Meaning
Contractual timelines define how an external participant earns equity through continued service over a specified period. Most advisory vesting schedules utilize a monthly accrual method that distributes shares or options throughout a three year or four year engagement. This structure prevents a single large grant from leaving the company capitalization table before value is delivered.
It limits the risk of early departures where an advisor would otherwise keep a full allocation without providing the guidance promised during recruitment.
Service Requirement
Continuity of support determines the rate at which an individual secures ownership rights. Most advisory vesting schedules require at least twelve months of service before any shares are released.
Acceleration Clause
Specific events might trigger the immediate delivery of all unearned shares. When an acquisition occurs, advisory vesting schedules might move forward to the current date. Such clauses protect the advisor from losing their potential stake when the company ownership structure changes.
Equity Cost
The allocation of shares to external guides represents a real expense in the form of future ownership. Companies treat advisory vesting schedules as a non-cash expense that impacts the available pool for future hires. Dilution occurs as these schedules progress, reducing the percentage held by founders.
