Advisor Agreement Template: How to Set Clear Terms for Startup Advisors

In November 2008, Airbnb founders Brian Chesky and Joe Gebbia were running out of money. Their business had launched, but traction was limited. During dinner with Michael Seibel, then CEO of Justin.tv and an advisor to the founders, Seibel suggested they apply to Y Combinator. Chesky initially resisted. They already had customers and felt they were beyond the programme's starting point.

Seibel's response was blunt: “Look at you. You guys are dying. Do Y Combinator.” The deadline had passed, but he helped get their application in front of Y Combinator founder Paul Graham. WIRED recounts the encounter.

The lesson is not that every startup needs a famous advisor. Seibel did not run Airbnb for its founders or guarantee its success. He recognised that they needed a different route forward and challenged them to consider one. Sometimes an advisor's greatest contribution is asking the question a founder has been avoiding.

Good advice, however, does not automatically make a good working relationship. How often will you meet? What are you expecting the advisor to contribute? Will they receive shares? And what happens if either side wants to leave?

An advisor agreement puts those expectations in writing before goodwill turns into disagreement.

Bringing on a startup advisor? Download our Advisor Agreement Template to help set clear expectations, responsibilities and compensation from the start.

What Is an Advisor Agreement?

An advisor agreement is a contract between a business and an individual who provides advice, expertise or strategic support. It describes the services, time commitment, compensation and conditions of the relationship.

An advisor might be an experienced founder, industry specialist, former executive or investor. Their value should come from experience that addresses a real gap in the business.

A consultant is usually engaged to deliver defined work; a mentor may offer informal guidance. A non-executive director holds a board position and has director responsibilities. An advisor does not become a director simply because the company gives them that title. If someone is joining as a genuine co-founder, consider the Founder Agreement and Co-Founder Agreement Template instead.

Why Do Startups Need an Advisor Agreement?

Advisory relationships often begin with enthusiasm, but expectations can diverge. A founder may expect investor introductions and regular calls while the advisor has agreed only to occasional conversations. Neither has necessarily acted in bad faith; they understood the arrangement differently.

A written agreement settles the practical questions early: expected services and availability, compensation, confidentiality, data and intellectual property responsibilities, conflicts of interest, and how either side can end the relationship. It is easier to agree these terms before anyone is disappointed.

“The best advisors are people who have done it before you.”

A useful reminder for founders: Choose advisors whose experience is relevant to the challenges your startup is facing.

What Should an Advisor Agreement Include?

The terms should reflect the actual work and level of involvement. Pay particular attention to these areas.

1. Term and Duration

State when the agreement starts and whether it is fixed-term or ongoing. The supplied template allows either, with one month's written notice from either party. Also specify when immediate termination is permitted.

2. Services and Time Commitment

Be specific. "Help grow the business" could mean a monthly strategy call or regular introductions, product reviews and fundraising preparation. Agree on the advisor's contribution, meeting frequency and availability. Attendance alone is not a measure of value; one relevant introduction may matter more than several routine calls.

The supplied template requires a minimum commitment of 7.5 hours per calendar week. That is substantial for an advisor and considerably more than the occasional call many founders imagine. Before keeping this provision, agree what those hours will involve and whether the advisor can realistically provide them.

3. Compensation, Shares and Expenses

Set out exactly what the advisor receives. If shares are involved, identify their number and class, proposed issue dates, conditions and what happens if the relationship ends early.

The supplied template provides for up to 120 ordinary shares with a nominal value of £1 each, issued in instalments of 10 every three months over 36 months. The £1 is nominal value, not market value, and 120 shares does not reveal the advisor's ownership percentage. That depends on the company's total share capital and the rights attached.

The template also allows certain shares issued ahead of their relevant issue dates to convert into deferred shares if the agreement terminates. This is an unusual, template-specific mechanism, not a standard feature of advisor agreements. Both parties should understand which shares are affected and what rights remain after conversion. Have a solicitor review it before use.

An agreement does not itself complete a share allotment. Check the company's articles, shareholder arrangements, applicable pre-emption rights and required authority. Section 549 of the Companies Act 2006 sets out restrictions on directors' power to allot shares.

Use the Cap Table Model Template with Funding Calculator to understand how an allocation could affect ownership and dilution.

The supplied template provides no cash payment and offers expense options: reimbursement under a policy, a company expense card with written approval, or no expenses. Set out approval and evidence requirements.

4. Other Activities and Conflicts of Interest

Other clients and investments are not automatically a problem. They matter when they could affect the advisor's judgement or expose confidential information. Require disclosure of relevant conflicts and agree how they will be managed. Someone working with a direct competitor, for example, may need to avoid certain discussions. Avoid blanket restrictions that unnecessarily limit unrelated work.

5. Confidentiality and Company Property

Advisors may see financial forecasts, customer information and product plans. Define what is confidential, how it can be used and when disclosure is permitted. Cover the return or deletion of company information and equipment when the engagement ends. For protection before sharing sensitive information, see the Startup Networks NDA Template.

