How to Compensate your Advisor

Once you think you’ve found the right advisor, then formalizing the advisor relationship comes with unique challenges.

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We worked hard with experienced attorneys, who have well over 300 advisor agreements signed under their watch working with the most renowned players across the Internet. We conferred with leading venture capitalists, angel investors and then vetted the structure with many of our over 500 advisors and dozens of experienced CEOs

We built three tools to automate and standardize the process, no more voodoo economics and debate over what is or what isn’t a fair deal structure.

We built:

  1. A framework, vesting schedule and recommended cadence by which we believe all advisor agreements need to be managed.
  2. A calculator to suggest specific equity amounts, which we call the Kulpulatorafter our co-collaborator (and Bad Ass Advisor) Ryan Kulp, who built a series of very impressive employee equity calculators  in 2015 that got a lot of attention on ProductHunt.
  3. A simple, standard advisor agreement that we think addresses some of the most common issues that we've seen in advising engagements. When you're ready to formalize your advising relationship, just fill in a few blanks and you're ready to go.

We hate paperwork just as much as the next person (if not more). Our goal is to get you through the process of finding a most excellent advisor and all the legal mumbo jumbo and uncomfortable negotiation as quickly and cheaply (can you say free!!) as possible, so you can focus on the task at hand---building bad ass companies with the smartest people on the planet helping you along the way.

The highlights of the framework are:

  • Clear expectations. Both parties clearly specify what the goals, activities, and time commitments of the relationship are. We call this ‘cadence’. Sounds like a no-brainer, but you'd be surprised how infrequently this happens.
  • 30-day "dating" period. If the relationship doesn't work, no compensation is due and the agreement expires.
  • 2-year working term. 4-year vesting is great for employees and directors, but the advisor's expertise has a shorter half-life. After the initial 2 years, the advisor remains loosely available to the company but with a dramatically reduced time commitment.
  • Stock vests monthly, as it is earned. Advisors get the company's stock option agreement and paper.

Our legal agreement is especially easy to use.

Proprietary rights, confidentiality, non-compete, conflicts, assignments, compensation and term agreements are all a part of the agreement.

We’ve also made it A-tier legal firm accepted boilerplate. Many of the top law firms in Silicon Valley have accepted our agreements (some may ask to convert our agreement to their paper, but typically what they charge you to make this conversion it’s very quick and never requires a number of volleys back and forth between your counsel, your advisor and in some cases, his counsel.

Finally, we used Google Docs do it really easy to collaborate and refine it. Companies select the New Agreement link, enter the advisors’ personal email address (usually a Gmail account) and the document configures to the specific advisor-type agreement and suggested framework. Parties simply enter in the Kulpulator-recommended equity amount per month, verify the document online, sign and/or convert to a PDF and keep it on file.

Questions, comments, concerns? We'd love to hear your thoughts. Let us know at agreements@badassadvisors.com.