All entrepreneurs, and especially first-time founders, will at some point in their journey of building a business need advice - even if they don’t yet know they need it. It may be advice for a very specific pain point or a guiding hand from someone who has been through a similar journey before them. This is where startup advisors come in handy.
But some advisors, particularly those that help out business owners continuously throughout the company-building process, want to see something in return - usually in the form of equity. Of course, onboarding a new shareholder to the cap table can be complicated, with many details needing to be hashed out. This is where the ‘FAST’ enters the picture.
The Founder Advisor Standard Template (FAST) is a boilerplate agreement between a company and their advisor. Here, the advisor offers their mentorship in return for the right to obtain shares of the business in the future. Importantly, this agreement makes the advisor an external consultant, not an employee and there are no salary or cash bonuses attached to their services.
The FAST was created and published by the Founder Institute to support founders by streamlining the setup of their advisory boards. The template has been used by thousands of entrepreneurs and mentors alike, proving its immense value to the startup community.
The most helpful feature of the FAST is that it standardizes the amount of equity an advisor receives for their support. This helps both sides skip a long and tedious negotiation process to instead focus on building a great business together.
The Founder Advisor Standard Template determines the following (and more):
The FAST shines because of two core benefits: standardization and incentive alignment.
Because the FAST is standardized, it leaves little room for back and forth negotiations, and saves legal costs. Hence founders do not need to pay a lawyer to draft up a new document for them. This makes the FAST cheap and easy to use in comparison. Moreover, mentors are usually familiar with the contract, allowing them to trust that their interests are met as well.
Most founders do not have the cash on hand to pay an advisor. And if they do, that cash is likely needed in other parts of the business. And because the FAST determines that the advisor will be compensated in equity, founders do not need to spend money needlessly. Hence, incentives are aligned as the quality of the mentor’s advice will positively affect their equity’s value down the line.
The Founder Advisor Standard Template can be found on the Founder Institute’s website here. By simply checking a few checkboxes and adding signatures, founders and advisors can set up their agreement and future collaboration within minutes.
It goes without saying that founders need to identify and engage with the right advisor before even considering the FAST. The best way to find a suitable mentor is to leverage multiple channels. On the one hand, entrepreneurs can research and shortlist individuals who have experience in the field they need counsel in, for example other founders, industry experts or consultants.
BitsForDgits' advisory board, Linkedin and Twitter are both great places to find and also get in contact with potential candidates. On the other hand, founders can utilise their network and ask for referrals. The resulting candidates from this channel tend to come with a warm introduction which also functions as a trust bonus since a common connection has engaged with both parties and on some level vouches for each party.
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