How to handle equity for advisors vs employees

Advisor equity is typically 0.1% to 1% over 2 years with monthly vesting and no cliff (the FAST template from Founder Institute is the standard). Employee equity is 0.05% to 2% over 4 years with a 1-year cliff, scaled by seniority. Advisors get faster vesting because their commitment is lighter; employees get the cliff because it filters for fit. The two are not interchangeable, and treating them the same creates cap table chaos.

Founders confuse these two grants more than almost any other early-stage decision. Then Series A diligence surfaces the mess and you spend $30k on a lawyer to clean it up. This post lays out the actual numbers, why the structures differ, and how to set them up correctly the first time.

Two different instruments for two different commitments

An advisor and an employee both get equity, but they are doing different things. An advisor offers 2 to 4 hours per month of intros, hiring help, and pattern-matching. An employee builds the product 40 to 60 hours per week. The grant structures reflect that asymmetry.

Dimension	Advisor grant	Employee grant
Typical size	0.1% to 1%	0.05% to 2%
Vesting period	2 years	4 years
Cliff	None (or 3 months)	12 months
Vesting cadence	Monthly	Monthly after cliff
Standard template	FAST (Founder Institute)	Stock plan + option grant
Exercise window post-departure	30 to 90 days	90 days (sometimes 7 to 10 years)
Instrument	Common stock or RSA	ISO or NSO option
Tax form	83(b) election within 30 days	83(b) on early-exercise; otherwise at exercise
Refresh / extension	Renegotiated at 2-year mark	Refresh grants every 2 to 4 years

The rest of this post is the why behind each row, and where founders get burned.

Advisor grants: the FAST template and what it locks in

The FAST template (Founder/Advisor Standard Template) from Founder Institute is the closest thing the industry has to a default. Almost every YC company uses something within 80% of it. The structure is intentionally simple so you can sign an advisor in a single email exchange without a lawyer.

FAST breaks advisor commitment into three tiers:

• Standard: monthly check-in, ad hoc intros. 0.1% to 0.25% over 2 years.
• Strategic: monthly meetings plus 2 to 3 named deliverables. 0.4% to 0.7% over 2 years.
• Expert: deep involvement, prep work, ongoing operator support. 0.7% to 1.0% over 2 years.

Multiply by company stage (idea / startup / growth). An idea-stage Standard advisor lands around 0.25%. A growth-stage Expert tops out at 1%. The full grid is public on the Founder Institute site.

Why advisors get monthly vest with no cliff

The cliff protects you against an employee who joins, ships nothing for 11 months, and quits. With an advisor, the commitment is so much smaller (4 to 8 hours per month) that a 1-year cliff would be insulting. They'd rather walk than sign a 12-month wait on 0.25%.

Monthly vest also gives both sides an easy exit. If the advisor isn't useful by month 3, you recover 21 months of unvested equity, not a year locked. If you turn out to be a founder they can't stand, they keep what they earned and leave clean.

The 2-year term reflects that most advisor relationships peak in usefulness early. By month 18, the advisor has made the intros they were going to make. Renegotiating at the 2-year mark is honest: if they still add value, extend; if not, the relationship sunsets without a cap table fight.

When advisor grants go wrong

The number one failure mode is cap table clutter from too many small grants. Founders sign 8 advisors in year one at 0.25% each, and now 2% of the company is spread across people who attended 3 calls total and went quiet. By Series A, your lawyer is tracking down four of them to sign repurchase paperwork, and one is in Bali ignoring email.

The fix is brutal triage. Sign two advisors who genuinely change the trajectory. Skip the rest. If a potential advisor wants equity for "a few intros," pay them $1k flat per intro that closes and move on. Equity is the wrong tool.

The number two failure mode is forgetting the 83(b) election. Advisor grants are often restricted stock (RSA), not options. The advisor has 30 days from grant to file 83(b) with the IRS, locking in tax on the (near-zero) current value instead of the (potentially huge) future value at each vesting date. Miss the window and the advisor owes ordinary income tax on the spread monthly for 24 months. We have seen advisors hit with $40k tax bills on grants that paid them zero cash.

