The FAST agreement is used by tens of thousands of entrepreneurs and consultants a year to build productive working relationships, business advice and support for a standardized amount of equity. Wait, what is “formalizing”? As a general rule, after a few meetings and working meetings, you want to formalize your consulting relationship. This means signing a consultant agreement: a legal document that briefly describes the consultant`s commitment to your company and gives it a small amount of equity. It is a short document, and there are several models on the web. (Here is one we created with the blessing of the two main law firms Orrick and Gunderson Dettmer). Don`t try to recreate the wheel with this chord. I would suggest our proposal or another one that has been blessed. You don`t need to find a lawyer to make another one for you. How much equity do I have to give? Okay, so you`ve found an advisor, you`re willing to sign a deal and you`re willing to give some equity. How much should you give? The amount generally ranges from .2 to 1 percent, and it`s a good idea to take into account the size and growth of your business and the consultant`s experience (both as a professional and as a consultant). Why is a consultant agreement so important? This may seem like trivial paperwork, but without it, you often lose a consultant`s attention on other projects — and in the worst case scenario, your relationship with someone who could have been a big advantage can annoy you. Two months ago, we expanded FounderDating – a network of entrepreneurs — to network entrepreneurs and consultants. My biggest shock as we pay clients was the number of entrepreneurs and consultants who work together “informally.” This is frankly the biggest mistake you can make in a consultant-consultant relationship.
Once in a blue moon, everything might be fine, but most of the time, your relationship will disappear or, at best, be inconsistent if you don`t have a consultant`s agreement. If you got away with it without establishing formal relationships, you were lucky. But here`s how to do it properly: Equity compensation for consultants is almost always in the form of unqualified stock options (NSOs or NQSOs) on common shares, much like employee compensation. The board agreement stipulates that the board of directors grants the advisor a stock-option grant and, ideally, it should be clear when the stock grant is executed. In due course, if not with the agreement, the board of directors should issue the grant to the option of action. This grant will indicate the number of options and the strike price of these options. The exercise price must be fair value on the date of the option grant. In addition, it should be noted that the stock is subject to stock incentives or stock options plans. Advisory obligations and remuneration are codified in the advisory agreement (advice contract or advisory agreement).
Consultant agreements generally set the duration of the agreement, the amount of equity transferred during the agreement and the laying plan. Confusion advisory boards are not boards of directors. This means that the members of the advisory committee do not have fiduciary obligations. In addition, companies are not required to comply with the recommendations of an advisory board. With a single signature and a box to coerc on the FAST agreement, entrepreneurs and consultants can agree in a few minutes on how to work together, what to accomplish and the correct level of equity compensation. Contractors should work carefully with consultants.