Startups Need Quality Advisors (Agreements)

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Attracting a venerable group of advisors is a crucial step for startups and emerging growth companies. It may feel like a daunting task to ask a potential advisor to sign an Advisor’s Agreement. However, setting clear expectations from the beginning will go a long way to creating an accountable, transparent relationship with this new advisor. Esteemed advisors know that as a startup, you are strapped for cash. Don’t fret. Many advisors will look at the opportunity as a whole to see if this relationship can provide something other than cash in return for their services (i.e. networking opportunities or contributing to a particular field). In any case, one of the most popular ways of attracting a top-notch advisor is by offering equity in return for advisory services.

Regardless of the way you compensate your advisors, you can customize the kind of relationship you have with any advisor by drafting a proper Advisor’s Agreement. Here are some things to consider when defining the expectations:

  • Ensure the advisor understands that an employment relationship is not being created, and include that in the Advisor’s Agreement.
  • Express the role of the advisor by setting out a mutually agreeable set of tasks in the form of “Services” they will provide.
  • Limit the advisor’s ability to delegate the agreed upon services. You are asking this particular advisor to perform the agreed upon services. This is a simple way of making this clear from the beginning.
  • Predetermine a minimum number of advisor meetings and write it out in the agreement. Your potential advisor will likely be on the go constantly, so it is important that meeting frequency is clear from the outset.
  • Attention IP heavy startups, you know who you are! Ask your advisor to sign a robust IP & Confidentiality Agreement in conjunction with the Advisor’s Agreement. You want to make sure you can be transparent with your advisor on all issues, and IP is definitely no exception. A strong IP agreement will make sure ownership of IP remains with your startup.

Topics:  Advisor's Agreements, Contract Drafting, Emerging Growth Companies, Startups

Published In: Business Organization Updates, General Business Updates, Finance & Banking Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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