When Equity Makes Sense vs. Cash Retainer
Equity for advisors makes sense in three specific situations:
1. The advisor's commitment is substantive and ongoing — monthly or quarterly meetings, named role (e.g. 'Advisory Board Member'), public association with the company. 2. The advisor provides access to a network or domain expertise that the founder cannot pay cash for at market rates — partnerships, customer introductions, fundraising introductions, regulatory navigation. 3. The advisor is willing to be associated with the company in public materials — investor decks, website, recruiting materials — and the association has signalling value.
Equity does not make sense for: one-off introductions (pay cash if anything), generic mentorship from someone giving the same advice to twenty other startups, or advisors with no defined deliverables. The right response to vague 'just give me 1% and I'll help' is 'we don't grant equity without defined deliverables; here's our standard FAST agreement.'
Grant Sizes by Stage
Industry benchmarks (calibrated to EU startup market practice):
• Pre-seed: 0.25–0.5% per advisor for a high-impact, named advisor with monthly commitment. 0.10% for occasional sounding-board advisor. • Seed: 0.10–0.25% per advisor. The total advisor allocation across all advisors should stay under 2% of fully diluted. • Series A and beyond: 0.05–0.10% per advisor. New advisors at this stage are usually domain experts (regulatory, industry) brought in for specific value-add. The company is mature enough that the cap table cost of higher grants is unjustifiable.
These are full-vest amounts (typically over 2 years). They are fully diluted percentages, not 'common-only' percentages — make sure your advisor agreements are clear about the denominator. See [fully diluted capitalization](/captable/fully-diluted-capitalization).
Outliers exist. A truly transformational advisor — a former CEO of a public company in your sector, joining for 18 months of intense involvement, opening doors that would otherwise be closed — might justify 1%. These are once-in-a-company hires. The 0.25% grant to the seed-stage 'advisor' who attended two coffees is the standard pattern of over-granting.
Vesting Structure for Advisor Grants
The standard advisor vesting: 24 months total, monthly vesting, no cliff. The 'no cliff' point is critical — unlike employees (who get a 1-year cliff because they might not work out), advisors are committed at the moment of grant or you would not be granting. A cliff for advisors is unusual and signals founder uncertainty about the relationship.
Variations to consider: shorter vesting (12–18 months) for advisors hired for a specific time-bounded engagement, milestone vesting (e.g. fully vested on completion of defined deliverables), or single-trigger acceleration on change of control (standard for advisors).
The FAST agreement (Founder Advisor Standard Template, originally from Founder Institute) is the most widely used template in EU startups. It defines four tiers (Standard / Strategic / Expert / Significant) with corresponding equity ranges and time commitments. Most advisors expect FAST-style terms; many will negotiate to higher tiers but the framework gives you a defensible negotiation anchor.
See [vesting schedules](/captable/vesting-schedules) for the underlying mechanics and [esop](/captable/esop) for how advisor grants integrate with the option pool.
Options vs. Shares for Advisors
Two structural choices: grant options (advisor receives the right to purchase shares at a fixed strike price, vesting over time) or grant restricted shares directly (advisor receives shares immediately, subject to reverse-vesting buyback).
Options are the standard for advisor grants from the company's option pool. The strike price is set at fair market value (the most recent 409A or local equivalent — see [409a valuation](/captable/409a-valuation)). The advisor exercises by paying the strike price; they then own common shares. Tax treatment varies by jurisdiction: German VSOP / ESOP, UK EMI, Irish KEEP, French BSPCE all have different rules for advisor eligibility (some schemes are employee-only and exclude advisors).
Restricted shares are issued directly with reverse-vesting (the company has the right to buy back unvested shares at the original price if the advisor relationship ends). Tax-cleaner in some jurisdictions but requires the advisor to pay nominal value at grant and creates immediate ownership on the cap table.
For most EU startups, options are simpler administratively. Restricted shares are used when the advisor wants immediate vested ownership or when tax planning specifically favours the structure. Consult tax counsel; the wrong choice can create six-figure tax surprises for the advisor.
Red Flags and EU Tax Considerations
Red flags that should stop an advisor grant:
1. Asking for shares rather than options without explanation. Immediate ownership is more valuable; the request signals the advisor wants the equity, not the engagement. 2. Asking for accelerated or no vesting. Indicates the advisor wants the equity guaranteed regardless of contribution. 3. Asking for above-market grant size (e.g. 1%+ at seed) without commensurate commitment. 4. No defined deliverables. 'I'll help when you need me' is not a deliverable. 5. Request for board observer rights or veto rights as part of the advisor package. These are governance rights, not advisor compensation.
EU tax considerations: advisor option grants are typically treated as taxable benefits at the time of exercise (income tax + social contributions in most EU jurisdictions). The advisor should be told this upfront and may want to time exercise around tax planning. Some EU schemes (German VSOP, UK EMI, French BSPCE) offer favourable treatment but eligibility rules vary. Always have the advisor consult their own tax adviser; never give tax advice to advisors directly.
See [equity refresh grants](/captable/equity-refresh-grants) for advisor grant refreshes at later stages, [fully diluted capitalization](/captable/fully-diluted-capitalization) for the denominator math, [cap table management](/captable/cap-table-management) for ongoing operational discipline, and [esop](/captable/esop) for the pool that advisor grants come from.