I don't want to throw rocks at anyone's effort to be helpful.
The "Founder Advisor Standard Template" put forward on TechCrunch last week by The Founder Institute is an okay form. Presumably it reflects programmatic recommendations the Institute gives participating entrepreneurs and advisors.
It's not right for all startups. Even if you can peg your company to one of the stages of development referenced in the form, the right advisor agreement for you may need to be drawn from another model.
When documenting the advisor/startup relationship, the biggest issue - sometimes the only quandary - is how to deal with the intellectual property the advisor may contribute.
A startup won't err in getting an assignment of inventions of the same scope it requires of employees or the founders themselves.
On the other hand, many prospective advisors are active day to day in the very industry the startup means to disintermediate. These folks are valuable precisely because they are in no position to sign broadly worded assignments of invention.
The Founder template doesn't tell you what to do if the advisor declines to give you the requested IP assignment. I guess you ask your lawyer.
More worrisome is how the template implies it's okay to skip share numbers and talk about equity grants in terms of percentages.
Measuring shares in percentages is almost always a mistake. Doing so in a legal document is tanatmount to committing yourself to forever carrying a book of matches in one hand and a full can of gas in the other, promising you'll never put both down.
Am I exaggerating? Suppose you tell someone her equity grant will be 0.25% of the company. A month later, you close a financing in which you sell 20% of the company. You know with certainty that your advisor now has a claim on 0.20% of the company. With equal certainty, she knows you owe her 25% more shares than you actually issue, because her percentage (in her mind) was based on the company's capitalization post-financing.
This kind of misunderstanding happens all the time.
I do hand it to the Founder Institute for publishing the percentages it regards as appropriate for advisor equity grants at different stages in a startup's journey!
But when it comes to proscribing the legal document to put the benchmarks into practice, the Founder Institute's form - like many "standard" templates - adds to the noise and confusion.
Instead of new templates, we need to surface the templates promulgated by law firms and then we need to analyze and understand what language is common to all forms, what variants are standard, what provisions are outliers.
We need a way to mash up what is actually being used after being recommended by lawyers, and we need an intelligent, user-friendly way to visualize how to pick out the right clauses for a given, new set of circumstances.
Photo by isafmedia.