Why Create An Advisory Board
How to prevent costly mistakes by learning what you don't know, now.
If I could go back in time to the first year of building my company, I would only choose to change only one thing. That would be to surround myself with good people who knew all of the things I didn’t and had yet to learn. It’s a simple concept, but one that can have truly powerful consequences for any new company. Here’s why:
You don’t know what you don’t know.
For a first-time founder, this can be a make-or-break moment. Perhaps you would have made a different decision about your product if you had just known a bit more about how to build software for scale. Perhaps you could have closed that needed deal if you had someone there to coach you through the nuances of enterprise sales. You get the point. The biggest hurdle to starting something up is the raw inertia it takes to get moving and limiting the early risk can be the difference between survival or failure.
One of my mentors once said, “If I’m doing my job right, you will make different mistakes.”
So where to start? For the sake of this article, I will share guidance as if this is your first company. Let’s break it down into small actionable steps that will create a clear system for you and anyone you would like to invite to your board. Watch this video for a quick crash course on one founder’s perspective.
Find the gaps. Are you a first-time founder? Or is this your 3rd company? Depending on where you start with your experience will determine what expertise you need in your corner.
Are you an expert in the market you will be operating in? (Strategy)
How will you position your product to be different and communicate this in a clear way? (Strategy)
What type of company are you building, deep tech, hardware, software, CPG, etc.? (Strategy)
Do you know how to build the product you think will solve the problem? (Technology)
If yes, do you have experience in all of the different technologies that will be used?
Will your product require any unique design elements or user experiences in order to delight your customer? (Product Design)
How will you reach your customers? (Marketing)
Do you know what type of sales model you will need to use? (Sales)
Do you understand how to sell into that market? (Sales)
Do you understand how long it will take to sell your product? (Sales)
What type of talent will you need to attract in order to make a great product? (People & Talent)
Do you know how all of the pieces of your company need to fit together for you to scale? (Operations)
Do you understand what costs will scale flat or linear? (Operations)
Hopefully, you get the idea. There are more questions that will depend on your specific niche, but use the above as an outline to determine where you “don’t know what you don’t know”.
Who are they. These are the people who you will be trusting to guide you through uncertain times. Consider the following questions when meeting people and interviewing them for your advisory board.
How do they behave, and hold themselves when you interact with them and what do their peers think about them? Don’t be afraid to ask for references.
What is their longest business relationship? A good formula here is it should be something like their current age (approx) minus 22 (avg. years before a career). If they have long enduring relationships, they are probably someone you want to be around too.
What have they accomplished? Go into detail about the specifics. Especially if you are considering them to advise you on something technical like software design, or firmware, etc.
Where are they at in their careers? Are they able to give you the time and attention you need or are they so focused on their own life and career, you may be not getting their best. A good rule: If they don’t need anything from you and they are excited to help and support you, they will check this box.
Lastly and probably most important, do you enjoy spending time with and feel supported by this person? Remember, these are people you are inviting to go on a journey with you. You will be getting to know each other at your best and worst moments. Make sure you can ride the up and downs together as partners.
Where to find them. The difficulty of this next step will be determined by how strong your network is. An entrepreneur’s best weapon for solving any problem is their degree of separation from the person who knows the answer. Taking the time to get the right people around you is critical.
Your immediate network. Friends and family are a great place to start. Take the list of people you need to your close relationships. You may be surprised who you get introduced to.
LinkedIn and other cold outreach. Use the tools available to you. LinkedIn is a powerful tool to find and connect with people who match the background and experience you are looking for. There are also other great prospecting tools like ZoomInfo that have contact information available if you are going to reach out cold.
Craft your ask. Be very specific with what you are asking from a time commitment from your advisory board. How much time will you be asking from them per month? Is there specific support you will need from them now or in the future? Typically, advisory engagements can look like this:
The board will meet once per month for 1-2 hours. Or whatever frequency you require.
Participants are expected to be fully present at such meetings. Dates should be sent far in advance to ensure time to plant.
Advisors can expect equity compensation ranging from 0.1% to 0.75% or higher depending on their strategic value.
Equity will be distributed on a 2-year vesting schedule. (This can be negotiated if necessary.) Cliff or no cliff.
You will issue a standard advisory agreement to formalize the relationship if they agree. See here for an industry-standard template.
Formalize the relationship: The last step is to formalize the relationship through documents and clearly communicating expectations.
Following the steps above should be a pretty foolproof way to build a network of people around you that can support you throughout the life of your startup. Keep in mind that what you ask of these people is as rigid or as flexible as you need it to be. Feel free to modify your asks according to your needs.