Advisory board: how to build one for a startup and what to pay advisors

An advisory board is a small group of experienced people who give a company advice, introductions and occasional help, without any authority to run it. At a startup it is usually less formal than the name suggests: a handful of individual advisors, each with a short written agreement and a small equity grant, whom the founders call on when a question lands in their area.

The useful way to build one is to start from the gaps in the founding team, trial each candidate on a small piece of real work, and only then talk about equity. Published templates and data give a reasonable range for what to offer, covered below.

Advisory board or board of directors

The two are easy to confuse. A board of directors is the company's formal governing body, and its approval is needed for decisions such as equity grants. An advisory board has no such role. Carta's guide to advisory shares notes that even a grant to an advisor needs formal board approval: the directors approve, the advisors advise (Carta).

That makes an advisory board easy to change: add an advisor when you enter a new market, and let an agreement lapse when their area stops mattering.

Decide what each advisor is for

Write down the two or three questions the team keeps getting stuck on, then describe the person who could answer each from experience. Examples of gaps that justify an advisor:

• How customers buy. Someone who has worked inside the kind of organization you sell to, and knows who approves a purchase.
• A specialist area. Regulation, a technical standard, or a supply chain the team has never worked in.
• A first hire or first channel. Someone who has hired the first salesperson, or built the first partner program, at a company like yours.
• Fundraising in your sector. Someone investors in your market already know.

Avoid adding people for their title alone. The Founder Institute, which publishes the FAST advisor template, puts it directly: a well-known name or domain expertise does not mean someone will be a good advisor (FAST Agreement).

A worked example

This example is hypothetical. Two engineers are building scheduling and reminders software for independent veterinary clinics. They know the product side well and have three gaps:

1. How a clinic owner or practice manager decides to switch software.
2. Which practice management systems clinics already run, and what integrating with them involves.
3. How to hire and pay a first salesperson who sells to clinics.

That gives three advisor profiles: a former practice manager, someone who has sold software to veterinary clinics, and a sales leader who has built a small team from scratch. It does not yet give three advisors. The founders still need to find out who among the candidates is useful in practice.

Find and trial candidates

The Founder Institute's FAST page lays out a sequence many founders follow (FAST Agreement):

1. List 10 to 15 target advisors.
2. Find people you have in common and ask for an introduction.
3. Send a five-sentence introduction and ask for a call or a coffee.
4. If the conversation goes well, make a small request to test the working relationship.
5. If that works, invite them to engage more formally, without discussing compensation yet.
6. If they agree, send the agreement.

The Founder Institute recommends working with a potential advisor for at least a month, and spending at least 8 hours together, before discussing the agreement. The small request in step 4 is the important part. Ask for something with a visible result, such as reviewing your pricing page or introducing you to two clinic owners, and see what comes back.

What to pay advisors

Startup advisors are commonly paid in equity, usually stock options or restricted stock, vesting over time. Two public reference points help set a range.

The FAST template. FAST sets grants by company stage and by how much the advisor does (FAST Agreement):

FAST's worked example has an expert-level pre-seed advisor earning 1% vesting over two years, and the agreement includes a three-month cliff so an unproductive relationship can end before any equity vests. Its FAQ adds that a technology startup often reserves around 5% of equity for all its advisors, and that FAST is not meant for project consulting or work-for-hire.

Carta's data. Carta reports that in the first half of 2024 the median advisor grant was 0.21% of fully diluted shares at pre-seed companies, 0.12% at seed and 0.05% at Series A, and that only 10% of pre-seed advisors received 1% or more (Carta). So the FAST figures sit above the median grant Carta observed. Treat FAST as an upper guide for an unusually involved advisor and Carta as a picture of what is typical.

Carta also describes common vesting terms: often two years, vesting monthly, sometimes with a three-month cliff, because advisors tend to deliver most of their value early.

A quick hypothetical calculation shows what these percentages mean. If the veterinary software company has 10,000,000 fully diluted shares and offers a seed-stage standard grant of 0.25%, that is 25,000 shares. Vesting monthly over 24 months, about 1,042 shares vest each month. If the advisor stops after six months, about 6,250 shares have vested.

Carta suggests one more option before promising equity: ask whether the advisor would rather invest. Putting in their own money gives them a stronger reason to help.

Write it down

Carta lists what an advisor agreement should cover: the advisor's area of expertise, their specific role and responsibilities, the expected time commitment, the exact number of shares or options, the vesting schedule including any cliff, and confidentiality and intellectual property terms. FAST is a common starting point. Carta recommends having your lawyer review any agreement and documenting board approval of the grant (Carta).

When a paid call is enough

An advisor makes sense when you expect to come back to the same person for months. Many questions are narrower than that. If the veterinary founders only need to know how practice managers compare scheduling tools, two years of vesting is a heavy price for one answer, and it gets you only one person's view.

For a one-off question, a few paid conversations with people who have done the job are usually faster and give you more than one perspective. They also make a good version of the Founder Institute's trial period: the person who gave the most useful answer on a paid call is a natural candidate for an advisor role. If you need someone to own a function part-time instead of advising on it, see fractional executives. If you need a defined project delivered, see hiring a consultant. For ongoing support outside a startup context, how to find a mentor covers free programs.

Your next step

Write down your two or three biggest gaps and one sentence describing who could close each. Hold short conversations with several people per gap, give the best of them a small request, and offer an advisor role only after it goes well.

If you do not know people in the field, Instant Expert can find people who match a description such as "practice managers at independent veterinary clinics." You review who it finds, it sends your invitations and you pay for each call that gets booked. The directory pages for operations professionals in veterinary services and sales professionals in veterinary services are one place to start. How to choose the right expert for your first call helps you pick whom to speak with first.