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How to create a FAST Agreement
What is a FAST Agreement Template?
FAST stands for “Founder Advisor Standard Template“. Firstly, it was created by the Founder Institute to help aspiring entrepreneurs in the startup set up advisory boards and engage with mentors.Create Now
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What is a FAST Agreement?
Essentially, a FAST Agreement is a short, simple contract by which a company engages a person to act as its mentor or advisor.
Typically, under a FAST Agreement, the advisor receives no cash compensation for his service in return. But, instead has the right to receive shares in the future. In essence, the claims may be vested to the advisors on various stages of growth of the company or a fixed vesting schedule. Importantly, by using a FAST Agreement, the advisor serves as an independent consultant, not as an employee.
In essence, FAST stands for “Founder Advisor Standard Template”. Firstly, it was created by the Founder Institute to help aspiring entrepreneurs in startup set-up advisory boards and engage with mentors. Notably, the template was first released by the institute in 2011. Then, a new version of the template was released in 2017. Importantly, it has since been in use by tens of thousands of entrepreneurs and advisors per year to establish productive working relationships, and additionally, for trading advice and support for a standardized amount of equity.
Why should I use a FAST Agreement?
Usually, many entrepreneurs face this problem when they have great business ideas and plans for their company. But, they need some guidance on how to take the next steps and are in need of an advisor. At this stage, they cannot provide cash compensation. However, they can promise a share in the company’s equity as the company grows. And, according to the performance of the advisors. Essentially, if find you are in a similar situation, you can use a FAST Agreement to appoint advisors.
Notably, the FAST Agreement is intended for an advisor or a mentor who will assume an advisory role in the business. However, if you wish to engage this person to give core input to your business or perform executive functions, use an Employment Contract or a Director’s Service Agreement (if the person will be appointed as a director).
Key points included in a FAST Agreement
- Services you expect to receive from the advisor;
- Type and amount of shares that the advisor will receive;
- Schedule for vesting of the shares;
- The mechanism under which the advisor will receive shares; and
- Independent i.e. no employer-employee relationship
- Non-disclosure agreement
Why are advisors only compensated with equity?
FAST Agreement targets advisors who are high-level executives with experience and the ability to provide strategic guidance and advice. Their roles are usually on the advisory board and so they are compensated with equity.
Tips on engaging with an advisor?
An advisor is only valuable to you if you are able to find the right one. Here are some things to consider before engaging with an advisor.
- Research: do not be fixated on one advisor only. Keep an open mind and lots of options for potential advisors.
- Meeting and Introduction: Just because someone looks good on paper does not mean the end result will be pleasing. The relationship formed with advisors is unlike any. It is not like that of an employer and employee and the work of it is quite unique as well. Hence, get to know your advisors first. See if your working style and vision truly match.
- Opportunity and compensation: much like the point above, advisors can help you find new opportunities to aid in the growth of your business drastically. Discuss their roles in advisory boards in finding strategic ways around. Also, talk with them about the compensation realistically. This is usually done in exchange for equity.
How is compensation in a FAST Agreement determined?
A company’s maturity has 3 levels. The first is an idea, followed by startup and growth. The level of engagement by an advisor influences the compensation they receive. For early-stage startups, there are standard advisors. For growing companies, strategic and expert advisors will be required.
When you’re looking for more experienced insights to take your business forward you can use a FAST Agreement to do so. Having experienced professionals as advisors helps to establish a productive working environment, whilst also providing valuable advice and support. However, it is recommended to spend some time with an advisor first to figure out if the relationship works well for both of you. The entire purpose of FAST Agreements is to make this process more easier and efficient.
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Along with this document, make sure you see these other templates in our library:
- Shareholder Agreement
- Option Agreement
- Employee Option Repurchase Agreement
- Share Appreciation Rights Plan
- Share Option Plan
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