Search advisory shares, and you will find the same answer repeated: grant your advisor 0.25%, vest it over two years, sign a FAST agreement, done.
That advice is written for American companies. In India, an external advisor cannot legally receive either of the two instruments founders reach for, and almost nobody mentions it.
This covers what advisory shares are, how much advisors get elsewhere, and what an Indian founder can actually do instead.
What are advisory shares?
Equity granted to someone who advises the company without working in it.
They are not a separate class of share. The term describes who receives the equity and why, not what the instrument is. In the US, they are commonly issued as stock options or restricted stock, the same instruments used for employees, with different sizing and a shorter schedule.
The logic is simple. An early company cannot pay for senior expertise in cash, so it pays in ownership instead. The advisor takes a small stake, contributes time and introductions, and earns the equity as they go.
Advisory shares vs equity: what is the difference?
Size, speed and purpose.
Founder equity | Employee options | Advisory shares | |
Typical size | Majority of the company | 0.05% to 1% per person | 0.1% to 1% per advisor |
Vesting | Four years, one-year cliff | Four years, one-year cliff | Two years, monthly |
Cliff | One year | One year | Zero to three months |
What it buys | Building the company | Full-time work | Specific expertise and access |
Pool size | Not applicable | 8% to 15% | Around 5% in total |
The vesting difference is the one that matters. An employee is signing up for years, so a four-year schedule with a one-year cliff makes sense. An advisor is committing to a monthly call and some introductions, so two years with monthly vesting matches what is actually being exchanged.
Our guide on the ESOP pool covers how the employee side is sized, and sweat equity shares covers the instrument closest to this in Indian law.
How much advisory equity should you give?
Between 0.1% and 1%, and the published benchmarks run higher than reality.
The reference point most people use is the FAST Agreement, the Founder/Advisor Standard Template published by the Founder Institute. It sets rates across three company stages and three engagement levels.
Stage | Standard | Strategic | Expert |
Idea | 0.25% | 0.50% | 1.00% |
Startup | 0.20% | 0.40% | 0.80% |
Growth | 0.15% | 0.30% | 0.60% |
Standard means roughly one meeting a month. Strategic adds introductions. Expert means active project work.
What actually happens is lower. Carta's data through 2023 puts the median advisor grant at 0.23% at pre-seed, against FAST's 0.50% standard tier, with only one advisor in ten receiving 1% or more.
The practical ceiling is the total. Advisory pools are commonly capped around 5% of fully diluted equity across all advisors. Offer a single advisor 3% at seed stage and your next investor will ask why, which is a conversation you do not want to be having.
How do advisory shares work in India?
They largely do not, and this is the part no guide covers.
Indian company law offers two routes for giving equity without cash, and both exclude external advisors.
ESOPs, issued under Section 62(1)(b) of the Companies Act, 2013 read with Rule 12 of the Companies (Share Capital and Debentures) Rules, 2014. Rule 12 limits these to permanent employees of the company, its holding company or its subsidiaries, and to directors who are not independent directors. Promoters and directors holding more than 10% are excluded outright.
Sweat equity, issued under Section 54 read with Rule 8. The eligible categories are permanent employees who have worked at the company for at least a year, and directors. External consultants are not eligible, even where they have contributed intellectual property.
An advisor who is neither an employee nor a director sits outside both. That describes most people a founder wants as an advisor.
So what can you actually do?
Appoint them to the board as a non-executive director. This is the cleanest route. A non-executive, non-independent director qualifies for both ESOPs and sweat equity. It also means board responsibilities, filings and a formal position, which some advisors want and others will refuse.
Put them on payroll part-time. A permanent part-time employment arrangement brings them inside Rule 12. It changes the relationship, adds payroll obligations, and takes a year before they qualify for sweat equity.
Transfer shares from your own holding. A founder can sell or transfer personal shares to an advisor through a secondary transfer. The company issues nothing, so the cap table does not expand, and the dilution falls entirely on you rather than on all shareholders. It also triggers capital gains for you at transfer.
Pay them in cash. Less satisfying, but for an advisor doing a few hours a month it is often the simpler arrangement, and it avoids putting a non-contributing name on the cap table permanently.
