1-year cliff | Usually the employee schedule: 4 years, 1-year cliff |
How much equity advisors get
The public benchmark is the Founder Institute's FAST agreement (Founder / Advisor Standard Template), now in Version 3, updated July 2026. The grant depends on company stage and advisor involvement.
| Advisor level | Pre-seed | Seed | Series A |
|---|---|---|---|
| Standard: monthly meetings | 0.50% | 0.25% | 0.10% |
| Expert: adds contacts and projects | 1.00% | 0.75% | 0.50% |
FAST also defines a middle "Strategic" tier between those rows, and notes that a 5 percent pool for a whole advisory board is not uncommon at technology startups. Per FAST, the grant is restricted stock or options vesting over two years.
Actual grants run below the template. Carta's guide, citing its H1 2024 compensation data, puts the median advisor grant at 0.21 percent of fully diluted shares at pre-seed, 0.12 percent at seed and 0.05 percent at Series A; only 10 percent of pre-seed advisors received 1 percent or more. So the honest range is 0.05 to 1 percent, with most grants near the bottom. Grant by expected involvement, not by the advisor's fame.
Vesting norms for advisors
Advisors vest faster than employees because their value front-loads. Per Carta, advisory share agreements often run two years, vesting monthly, with no cliff; some add a three-month cliff so either side can walk away early. FAST builds in that three-month cliff and recommends working with the advisor for at least a month and at least 8 hours together before signing. Orrick's startup lawyers describe the same pattern: usually two years, sometimes with a cliff but often without.
Advisors frequently negotiate single-trigger acceleration, so unvested shares vest in full on a sale of the company or if the company ends the relationship (Carta); Orrick's reasoning is that an advisor, unlike a key employee, is not expected to stay through an acquisition. Some founders tie part of the grant to milestones, such as closing a priced round (Carta). Either way, keep monthly vesting, a written termination clause, and a review at the two-year mark.
Where the shares come from, and what they cost you
Advisory shares are usually granted from the option pool, the same pool as employee grants (Carta). Every advisor grant leaves less pool for hires, and the pool usually gets refilled, at the founders' expense, before the next priced round. If the pool is already counted in your fully diluted shares, a grant from it does not change anyone's fully diluted percentage; a grant that needs newly issued shares dilutes everyone pro rata. Do the arithmetic for both cases; the example below shows how.
Taxes, in plain words. With NSOs, per Carta, the advisor owes ordinary income tax at exercise on the spread between strike price and fair market value, then capital gains tax on any further gain at sale. With restricted stock, the advisor owns the shares from the grant date and owes ordinary income tax on their value; an 83(b) election lets them pay that tax on today's low value instead of on each vesting date. Per IRS Form 15620, the election is open to an employee or an independent contractor and must be filed no later than 30 days after the shares are transferred. Restricted stock suits the earliest companies, when the 409A value is still very low; options suit companies that already have a valuation (Carta). Point the advisor to their own accountant: Carta is blunt that founders should never give tax advice.
The mistakes founders make
- Paying for one intro. A single introduction is a favor, not an advisory role. FAST says plainly it is not built for one-off consulting or work for hire. Buy the coffee, keep the equity.
- No vesting. A grant that vests on signing pays for a relationship that has not happened yet.
- No written agreement. A handshake grant has no board approval, vesting terms or strike price behind it, and it surfaces in diligence. Use FAST or a lawyer-reviewed template and document board approval of the grant (Carta).
- Too many advisors. Ten people at 0.5 percent is 5 percent of the company, the size of a whole advisory pool per FAST, for a group that has never met.
- Skipping the trial. Work together for a month before signing anything.
Model it, then go raise
Agree on the role, run the trial month, sign the agreement, grant from the pool, then check the cap table. Round Funded's cap table calculator takes founder shares, investment amount, pre-money valuation and pool size and shows founder, investor and option pool ownership after the round, with the pool carved out pre-money. Once the table is clean, find investors by stage and sector across a catalog of 60,000+ active angels, VCs and family offices; a good advisor's first job is often to say which twenty to email first.
Worked example
Example: Northwind Robotics, a hypothetical pre-seed company.
Northwind has 12,000,000 fully diluted shares, including a 1,200,000-share option pool. The founders hold 8,000,000 shares, or 66.67 percent. They bring on a former robotics VP as an expert-level advisor: monthly meetings, customer intros and help hiring a head of engineering. Using the FAST pre-seed expert rate of 1.00 percent, the grant is 120,000 NSOs at a $0.10 strike (the current 409A price), vesting monthly over 24 months with a 3-month cliff.
| Item | Math | Result |
|---|---|---|
| Grant | 12,000,000 x 1.00% | 120,000 options |
| Monthly vest | 120,000 / 24 | 5,000 options |
| Vested at the 3-month cliff | 3 x 5,000 | 15,000 options |
| Vested if the advisor leaves at month 10 | 10 x 5,000 | 50,000 options |
| Returned to the pool | 120,000 - 50,000 | 70,000 options |
| Cost to exercise the 50,000 | 50,000 x $0.10 | $5,000 |
Because the grant comes out of the existing pool, the founders' fully diluted stake stays at 66.67 percent. If the pool were empty and Northwind issued 120,000 new shares instead, the count would rise to 12,120,000 and the founders would fall to 8,000,000 / 12,120,000 = 66.01 percent, a 0.66-point dilution. If the advisor later exercises the 50,000 options when the shares are worth $2.00, the spread of 50,000 x ($2.00 - $0.10) = $95,000 is ordinary income in that year.
Frequently asked questions
what are advisory shares
Advisory shares are equity a startup gives an advisor instead of cash for guidance, introductions or credibility. They are ordinary common stock options or restricted stock, not a special class, and usually amount to 0.1 to 1 percent of the company, vesting monthly over one to two years, most often two, out of the option pool.
how much equity do advisors get
The Founder Institute FAST agreement, Version 3, sets 0.50 percent at pre-seed, 0.25 percent at seed and 0.10 percent at Series A for an advisor who meets monthly, rising to 1.00, 0.75 and 0.50 percent for an expert who also brings contacts and projects. Carta's H1 2024 data shows real medians lower: 0.21, 0.12 and 0.05 percent.
advisory shares vs equity: what is the difference
There is no difference in the instrument: advisory shares are equity. The difference is the deal around it. An advisor grant is a fraction of a percent, vests over one to two years (usually two) instead of four, is issued as NSOs or restricted stock rather than ISOs, and pays for part-time outside advice rather than full-time work.
what is a FAST agreement
FAST is the Founder Institute's free Founder / Advisor Standard Template, a one-page advisor agreement first released to the public in 2011 and now in Version 3 (July 2026). You tick the company stage and the advisor level, and the grid sets the equity, from 0.10 to 1.00 percent, as restricted stock or options vesting over two years with a three-month cliff.
how are advisory shares taxed
It depends on the instrument. Non-qualified stock options are taxed as ordinary income on the spread at exercise, then as capital gains at sale. Restricted stock is ordinary income on its value; filing an 83(b) election with the IRS within 30 days of receiving the shares locks in today's low value. Advisors should confirm the details with their own accountant.
Round Funded resources
Sources
Cite this term
Round Funded. "Advisory Shares." Startup Fundraising Glossary, reviewed September 26, 2026.
Stable URL, it will not change: https://www.roundfunded.com/en/glossary/advisory-shares
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