Employee grants: cliff, vesting, and the seniority ladder

Employee grants run on a different physics. The 4-year vest with 1-year cliff has been industry standard since the late 1990s, and there is a reason every operator defaults to it without thinking.

The cliff exists because hiring is hard and you will hire wrong sometimes. The first 12 months are the testing period. If the engineer is still there at month 13, they have earned the right to start accumulating equity. If they leave or you fire them before month 12, they get zero. This sounds harsh, and it is, but it protects the cap table from the worst version of a bad hire: someone who collects a year of equity for a year of mediocre work and then leaves to do the same thing somewhere else.

The 4-year length matches typical tenure at venture-backed startups. Most equity-rich exits happen in years 4 to 8. Vesting over 4 years aligns the employee's incentive with the company's long-term value. Vest faster (say 2 years) and you lose the retention incentive in the years it matters most.

What employees actually get, by seniority

Real numbers, post-seed, pre-Series A (rough US market):

Role / level	Equity range	Typical grant
Engineer 1 (founding engineer)	0.5% to 2.0%	1.0%
Senior engineer (post-product)	0.25% to 0.75%	0.5%
Mid engineer	0.10% to 0.30%	0.20%
Head of Eng / VP Eng	1.0% to 3.0%	1.5%
Head of Sales	0.75% to 2.0%	1.0%
Designer (non-founding)	0.10% to 0.50%	0.25%

These ranges contract sharply post-Series A. A senior engineer joining a $20M ARR Series B startup will see 0.05% to 0.15%, not 0.5%. The cliff and 4-year vest stay constant; the percentage scales with dilution.

If you are early and pre-product, follow Index Ventures' Optionplan calculator. It's the most respected public tool and most VCs we work with reference it directly during board discussions.

When employee grants disappoint

Two heartbreak scenarios:

Acquisition before the cliff. You hire a senior engineer with 0.5% at month 8. Acquisition closes at month 11. They get nothing. Acquirers often negotiate retention packages for key employees, but it is cash or RSUs in the acquirer over a new vest, not the original grant. The fix: write acceleration into key hires' grants. Double trigger acceleration (acquisition plus termination without cause) is standard for executives and increasingly common for early engineers.

The 90-day post-termination exercise window. The dirtiest secret in startup equity. An employee with vested ISOs has 90 days after leaving to exercise or lose them. For a 0.5% grant at a $20M valuation, that's a $100k strike the employee has to pay in cash, plus AMT tax on the spread. Most employees don't have $100k lying around, so they walk from years of vested equity. Pinterest, Quora, and Coinbase moved to 10-year exercise windows; most early-stage companies have not. If you want to be a fair employer, change the default in your stock plan to 10 years before you write a single grant.

Cliff vs no-cliff: the philosophical split

Why filter employees with a cliff and not advisors? Different failure modes.

The employee failure mode is hiring wrong. Someone interviews well, gets a 1% grant, and 9 months later you realize they ship one PR a month. The cliff means you can part ways with no cap table damage. Without it, you've handed away 0.75% for nothing.

The advisor failure mode is soft fade. An advisor who isn't adding value rarely does anything bad; they just stop showing up. The monthly vest matches the monthly value. If they ghost, you terminate the agreement and recover the unvested portion. Same instrument, different commitment shape, different vesting rules.

When advisors and employees swap roles

A few patterns, since this comes up:

Advisor to employee. Leave the advisor grant vesting in parallel and write a new employee grant on top. Carta and Pulley handle this cleanly. The new employee grant gets a fresh cliff.

Employee to advisor. When an early employee leaves on good terms and you want to keep them in the orbit, convert their unvested employee equity to an advisor grant on the FAST template. They keep what they vested as an employee and continue vesting a smaller amount monthly.

Co-founder demoted to advisor. The awkward one. If a co-founder is leaving day-to-day but still owns 15%, you cannot retroactively put them on a FAST template. Negotiate a clawback on unvested founder shares (standard 4-year founder vesting should already cover this) and offer a fresh small advisor grant. This conversation needs a lawyer.

What to do, concretely

If you are setting up your first advisor agreement, start with the FAST template, pick a tier based on what you are actually asking the advisor to do, and remind them about the 83(b) on grant day. For your first employee grant, use Carta or Pulley, default to a 10-year post-termination exercise window in your stock plan, and benchmark size against the Index Ventures Optionplan calculator.

