Standardizing Early Corporate Documentation to Prevent Informal Claims
Standardizing corporate records early fixes equity expectations, eliminating discrepancies between personal recollection and enforceable equity ownership.
unvested advisory grant
Meaning
Future equity promises remain as an obligation on a cap table until a consultant satisfies the required duration of service. An unvested advisory grant motivates an advisor to stay involved with the company over a multi-year period. It is a recorded promise that only turns into actual ownership as specific time or performance hurdles are cleared.
This mechanism protects the founders from giving away equity to people who stop helping and terminates if the advisor leaves the role.
Vesting Logic
A schedule defines when chunks of the grant become the property of the advisor. The vesting logic usually includes a cliff period where no shares are earned during the first few months of service. This ensures the partnership is a good fit before any value is permanently transferred.
Cancellation Power
If the relationship ends early, the company keeps all the shares that have not yet vested. This unvested advisory grant simply disappears from the future cap table. The recovery of these shares happens automatically under the terms of the grant agreement.
It allows the company to reallocate that equity to a new advisor without additional cost. This flexibility is a tool for managing early-stage resources.
Dilution Factor
Potential shares are tracked as part of the fully diluted share count during a fundraising round. Investors look at these grants to see how much of the company is already spoken for.