The competition in the startup sphere is already saturated, that emerging businesses must overcome all the hurdles to be successful. Having the passion and big ideas will only advance your startup thus far. The committee of founders and the board members will not always possess the essential expertise that is necessary for all aspects of the business to stay afloat from the competition. An advisory board has the potential to provide immense succor to your organization by bridging key gaps in your leadership structure.
Typically, startups usually get to a certain point in their journey where they lack certain skills and knowledge internally. Whether this phase is related to a funding issue, a technical problem or any issue associated with the industry, hiring the right members on your advisory board is the solution to transcending hindrances and rising to the top.
It is crucial for startup boards to understand a number of important things as regards the duties of advisory boards — the role of an advisory board, what contributions or changes can be expected of them to add to the startup, and of course how you can find the right members for your team.
What Does Being a Startup Advisor Mean?
Let us start by clarifying what the role of a startup advisory board member is. A startup advisory board member is not the same as a consultant or mentor. One confusing feature of startup advisory boards is that although they are members of a group, they, however, do not necessarily function within the capacity of a group. Generally, an advisory board does not have a regular meeting schedule, if at all they meet. Also, they do not have any legal responsibilities and they are not tied to the same fiduciary obligations as members of the regular board.
Having clarified what advisory boards do not do, let’s take a look at what exactly the role of advisory boards of startups is. As required, startups advisory board members consult with executives, board members, and founders collectively and individually, on a basis of when necessary.
Board members for startups general prepare the agreements for members of the advisory board, outlining their roles, and in most cases giving them an equity compensation.
The case is different for mentors, as they only offer informal consultation, and moreover, they don’t receive any payments. The role of a consultant is different as well. While they offer advice to boards in like capacity as members of advisory board members, they however typically only advise on some specific matters, and they receive payment for their time.
When Should an Advisory Board Be Formed?
You are likely wondering that at what point in time should a startup firm establish an advisory board? Ideally, the most appropriate time to form an advisory board is when the firm adds key staff or when they are trying to establish partnerships and/or build sales. Having the right members on your advisory board will give you broad networks that can assist you in connecting with external vendors and identifying the most suitable talent for your staff. Your advisory board may be comprised of individuals who have significant experience in the industry or who have recorded tremendous success in other enterprises. You can choose to ask certain individuals to join your advisory board and help you overcome distinct challenges that are new to you.
Why Advisory Boards are Important to Startups
While founders often possess a significant level of experience, most individuals still do not have sufficient expertise in all aspects of the enterprise. Usually, they tend to be lacking in certain areas such as industry knowledge, compliance, or human resources.
Below we have highlighted some of the advantages you stand to enjoy when you have a startup advisory board:
- You enjoy the benefit of advice from several experts from different fields like legal, tech, and hiring.
- Members of an advisory board bridge the gaps in the existing knowledge of the founding board existing knowledge.
- With the establishment of an advisory board, the board of executives can make higher-quality decisions.
- Advisory board members assist in solving complex problems.
- Members of the executive board can receive expert guidance as regards investing decisions.
- Startup boards can get additional knowledge about developing efficient workflows.
Now that we’ve identified the role and benefits of the advisory board, how then can you find members for your startup advisory board?
How to Find Members for your Startup’s Advisory Board
The best place you can find members for your startup advisory board is right inside your very own network. It is typical for mentors to become the startup’s formal advisors so far as they have been valuable to the firm in the past and the executives have been able to establish a reliable relationship with them. When you work with them in the capacity of an advisory board, it avails you the opportunity to grow on that relationship as you continue to grow your business. Members of a startup advisory board often project a more objective view and will work very well with you as an extension of the firm’s leadership team.
Beyond your professional and personal networks, you can also ask your angel investors about experts they know who great additions to the advisory board would be. Generally, angel investors usually have vast networks, which makes it a valuable source to leverage. Even if an angel investor isn’t interested in supporting your company, they may willingly connect you with individuals who can contribute to the growth and success of your business. Venture capitalists also tend to have a vast network of diverse professional experts within companies in their portfolios. They may be able to recommend people that may be valuable additions to your advisory board.
Who should be on an advisory board?
Generally speaking, the advisory board should be comprised of experts and experienced professionals in the startup industry. There is no single size fits all approach to selecting the members of an advisory board. However, it is advisable to seek potential members who possess the following qualities: technical expertise, culture fit, independent thought, value congruence, courage, and wisdom.
How efficient the advisory board is will be determined by its size. In order to choose enough advisors that will form the advisory board, it is typically recommended that it does not exceed 5 to 8 members.
Tips for Choosing Members of your Startup Advisory Board
Appointing members of your advisory board should go beyond choosing a person simply because they are from a specific field out of a hat. You must not ignore the important phase of screening advisory board candidates, the same way you would screen your employees. In establishing this new relationship, it is pertinent to agree on what the expectations of both parties are. It is necessary to sign a formal contract/agreement that defines the duration of the relationship, the duties, and responsibilities of advisory board members, as well as the agreed compensation, which in most cases is given in the form of equity.
Importantly, be sure to avoid giving members of the advisory board too much equity share and ensure you detail the conditions of their compensation in a written contract. Members of the advisory board are not necessarily static. The needs of the company can change precipitously. The board of founders may consequently decide to review the membership of the advisory board every 6 months, or so, to replace advisory board members that are not performing their respective roles. Advisory board members with good motives may even offer to terminate the agreement if they have contributed all that they can to the startup.
It is the duty of entrepreneurs to bring ideas to the marketplace. A startup business contributes a great deal of value to the industry. It will provide jobs, products, and services, and the right amount of disruption is necessary for healthy competition. As you build your startup, you will find numerous details that you have to tend to.
A board of advisors is therefore one of the best resources for your startup’s growth. It’s a resource that combines all the necessary efforts and industry expertise in a single body. Regardless of the several obstacles, it is worthwhile to launch a new business. With an advisory board, you can leverage the right expertise, when needed, to develop a thriving, successful company.