Advisory shares are a type of equity compensation that startups can give to advisors in exchange for their business insight and expertise. They are typically financial rewards in the form of stock options, and advisors who receive advisory shares are usually businesspeople with previous experience as company founders or senior executives. Advisory shares are usually granted in lieu of cash compensation, and they are often used as incentives for advisors to invest in a company’s long-term success.

Advisory shares are usually subject to vesting for the duration of the working relationship, and vesting is the process of “earning” the shares over time. This encourages advisors to stay with the company for longer. There are two main types of equity compensation offered to advisors: restricted stock awards (RSAs) and stock options. RSAs are shares bought upfront, and options are the right to buy shares, which are usually delivered later on.

In the popular reality show Shark Tank, advisory shares are offered to investors in addition to a portion of the company’s stock. This works in favor of the investors as they are only purchasing equity instead of actual shares, which ensures there is no room for any conflict of interest in the future.