The one thing not to do is promise equity you cannot legally issue. Verbal advisory arrangements that were never documented are a recurring problem in Indian diligence, and they surface at the worst possible moment.
How does advisor vesting work?
Two years, monthly, with a short trial period rather than a long cliff.
The FAST schedule runs 24 months with monthly vesting and a three-month trial. The advisor receives nothing in the first three months. At month four they vest a quarter of the grant, then the remainder monthly across the following twenty months.
The three months exist for a specific reason. Advisory relationships fail quickly or not at all, and a short trial lets both sides walk away before any equity has moved.
Compare that to the four-year employee schedule covered in our guide on the vesting period, and the logic is clear. You are buying two years of a monthly call, not four years of full-time work.
Some agreements add acceleration on an acquisition. FAST's third version, released in June 2026, includes single-trigger acceleration as standard, vesting any remaining equity at close.
What is the FAST Agreement?
A free standard template for advisor equity, published by the Founder Institute.
It sets the equity grid above, a two-year monthly vest with a three-month trial, defined engagement expectations, and termination terms. Both parties tick boxes and sign, which takes minutes rather than a legal cycle.
Version three, released on 18 June 2026, is localised to other jurisdictions rather than assuming US law, which makes it more usable here than earlier versions.
When advisory shares go wrong
Three ways, in order of how often they happen.
The advisor disappears. They take the grant, attend two calls, and vanish. Monthly vesting limits the damage, which is exactly why it exists. Without vesting, they keep the full stake for three months of interest.
The grant is too large. A 2% or 3% advisor stake on an early cap table reads as a governance problem to the next investor. It suggests either that the founder gave equity away casually or that the advisor extracted it.
It was never documented. A verbal promise of equity that nobody wrote down is found during diligence, usually by the investor's lawyer, usually in the final week of a round. The cost is time and credibility rather than money, and both are scarce at that point.
Before you offer anyone equity
Work out what you are actually buying.
An advisor who makes three introductions that lead to customers is worth the equity. One who joins a monthly call and repeats what you already know is not, and you will be paying for it for years.
The test we use at PedalStart when founders ask about this is simple. Name the specific thing this person will do in the next six months. If the answer is general advice, pay in cash or nothing at all.
Key takeaways
Advisory shares describe who receives equity and why, not a separate class of share.
Benchmarks run 0.1% to 1% per advisor, with FAST setting 0.25% as standard at idea stage. Carta's observed median is 0.23%.
Indian law excludes external advisors from both ESOPs under Rule 12 and sweat equity under Section 54. Neither route is available to someone who is not an employee or director.
The workable alternatives are a non-executive directorship, part-time employment, a transfer from the founder's own shares, or cash.
Advisor vesting runs two years monthly with a three-month trial, against four years with a one-year cliff for employees.
Frequently asked questions
What are advisory shares?
Equity granted to someone who advises a company without working in it. The term describes the recipient rather than a distinct class of share, and the equity is usually issued through the same instruments used for employees.
What is the difference between advisory shares and equity?
Advisory shares are far smaller, commonly 0.1% to 1%, and vest over two years rather than four. Founder and employee equity is larger and tied to full-time commitment.
How much equity should a startup advisor get?
Between 0.1% and 1%, depending on stage and how involved they are. The FAST Agreement sets 0.25% as standard at idea stage, though the observed median is closer to 0.23%.
Can advisory shares be issued in India?
Not directly to an external advisor. ESOPs under Rule 12 and sweat equity under Section 54 are both restricted to employees and directors. Founders instead appoint the advisor as a non-executive director, bring them on part-time, transfer shares personally, or pay in cash.
Can sweat equity shares be issued to a consultant or advisor?
No. Section 54 limits sweat equity to permanent employees and directors. An external consultant is not eligible even where they have contributed intellectual property.
How long do advisory shares vest?
Two years with monthly vesting, usually after a three-month trial period, which is shorter than the four-year employee standard.
What is the FAST Agreement?
The Founder/Advisor Standard Template, a free advisor equity agreement published by the Founder Institute. Version three, released in June 2026, is localised to jurisdictions outside the US.