Do not draft the paperwork yourself. A $2k flat-fee engagement with a startup lawyer (Cooley GO, Clerky, or Stripe Atlas all have streamlined options) saves you from the kind of mistakes that surface at Series A diligence. Founders who try to save this $2k often pay $30k cleaning up grant inconsistencies 18 months later.

If you are still pre-product and trying to ship the MVP that makes any of this matter, you do not need an advisor yet. You need code shipped. A common pattern: founders sign three advisors before they have a working product, then realize what they actually needed was someone writing the backend. If that's you, book a vetted engineer for a 48-hour free trial on Cadence instead. Every engineer is AI-native by default (vetted on Cursor, Claude Code, and Copilot fluency before they unlock bookings), and weekly billing means you can test the relationship without writing an equity grant.

Once you do have a product and a team, look at the Series A engineering hiring playbook for how grant sizes change as you scale, and the bootstrap startup engineering playbook for the boring-but-correct way to structure early hires before you start handing out equity.

For the deeper mechanics of how vesting actually works (4-year vs 2-year math, acceleration triggers, repurchase rights), we wrote a detailed companion piece on software engineer equity and vesting that goes into the spreadsheet-level detail.

Common founder mistakes

• Treating advisor and employee grants as the same instrument. They are different sizes, different vesting periods, different cliff rules, different tax treatment. Use FAST for one and a real stock plan for the other.
• Signing 8 advisors in year one. Two great ones beat eight mediocre ones every time. The cap table cost is the same; the value is not.
• Forgetting the 83(b) election on restricted stock grants. Both the advisor (their problem) and the employee on early-exercise (your problem to remind them about). 30 days, no extensions, no exceptions.
• Defaulting to a 90-day exercise window on employee options. This silently steals vested equity from employees who can't afford to exercise. Change it to 10 years in your stock plan.
• Drafting grants without a lawyer. A $2k legal engagement at the start saves a $30k cleanup at Series A. This is one of the few times where DIY genuinely costs more.

If you're trying to figure out whether your next hire should get an equity grant at all, or whether a weekly engagement is the right shape, run the numbers on Cadence's ROI page before you sign anything. Equity is the most expensive currency you have. Don't spend it on someone whose work could have been a 6-week booking.

FAQ

How much equity should a startup advisor get?

Most advisors get 0.1% to 1.0% over a 2-year vest with no cliff, monthly vesting. The exact percentage depends on advisor tier (Standard, Strategic, or Expert per the FAST template) and company stage (idea, startup, or growth). An idea-stage Standard advisor lands around 0.25%; a growth-stage Expert lands near 1%.

Why do employees have a 1-year cliff but advisors don't?

The cliff exists to filter out bad hires before they accrue meaningful equity. Employees commit 40+ hours per week; if the fit is wrong, the cliff means you part ways without cap table damage. Advisors commit 4 to 8 hours per month; a year-long wait on a small grant would insult them. Monthly vesting matches the monthly value an advisor delivers.

What is the FAST template for advisor equity?

The FAST (Founder/Advisor Standard Template) from Founder Institute is the industry default for advisor grants. It defines three commitment tiers (Standard, Strategic, Expert) and four company stages, producing a grant grid that lands most advisors between 0.1% and 1.0% over 2 years. It's a single-page agreement designed to sign without legal review.

What happens to employee equity in an acquisition before vesting?

By default, unvested equity is forfeited at acquisition; vested options must usually be exercised within 90 days. Acquirers often negotiate retention packages for key employees in cash or RSUs, but these replace the original grant, they don't honor it. Single or double trigger acceleration clauses in the grant can protect employees against this; they are standard for executives and increasingly common for founding engineers.

Should I give equity to a contractor or freelancer?

Usually no. A contractor working for 4 to 12 weeks should be paid cash, not equity. Equity is for people whose long-term incentive needs to align with the company outcome. A short-term contractor (or, for the same reason, a Cadence engineer booked for a 6-week scope) is paid for the work they do; aligning their incentive with a 5-year exit is the wrong tool for the job.