6. Data Protection

If the advisor handles personal information, establish each party's responsibilities. The supplied template identifies the company as controller and the advisor as processor, but those roles must reflect the actual activity. An advisor who independently decides why and how data is processed may have a different role.

Where the advisor genuinely processes data on the company's behalf, the contract must cover applicable UK GDPR requirements. These include documented instructions, confidentiality, security, sub-processors, assistance with individuals' rights, end-of-contract deletion or return of data, and audit arrangements. The Information Commissioner's Office explains the required controller-processor contract terms.

Complete the schedule using the real processing activities, duration, personal data types and categories of individuals involved. Do not leave example fields in a signed agreement.

7. Intellectual Property

If an advisor creates material, designs, processes or product ideas for the company, clarify who owns the resulting intellectual property. The supplied template includes an assignment of rights arising from the services. Identify any pre-existing tools or materials that should be licensed rather than assigned.

8. Liability, Insurance and Termination

The supplied template includes indemnity provisions for losses arising from breaches and negligent or reckless acts or omissions. It also requires the advisor to maintain adequate insurance.

Indemnities can expose an advisor to significant financial liability. Both sides should check which losses are covered, whether liability is capped and whether the required insurance is realistically available.

Termination should deal with notice, immediate termination circumstances, company property, confidential information and outstanding compensation. Where shares are involved, be clear about shares already issued, shares still due and any conversion mechanism that applies when the engagement ends.

9. Independent Contractor Status and Legal Terms

The supplied template describes the advisor as an independent contractor and says they cannot bind the company unless authorised. That label does not settle employment status; the actual relationship and level of control matter. See GOV.UK guidance on employment status.

The template selects the law and courts of England and Wales. Legal systems differ across the UK, so specify the governing law and jurisdiction, particularly if the parties operate in different jurisdictions.

How Should Startups Compensate Advisors?

Match compensation to the contribution expected. Cash is straightforward but creates an ongoing expense. Equity can preserve cash and give the advisor an ownership interest, but dilutes existing shareholders. Staged share issuance can link shares to continued involvement if the conditions and company procedures are clear.

For another perspective, Pebble founder Eric Migicovsky discusses finding advisors and compensating them with equity in this short Y Combinator video, "Startup Advisor Equity?". His experience is useful context, not a universal formula for how much equity every advisor should receive.

Before agreeing on compensation, ask this: if the advisor stopped contributing next month, would both sides understand what happens to the shares already issued and those still due?

Want to hear how experienced founders approach advisor equity?

Watch Startup Advisor Equity? with Pebble founder Eric Migicovsky, from Y Combinator. He shares how he found advisors, worked with them and structured equity compensation.

How to Use an Advisor Agreement Template

Work through the template with the advisor; do not simply fill in the blanks.

1. Complete the details. Check the registered company name, company number, addresses, advisor details and start date.

2. Describe the work. Set out the services, availability, meeting arrangements and expectations.

3. Agree on compensation. Confirm payment, expenses or shares. For equity, check the cap table, share rights, issue schedule and company approvals.

4. Review the protections. Work through confidentiality, data protection, intellectual property, conflicts, liability and termination. Complete the schedules and remove unused options.

5. Get advice and sign. Give both parties time to review. Seek legal advice on equity, indemnities and complex obligations, then retain the signed agreement with company records.

A signed template does not replace required shareholder approvals or share-allotment procedures.

Common Advisor Agreement Mistakes to Avoid

Watch for these avoidable mistakes:

• Promising vague support: Agree what the advisor will contribute, not simply that they will "help out".

• Offering shares without checking ownership: A share number means little without the wider capital structure and rights attached.

• Treating every advisor as a processor: Data protection roles must reflect the actual activity.

• Ignoring pre-existing intellectual property: Clarify what the advisor already owns and what the company will receive.

• Copying every clause unchanged: The weekly commitment, deferred-share provision and indemnity may not suit every arrangement.

• Leaving the exit until later: Agree what happens to shares, information, expenses and company property before either party needs to terminate.

Is an Advisor Agreement Legally Binding in the UK?

An advisor agreement can be legally binding if the requirements for an enforceable contract are met. A simple contract generally requires agreement, consideration and an intention to create legal relations; different rules can apply to a deed.

Signing does not automatically make every clause enforceable, determine employment status or complete a share issue. Company approvals and statutory obligations still need to be addressed separately.

Because this template includes equity, deferred-share and indemnity provisions, have a solicitor familiar with startup and company law review it before use.

Final Thoughts

An advisor's name on your website is not the same as a useful working relationship. Be clear about what you need, what they can realistically contribute and what you are prepared to offer. Agree the difficult terms while both sides are still enthusiastic, not when one is already considering leaving.

If you are preparing to work with a startup advisor, download the Advisor Agreement Template and adapt it to your company's needs. Use it as a starting point for a proper conversation, not a substitute for legal advice.

Have you worked with a startup advisor before? What made the relationship valuable, and what would you do differently next time? Share your experience with the Startup Networks community.