Founder Advisor Standard Template (FAST) 3.0
FAST Agreement
The Founder/Advisor Standard Template (FAST) was introduced by the Founder Institute in 2011 to simplify advisor agreements for startups. Its goal was to reduce lengthy negotiations and legal complexities, making it easier for startups to formalize relationships with advisors. While a 2018 update addressed some concerns, the template still presents challenges that can impact both startups and advisors.
Drawing from our experience with over 300 startups, we have developed a more comprehensive, VC-approved template that better aligns with the needs of modern startups, including those in the crypto space.
TL;DR — FAST 3.0 at a Glance
While the FAST agreement provides a useful starting point, there are areas where it can be improved to better serve both startups and advisors. Our updated, VC-approved template builds on these principles to provide a more effective framework for modern startups, fostering stronger and more transparent relationships:
Key Considerations
United States
The FAST agreement provides a standardized approach to equity compensation based on company stage and advisor engagement. However, it doesn’t always give advisors a clear understanding of the long-term value of their equity.
Since equity is expressed as a percentage, it can be difficult for advisors to grasp how their ownership stake will change over time. Future funding rounds, stock option grants, and other equity issuances dilute ownership, and without a clear reference to the total number of outstanding shares, the actual value of an advisor’s stake can be uncertain.
For example, receiving 10,000 shares in a company with 10 million outstanding shares (0.1%) might seem straightforward, but if the total share pool doubles, the stake shrinks to only 0.05%. Using fixed share counts would give advisors a clearer picture of their stake in relation to the company’s capitalization.
Additionally, percentages alone don’t account for company valuation. A 0.2% stake in a startup valued at $5M pre-money is very different from the same percentage in a company valued at $20M. By specifying shares instead of percentages, companies provide advisors with more meaningful context, allowing them to estimate the dollar value of their equity based on the latest 409A valuation or funding round.
Moreover, agreements based solely on percentages make it impossible for advisors to file an 83(b) election, a crucial tax benefit that allows them to pay taxes on equity grants at the time of issuance rather than at a potentially higher future valuation.
Flexibility for Different Advisor Roles
The FAST agreement is designed to be a one-size-fits-all solution, but in practice, advisor relationships vary significantly. The template simplifies engagement levels into broad categories, which may not always capture the specifics of advisor’s contributions.
While this standardization speeds up agreement execution, it can overlook important details such as industry-specific expertise, customized performance-based incentives, or milestone-driven compensation structures. A more tailored approach could better align advisor incentives with company success while ensuring that both parties benefit from a well-structured relationship.
Clearer Equity Terms and Transfer Restrictions
Startups also often overlook essential legal steps when issuing shares. A common mistake is failing to sign a stock purchase agreement that formally documents the transfer of shares to advisors. Compared to standard share purchase agreements (SPAs), which clearly outline purchase price, payment terms, and closing conditions, the FAST agreement leaves room for interpretation regarding how shares are actually issued (e.g., options vs. restricted stock).
This lack of specificity can complicate capitalization table management and create potential misunderstandings down the road. Furthermore, in 95% of our cases, VCs required startups to amend FAST grants with SPAs and transfer restrictions during due diligence before closing, thereby delaying investments by 2–4 weeks.
Additionally, some common protections found in standard founder agreements, such as transfer restrictions, are missing from the standard FAST. Without these safeguards, advisors who receive equity may have more freedom to sell their vested shares, potentially leading to unintended consequences:
Unrestricted Sales: Advisors could sell their shares to competitors or other third parties, affecting company control or violating securities regulations in case of private companies. By contrast, founder agreements typically require board approval for any transfers and provision of representations and warranties consistent with the U.S. sanctions and securities regulation, especially relevant for C-Corporations.
No Right of First Refusal (ROFR): Without ROFR provisions, startups may not have the opportunity to repurchase advisor shares before they are sold to outside investors, which could lead to dilution risks in future funding rounds.
Alternative Compensation Models: Tokens vs. Equity
For startups, particularly those in Web3 and crypto, traditional equity grants aren’t always the best way to compensate advisors. Unlike equity, tokens derive their value from ecosystem utility rather than company ownership, providing startups with more flexibility in structuring incentives.
Token-based compensation offers several advantages:
Preserves Equity: Startups using tokens retain more equity across funding rounds compared to those relying solely on equity grants. This allows founders to maintain greater control while keeping more shares available for future investors or key hires.
Performance-Based Vesting: Tokens can be structured with milestone-based vesting (e.g., a percentage released upon product launch or user growth milestones), ensuring that advisors are rewarded based on measurable contributions rather than time alone.
Liquidity: Unlike traditional startup equity, which typically requires an IPO or acquisition for liquidity, tokens can be traded on exchanges, allowing advisors to realize value sooner.
By incorporating token-based compensation options, startups can better align advisor incentives with their long-term vision while reducing the dilution risks associated with traditional equity grants. This approach reflects the growing trend in Web3, where contributors are rewarded for ecosystem growth rather than direct company ownership.
One document. Countless deals.
FAQ
The exercise price of the shares under the FAST agreement will be determined at the time of issuance and will be included in the applicable Stock Purchase Agreement.
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