SWEAT advisor options

Once upon a time, Swedish tech entrepreneurs had very few role models to engage as advisors in their startup journey. But that was a long, long time ago. Nowadays, there are lots of experienced founders and industry experts out there, who are willing to help other entrepreneurs.

Until now, there hasn’t been any standard for how to compensate advisors. By publishing this SWEAT (Startup Warrants for Engaging Advisors Template) guide and documents, I hope to minimize the thresholds, costs and headaches for entrepreneurs to engage advisors, and for advisors to more actively help founders.


In short, this is how SWEAT works:

  1. Establish a consulting agreement between the company and the advisor, with market-level compensation. The advisor must have a limited company (Swedish aktiebolag).
  2. To compensate the advisor, the company issues warrants (Swedish teckningsoptioner) to the advisor, for the same total value as the consultancy invoice.
  3. The warrants come with a warrant agreement, implementing e.g. vesting and drag-along.

When the advisor purchases the warrants (step 2), the company gets liquidity which they can use to pay the invoice from the advisor (step 1).

Please note that the SWEAT model does not work for board engagements since according to Swedish legal precedent, board members can only be compensated with (or at least taxed as) salary.

Speaking of tax implications, if you are concerned about this setup, please read the tax information (in Swedish) provided by our tax lawyer Erik Björkeson at DLA Piper. If you have any further tax questions, please contact him. If you have questions about the legal documents themselves or need non-tax-related advice, as usual you should contact Mattias Larsson.

How much equity?

It’s up to you. For reference, Founder Institute has put together a standard for defining commitment levels called FAST. In short, in the idea stage of the business, the advisor gets 0.05% for committing one hour per month for 24 months. In startup stage, the number is 0.04% and in growth stage it’s 0.03%. Of course these numbers are just benchmarks and you need to agree on expectations and compensation.

Using the FAST standard, this is what you get depending on commitment level and company stage:

Idea stage
Startup stage
Growth stage
Standard (5 h/month)0.25%0.20%0.15%
Strategic (10 h/month)0.50%0.40%0.30%
Expert (20 h/month)1.00%0.80%0.60%

Example: You have raised a small angel round and launched an MVP but you don’t have lots of revenue (i.e. you’re in startup stage) and you have found an advisor willing to commit 5 hours per month for 24 months. You would then give that advisor 0.20%.

For more details about the different stages and what to expect from the advisor, see pages 4-5 in the FAST template (although the legal document itself shouldn’t be used in Sweden).

How SWEAT works

Disclaimer: This web site and the documents that can be downloaded from here contain general information, which is not advice, and should not be treated as such. The information is provided “as is” without any representations or warranties, expressed or implied. I’m not a lawyer or a tax advisor and even though I’ve done what I can do minimize any legal, financial or tax risks, I obviously take no responsibility for how you use the documents. Even though I’ve used SWEAT a couple of times myself already, and know others who have as well, you should always talk to a lawyer and/or tax advisor before implementing.

As mentioned in the summary, SWEAT consists of two parts: a consultancy assignment where the advisor agrees to help out with expertise a few hours per month for two years, and warrants which give the advisor the right to purchase some shares after two years.

Let me describe how it works in more detail.

SWEAT consulting agreement

The consulting agreement may seem unnecessary, but it’s great is for tax reasons. Defining the scope of the engagement and pricing it as a consultancy makes it more obvious that the advisor is not engaged as an employee or a board member but as an expert consultant (assuming that’s true, of course).

The advisor immediately sends an invoice to the company for the full two-year period. Also, the agreement states that the company shall issue warrants to the advisor worth as much as the amount on the invoice.

Let’s assume that you have agreed to give the advisor 0.2% of the company in exchange for appr. 5 hours/month during the coming 24 months. You would then calculate the fair market value of those 0.2% (e.g. 50 kSEK), divide it by 0.78 (for tax reasons, see below) and use that amount (~64.1 kSEK) as the total fee to be invoiced, in §5.1 in the SWEAT consulting agreement. (The hourly fee in §5.1 would then be ~64.1 kSEK/24 months/5 hours ≈ 534 SEK/hour.)

Eliminating income tax effect

Why divide by 0.78? In order to eliminate the 22% Swedish company income tax effect for both the advisor and the company. If not accounted for, the advisor would lose (and the company would gain) 22% of the value in next year’s tax declaration since the consultancy is taxable income for the advisor (and deductible cost for the company).

The standard solution, as implemented in the document templates, makes the company issue a little more warrants to the advisor to cover the tax effect. In the example above, the advisor would instead get 0.2%/0.78≈0.26% of the company, worth ~64.1 kSEK (instead of 50 kSEK). In this standard case, with the numbers from the example above, the flow looks like this:

  1. The advisor sends an invoice of 64.1 kSEK.
  2. The company issues 0.26% worth of warrants for 64.1 kSEK.
  3. The advisor transfers the money for the warrants to the company’s bank account.
  4. The company pays the 64.1 kSEK invoice.

Don’t want that extra dilution?

If you really don’t want to be diluted by those additional 0.06%, you can instead pay the tax compensation in cash. This is often the preferred way if the company has good liquidity. If this is what you want, you just append “multiplied by 0.78” to the end of §6.4 in the SWEAT consulting agreement. With the example numbers from the example above, the flow will be:

  1. The advisor sends an invoice of 64.1 kSEK.
  2. The company issues 0.2% worth of warrants for 50 kSEK.
  3. The advisor transfers the money for the warrants to the company’s bank account.
  4. The company pays the 64 kSEK invoice.

