For a small startup, I'd like to give options to members of an advisory board and one other person. However, one of my lawyer friends says to wait until after the first round of financing to give them.
Is he right? If so, how could startups ever get advisory boards and other people who want options?
EDITED TO ADD: Thanks for answers 1 and 2 below. But why is it a problem to issue options before a financing round?
If all of the corporate formalities (such as board and stockholder authorizations) are followed, an option plan is authorized, option agreements are signed, etc., the paperwork is one issue that should be fine.
If a cap table is thoroughly done and a small number of options are issued, the cap structure will be clear.
With those two items addressed, why would an investor care if say 1% of the company's fully-diluted share pool consists of options before the first investment round?
Thanks for the advice- I'm just not understanding why it's a problem if a company is meticulous about things.