Meaning
Equity compensation issued to external contributors functions as the primary currency for strategic guidance. These advisor share grants differ from employee options through shorter vesting schedules and specific milestones related to network access or revenue targets. Agreements typically outline the exact nature of the involvement to avoid disputes over the value of the contribution.
Vesting Requirement
Time based accrual ensures the company receives ongoing value before ownership fully transfers. If the relationship ends prematurely, the advisor share grants stop accumulating, which protects the cap table from dead equity. Monthly increments are common in these arrangements.
Capital Dilution
Total allocations for mentors usually represent a small percentage of the overall pool. While individual advisor share grants might only reach a fraction of a percent, the cumulative effect of multiple advisors reduces the stake available for future hires. Founders must weigh the immediate expertise against this permanent loss of ownership.
A cluttered cap table can deter future investors who prefer to see larger blocks of equity held by full time employees.
Consulting Fee
Providing equity instead of cash preserves liquidity for operations. Using advisor share grants allows a startup to engage high level talent that would otherwise be unaffordable on a standard salary. This exchange transforms a liquid expense into a long term alignment of interest.
