When founders are at the earliest stages of building their startups, creating systems and structures around them to provide support and stay lean is crucial. One of those structures is an advisory board (also called a board of advisors).
I’ve coached hundreds of founders through the years, and this important startup function — the advisory board — has come up in most instances. Despite their value, many early stage founders either lack the knowledge to set one up or aren’t even fully aware that it’s an option for them.
Why Have a Board at This Point?
“I’m only one person. Why do I need a board? Shouldn’t I wait until the company is bigger?”
These are just a couple of questions founders have when they think about advisory boards, especially when they’re just getting started or when they’re in the pre-seed phase. And that’s if they’ve even thought about the opportunity in the first place, which many founders have not.
To answer those questions, here are a few important ways advisors can help your company:
- Provide expertise: It’s nearly impossible to fill every role your startup needs with just yourself, a handful of contractors, or even your first one or two hires. Having advisors with deep expertise in a specific function or specific industry, like product or marketing, can be a temporary solution for team gaps or help you navigate the industry you’re in that much better. Advisors can even act as a stand-in for a co-founder if you’ve decided to be a solo founder.
- Founder coaching: Advisors can more generally act as support for a founder’s role as a leader, similar to a mentor or even a startup executive coach. This relationship helps founders further advance themselves as people in leadership and resolve problems they may experience as leaders.
- Network connections: Simply put, some potential advisors can make the right introductions, and ideally, in higher volume. While this advisor function may seem transactional, it usually comes with additional knowledge (after all, that person likely didn’t develop their network by being bad at what they do) and enthusiasm for what you’re doing. Having this type of person in your court can be helpful in everything from customer acquisition to fundraising.
- Visibility: Don’t rule out the clear benefit of having someone on your board with a highly recognizable name or brand behind them or those who are well-known in your industry. While this advisor might be lighter on their time commitment to the business itself, their impact on founder or company brand visibility can be highly valuable.
You may also be wondering if your current mentors are enough. “Mentor” is a term that has a lot of different meanings, almost all of them either informal or part of a shorter-term formal program, such as an accelerator. Mentorship can be frequent (or not), it can include discussions about core business (but often doesn’t), or it can include sponsorship (but often doesn’t). A mentor can certainly get “upgraded” to an advisor, but there would (and should) be a formalization process of that role, which consists of a more structured process, a set of expectations, and involvement as a member of the larger pool of advisors.
An advisory board is also distinct from a formal board of directors. These boards are usually formed once a company gets to its seed stage or has notable revenues on the books, and members of the board usually have legal and financial liability as part of their role, as well as voting rights. It’s helpful to think about your advisory board as your foundational support structure and your board of directors as your decision-making and governance structure.
Advisory Board vs. Board of Directors: What's the Difference?
The most important thing to remember is that an advisor — whatever role they fill — should be your champion, whether it’s one-to-one with you or in public. They need to be enthusiastic about being by your side and about the solution you’re bringing to the world.
As entrepreneur, investor, and startup mentor Angel Gambino suggests, “The best advisor will complement your strengths, offset your weaknesses, and be willing to put some ongoing time into their role. … A great advisor should also be someone who is great to work with, gets you, is excited about your business, and truly supports you. You have to feel like they want you to win.”
So with that, here’s how to map out an advisory board strategy that will work for you.
Mapping Out Your Advisory Board Strategy
- Determine your needs.
- Set expectations.
- Find your advisors.
- Consider how you'll incentivize your board.
- Make the ask.
Determining Your Needs
Once you’ve decided it makes sense to set up an advisory board, there are two main questions I like to have founders ask themselves:
- What does your business need?
- What do you as a founder need?
If we consider several of the roles laid out above, some of them very clearly fall into business needs, such as network connections or product expertise.
But many founders overlook the value an advisor can bring to the table to address their own needs. This might include intellectual pushing, dealing with the ups and downs of leading a business and a team, or ensuring a founder is maintaining a healthy level of mental well-being.
Create a list of what your business needs and what you need. You don’t need to fill all of them with advisors, but you can prioritize and start filling out options from there.
One of the most important things when you’re establishing an advisory board is setting expectations. This is a process you can (and should) start well before actually speaking with (or certainly onboarding) an advisor. You can start by combining both research — what are other companies doing? — and the needs and desires you have for your company.
There are many variations of what founders may expect from advisors, but two top-level items to focus on:
- Time: How often do you want to access your advisors? Remember that most advisors have full-time jobs. (I generally start advisor roles at a few hours a month.)
- Communication style: How do you want to communicate with your advisory board? The best way to think about this is a combination of what you prefer and what the advisors prefer.
With expectation setting, I highly recommend that you put together a simple contract for your potential advisors, and include the base level of expectations. Advisors always have the option to increase their involvement from there.
With all of this work done, how do founders actually find an advisor?
One of the most obvious first places to look is existing networks. There will be people you’re regularly in touch with that pop into mind easily. From there, you may be pleasantly surprised at the roles some colleagues have that are the perfect fit. And if they aren’t a perfect fit, there are probably introductions that could be made.
A few times a year I like to skim through LinkedIn and see what folks are up to, a process that lends itself well to building a board.
For those outside your network, or for gaps you can’t fill with direct contacts, one good exercise is to build an achievable wishlist of people. The key word here is achievable. Choose people with whom you feel you have a reasonable chance of not only reaching but also creating a relationship with, such that they would be enthusiastic to join you.
Incentivizing Your Advisory Board
It’s always encouraged to incentivize great advisory board members with a small piece of equity in your startup, usually in the range of 0.1 percent to 0.5 percent (I often settled for around 0.2 percent or 0.25 percent). This should be vested over a few years and remember to take into consideration the baseline set of expectations discussed above.
There are certainly situations in which equity isn’t given. These are especially frequent in the earliest stages of a startup, as well as with newer advisors that you may want to get to know more first. It may also be that you have a larger board structure, with more active or notable board members incentivized with equity and with less active members who are not.
But, generally, be prepared to provide an equity incentive for advisory roles, and expect that many potential advisors may ask.
An important warning in the realm of advisor incentives: Beware of the predatory advisor. I’ve heard too many cases of early stage founders who’ve been approached by “advisors” in exchange for a large piece of equity — 5 percent or, in some cases, even 10 percent. This is not a healthy or encouraged setup for a founder, unless that “advisor” is putting in significantly more time than your average advisor. Usually, however, this is the sign of someone who is trying to take advantage of the situation.
Making the Ask
You’ve got your target list, expectations, and incentive structure ready, and you may have a few specific people in mind or in conversation.
How do you formally approach them to join your advisor role?
For some, it’s easy. You may have a long-term relationship already in place or you may have someone who’s exhibited a level of engagement and enthusiasm that signals they’d be delighted to take an advisor role. In this case, just ask!
For others who you may not know as well, you might need to develop the relationship a bit further. But there are a few ways you can push the conversation in the right direction more quickly:
- Be direct and state that you’re in the process of board development. State that you’ve enjoyed the person’s input so far, and that you’d be happy if they would consider.
- Create a call for advisors. Invite a few of your target advisors to submit their details.
Keep in mind, if someone has exhibited a level of interest in you or your company, they’re usually flattered to be asked to be an advisor, even if they end up not being able to take the role. So don’t be timid about asking.
Advisory boards are excellent vehicles of growth for early stage companies. With the appropriate knowledge and strategy, founders can be set up for future success with their advisors behind them.