SWEAT terms

To issue the warrants, the company needs a general meeting to approve the SWEAT terms. These terms and conditions apply to all warrants issued at the same time. It has official status and will be registered with Bolagsverket (i.e. it’s public!). This is also the reason why it has to be in Swedish (with English translation). The other warrant document (the SWEAT warrants agreement) is a private agreement between the company and the advisor and must be signed with every advisor.

You just need to fill in the blanks in the document. It should be pretty self-explanatory. It may be worth mentioning that the maximum number of warrants in §2.2 is the total number of warrants you are planning to issue to all advisors combined. If you’re unsure of how many advisors you’ll sign, you can always set this number slightly higher than you think is necessary. This way, you won’t have to convene a new general meeting if you find an additional advisor.

SWEAT warrant agreement

With each advisor you also sign an individual SWEAT warrant agreement, stating the number of warrants, price per warrant etc. This agreement is also where you implement e.g. drag-along (the company can force the advisor to sell the warrants in case of an exit) and vesting (if the consulting agreement is cancelled for whatever reason, the advisor must return the not yet earned warrants).

The warrant agreement is even simpler than the terms. The company will sign one warrant agreement per advisor and append the SWEAT terms to the agreement. I just want to point out a few things:

§3: Right of first refusal

Just like in most shareholders’ agreements, the existing shareholders have the right to purchase any equity instruments (shares, warrants etc.) before any third party may buy them. If the advisor gets an offer to sell the warrants, they must first be offered pro rata to the existing shareholders.

§4: Redemption right

This is often referred to as vesting. It basically means that if the consulting agreement is terminated for whatever reason (both the company and the advisor has the right to terminate it at any time it without cause), the company has the right to buy back some warrants from the advisor, for the same price as the advisor purchased them.

Also, according the consulting agreement, the advisor shall send a credit invoice (i.e. repay money) to the company for the remaining months of the 24-months engagement, so there is no net transfer of money. The number of warrants the advisor can keep is proportional to how many months have passed (out of the full 24-months period).

There is also three months cliff, meaning that if the relationship ends within three months, the advisor doesn’t get to keep any warrants.

§5: Right and obligation to sell

In case of an exit where a third party wants to acquire the majority of the company, the company can demand the advisor to sell the warrants to the acquirer. Also, even if the company doesn’t make such a request, the advisor has the right to sell in this situation. This is similar to a tag along and drag along in the shareholders’ agreement. The price per warrant would be the same as if the advisor first exercised the warrants and bought shares, then sold the shares.

§7: Shareholders’ agreement

The advisor is not a shareholder and is therefore not a party to the shareholders’ agreement. However, when exercising the warrants and subscribing for shares, the existing shareholders’ agreement must be signed.


Assuming that you have prepared the SWEAT documents and are ready for signing, you need to follow all the usual corporate formalities when issuing warrants. You will have to summon both a board meeting and a general meeting, and you need to submit documents to Bolagsverket. Follow the link to read more about the process with Bolagsverket. I’ll summarize it below. In the downloadable document package you will also find templates for the necessary meeting minutes.

  1. Hold a board meeting. First, the board must make a suggestion to the shareholders to issue the SWEAT warrants, see Board Meeting Minutes (Proposal to GM) and Board Meeting Minutes (Proposal to GM) Appendix 1. Appendix 1 also refers to the SWEAT Terms. All the mentioned documents can be downloaded below.
  2. Hold the GM. Next, a general meeting (annual or extraordinary) has to vote for issuing the SWEAT warrants, see General Meeting Minutes. Please note that it refers to the board proposal in Appendix 1 so make sure to attach it.

    Instead of making the decision of who gets how many warrants directly on the GM (which is most straightforward), you can instead let the GM authorize the board the mandate to sign new advisors continuously during the coming months. If you choose that path there will some more paperwork and you need to make some changes in the GM and board minutes, see Bolagsverket. The mandate has to be registered with Bolagsverket immediately, see latest registration document version at Bolagsverket (document no. 824). Don’t forget to pay the registration fee.

  3. Sign subscription list. When the GM has decided to issue warrants to the advisor(s), they have to subscribe for the warrants (i.e. confirm the purchase of the warrants) by signing the subscription list Warrant Subscription List. If more than one advisor are subscribing, they can sign the same subscription list or separate lists. Nowadays, subscriptions list are not legally required but are included in the StartupTools templates since it’s still common and might make the process more straightforward.
  4. Pay for warrants. After subscription, the advisor has to pay the price of the warrants, according to instructions from the company.
  5. Confirm subscription. The board confirms the subscriptions. Use Board Meeting Minutes (Confirmation).
  6. Notify Bolagsverket. You must inform Bolagsverket of the issue, see Bolagsverket’s web site for template 826, and pay the registration fee. They need to know that you have issued warrants but they don’t care to whom.

/Erik Byrenius





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One response to “SWEAT advisor options”

  1. Hi Erik,

    Firstly, thanks for putting this together – it’s super helpful!

    In the paragraph titled “SWEAT consulting agreement” what are you defining as fair market value for the 0.2%. Is it the value of the company? Or, the hourly rate of the consultant?



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