Startups are really bloody hard…and so we’re big believers in anything that makes life a little bit easier for teams.
We’re always on the alert for startup pain points which we can provide a bit of help with. We’ve published “Open Source VC” resources in the past including our seed-stage term sheet (with helpful explanatory notes), seed-stage financing documents and startup ESOP docs.
The latest resource we’re releasing is the Advisor Agreement Template, an Aussie specific version of the international FAST document from the Founder Institute.
It’s hugely important for founders to get the right advice at every stage of their startup journey — whether it be on digital marketing, capital raising or specific industry advice. This means that often founders might want to bring on advisors to their startup, but it can be expensive to get lawyers to prepare bespoke agreements every time. So we decided to put together this advisor agreement template which startups can use to get the advice they need.
The idea is that it’s short and simple to use. Accessibility is central to our Open Source VC materials, so it’s as plain English as we could get it. It’s a balanced agreement that we think startups and advisors would be comfortable signing without a heap of negotiation. It won’t be perfect for every advisor and every situation, and there are a few parameters around its use which we’ve set out below, but we hope it’ll make life easier for the startup community, and save you some legal fees along the way.
· The agreement assumes that the advisor is only receiving equity compensation (and no cash compensation), and that the advisor can genuinely be classified as an independent contractor rather than an employee. If they are more likely to be classified as an employee, you’ll need to be aware of your minimum wage/superannuation obligations and take some proper employment advice.
· The equity compensation is structured as an issue of options under a startup Employee Share Option Plan — in the vast majority of cases this will be most tax-efficient and simplest way to get equity to advisors. If the startup or advisor don’t qualify for the ATO’s start-up ESOP tax breaks (e.g. if the services are being provided by the advisor through a company), you may need some tax advice on the best structure for equity compensation.
· The service descriptions and equity compensation levels are just suggestions (based on what we often see in the market) — they can and should be tailored according to the specific circumstances for each advisor.
· It doesn’t have some of the bells and whistles in terms of legal protections for the startup (such as indemnities and non-competes) which you sometimes see in an advisor agreement — we’ve left those out in the interests of ease of use.
Disclaimer — This document, and any guidance notes within this document, must not be relied on as legal advice and we recommend that you seek professional legal and tax/financial advice to ensure that this document is suitable for your specific situation. 😇