Building A Start-Up Advisory Board – This is for SEO purposes and not to be shown on frontend. Keep hidden.
Starting a business venture is an exciting prospect. I have experienced this adrenaline rush and excitement a few times in my life, but entrepreneurship is not always glitz and glamour. The road to success will demand blood, sweat, and tears. Building an advisory board along the journey is, for many, a golden thread that can make the journey much easier.
So, what then is a Start-Up Advisory Board?
A start-up advisory board is a panel of experts (or a select few) who will act in an advisory role for your business. They provide knowledge and experience that you may not have. These individuals often offer their time and expertise for free. However, it is always wise to offer some form of compensation. (I will discuss that further into the article.)
The Advantages of a Start-Up Advisory Board
When starting a business of any type, there are going to be a myriad of areas needing experienced attention. While many entrepreneurs have general knowledge that will help their business grow, it is naive to think they can do everything proficiently. It doesn’t matter how many years of experience a person has, or how many ventures they have started, grown, or run; an advisory board can take the pressure off the entrepreneur and allow them to pursue areas of the operation in which they are most effective.
In a start-up, you might need to wear many hats for the different roles that will need to be fulfilled until funding is such that you can hire people with those particular skills. One advantage of the advisory board you put together is that they will guide decisions until those employees are hired. This is why choosing the people to be on your advisory board is an extremely important decision.
As far as my own interests are concerned, I have a passion for developing advanced and disruptive technologies. Most of my business focus has been on this, and my innovations have been designed along these lines. An advantage of having an advisory board during these start-ups was having access to the expertise some of the members had in a specific type of industry, technology, or skill set. I did not have to be the expert at everything. There were experts on my board whose job it was to point out these things to me along the way. So, diversified experience in your advisory board is another advantage; it saves you time and, ultimately, money.
As I mentioned above, while having the advisory board itself can lead to the ultimate success of the business you are starting, the people you ask to join this board will also make or break its effectiveness.
Networking is an important factor in the business world. People you know, places you go, conversations you have, conferences you attend are all great ways to find the people who will do the best job advising you. Being able to identify key individuals who will be able to help guide you and your business happens through careful planning and networking.
Credible people are not only those with advanced degrees or business names attached to them. Sometimes it is the quiet, low-key individuals who can offer you the most valuable assistance.
Experience and Expertise
While the education a person has to draw from is extremely important, book knowledge and university degrees can provide only so much guidance when it comes to growing a real-world business. The experience an individual has, both failures and successes, will provide your new venture with knowledge that books and universities cannot always impart.
It is a futile exercise to appoint someone to your advisory board with the same or less experience than yourself. It is suggested that appointees be recruited and vetted in the same manner a future employee would be.
You want to build a trusting relationship with the people on your board. Confidentiality and an understanding of the importance it plays in the business should be recognized and felt by each board member.
While gathering names and data about each potential member, it is important to determine the expertise they will bring to your advisory board. Remember that these people are there to advise and not control your business. Professionals can differentiate these roles and remain independent.
Building off the idea of bringing experts with differentiated skill sets to your advisory board, you will also want to bring diversity to your board. If you look at a car engine, there are many different parts all working together. Each one has a task to fulfill, and not are all created in the same factory. Bringing together the best parts, no matter where they are made, makes the car run efficiently. The same concept is true for your advisory board members. Diversity among members will help your business be the best it can be.
You will need experts from different areas of business, each one with knowledge and expertise in their own field. Board sizes can vary, depending on the requirements and stage of the company. It is typical to see 2-4 members on an advisory board for start-up ventures.
What do You Need?
Do not feel the need to appoint members whose expertise is not needed. As you are establishing your advisory board, outline your needs and requirements, such as how much time they will need to be available and what compensation will be offered. It is also a good idea to avoid the duplication of skill sets on the board.
Money Talk, Ahhhh!
When it comes to compensation, have a plan going in and be flexible. Having an agreement for each board member, with specific expectations and compensation, will be important to all parties. This agreement will also cover you if disagreements occur or in the unfortunate event that a termination of services is needed. You may want to draft the agreement in such a way that it allows you and the advisor a specific commitment time frame.
Advisors are not compensated in the same manner as employees or a Board of Directors. The traditional means of compensation is through equity shares or company stock. This method can be linked to the agreement period, compensating the individuals over a set period of time.
In the agreement, the total equity share “payable” to the advisor can be stipulated. This equity mechanism can be structured in the form of a vesting schedule. As an example, if the agreement provides 1% equity over a 24-month period, the advisor would be entitled to 1/24th of 1% for each month they serve the company.
Upon a future sale of the company, the advisor would receive a payout equal to the equity they earned during their period of service.
Some Final Thoughts
I value advisors. There is a respect felt in the business world when entrepreneurs can call on other experts, understanding that they have experience in a specific field or discipline that will benefit others. Having those people at your disposal to help guide you through various challenges and the growth of your business can be a valuable resource you will never regret creating. This is not to say you will always agree with them or want to follow their advice, but having that experience and expertise to use in decision making, along with the ability to see ideas from different points of view, is a benefit I have come to appreciate throughout my career as a serial entrepreneur.