Startup 101: Build an Advisory Board

Posted: January 11, 2014 by Vance VanDrake III in Leadership, People, Planning, Startup

vancevandrakeA strong advisory board, which shouldn’t be confused with a board of directors, is the single most valuable asset that a start-up can have.  An advisory board is generally a group of three to five individuals that advise the company, often for free, in a capacity that is less formal than that of a board of directors.  The value can be limitless, but some of the more significant benefits include the following:

  1. Your team is more important than your idea
    An A team with a B idea is more investable than a B team with an A idea.  Sophisticated investors bet on people, not ideas. This approach has become even more commonplace considering most start-ups pivot three or four times before settling on a business model. The original idea often evaporates and only a strong team can carry the company forward.  An advisory board gives you an instant team, often without giving up any equity, that can build credibility. Smart entrepreneurs will beef up an otherwise thin “management” slide on their deck with an impressive advisory board.
  2. It wont cost you anything
    Most advisory board members are not compensated and entrepreneurs should avoid, if possible, any payment other than picking up the occasional lunch tab. Entrepreneurs are the new rockstars and most founders don’t realize that being affiliated with a start-up is attractive; don’t be afraid to ask.  Prospective board members are likely to be flattered by your offer and will welcome the opportunity to lend a hand.
  3. The perfect advisory board member
    An advisory board member should be selected because they have (a) access to capital, (b) credibility, or (c) can provide a skill set that the current team lacks.  Every advisory board member should have at least one of these characteristics, but the perfect board member has all three.  Make a list of the skill sets that your business needs and draw up a “wish list” advisory board.  Leverage your network and start making “asks” of people that match your needs.
  4. Minimal time commitment
    An advisory board should not require much time from the founders or from the board members. Because advisory boards are generally not compensated, the time commitment should be less than a few hours a month. Many advisory boards never meet formally; entrepreneurs can reach out to specific board members when the need arises. The minimal time commitment can help entrepreneurs attract prestigious, but busy, prospective board members.
  5. Maximum flexibility
    Most advisory board members are not bound by contract or formal agreement. As a company grows, its needs may change and more prestigious individuals may be asked to serve.  The informality of an advisory board allows new members to be added and less relevant members need not be formally removed. There is no cap on the number of members allowed, which can help start-ups build a robust team.

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