Leveraging advisory boards: do's and dont's.

An advisory board can be a tremendous asset for a tech startup. It can offer strategic guidance, bring industry expertise and interesting networking opportunities.

Unlike an official board of directors – which is formal by nature - an advisory board serves a more flexible and consultative role. This flexibility helps founders navigate the complex landscape of launching and scaling their business with a more tailored and dynamic approach.

When building an advisory board, it’s crucial to look for seasoned professionals with diverse relevant backgrounds. These people can enhance decision-making, help drive innovation and ideally accelerate growth. For young tech startups, installing an advisory board could be an interesting move that can enhance the chances of success in a competitive market.

Guidelines for installing an advisory board for a tech startup

Identify your objectives

First, it's crucial to identify your objectives for the advisory board. What do you expect the board to contribute to your startup? This clarity will guide your selection of advisors and also ensure they understand their role.

Select the right advisors

Selecting the right advisors is essential. Look for individuals with diverse expertise relevant to your industry, including experience in scaling businesses, fundraising, technology, and market expansion. A mix of skills - such as technical, financial, marketing, and operational expertise - will benefit your startup greatly. Particularly, seek skills that complement those of the founders to create a well-rounded advisory board. Ideally, advisor will have proven expertise in the tech startup world or have close affinity with it. An exclusive “big corporate” or pure “academic” background may be an issue as the startup world has its own dynamics.

The role of an advisor is always limited in time. Once the company reaches a next stage, the added value of a specific advisor may become very limited. It is important to discuss with the advisors where you believe their value to be and how long you expect that value to last.

Roles and responsibilities

Once you have identified potential advisors, establish clear roles and responsibilities. Define the scope of their involvement, including their time commitment and areas of focus. This ensures that everyone is on the same page and knows what is expected of them, which is crucial for maintaining a productive relationship.

Schedule regular meetings

Regular meetings are important for maintaining momentum and ensuring that the advisory board remains engaged. Schedule these meetings with a clear agenda to ensure they are productive, focusing on strategic issues and actionable insights. Regular interaction helps keep advisors informed and invested in the company's progress. Agree with the advisors how often you will formally meet with the entire board. This could be once per quarter or three times a year. These meetings may be scheduled late afternoon / evenings as the advisors will likely have a busy schedule.

Leverage the network

Leverage the advisors’ networks for business development, partnerships, and talent acquisition. Encourage them to make introductions and open doors to new opportunities. This can significantly boost your startup's growth.

Provide access to information

Providing access to information is key to enabling advisors to give informed advice. Be transparent about the challenges and opportunities facing your company. This openness allows advisors to provide relevant and practical guidance.

Fostering a collaborative environment encourages open communication and respect for diverse viewpoints. Create a setting where advisors feel valued and their contributions appreciated. This environment enhances the effectiveness of the advisory board.

Evaluate and adapt regularly

It's essential to evaluate and adapt the advisory board regularly. Assess its effectiveness and be open to making changes to the board's composition and structure as the company evolves. This ensures that the board remains relevant and effective.

Keep it manageable and relevant

Avoid overloading the board with too many advisors, which can lead to inefficiency and conflicting advice. Keep the board size manageable, typically between four to six members. This ensures productive and coherent discussions.

Don't overlook cultural fit when selecting advisors. Ensure they align with the company’s values and culture. Avoid choosing advisors solely based on their reputation and credentials without considering their fit with your team.

Be vigilant about potential conflicts of interest. Ensure advisors disclose any affiliations that might impact their objectivity. This transparency maintains the integrity of the advisory board.

Be real and clear

While advisors provide valuable guidance, the ultimate decision-making authority should remain within the company’s leadership team. Rely on advisors for advice, not decisions.

Building an effective advisory board takes time, so be patient. Allow relationships and value to develop organically. Don’t expect immediate results, but recognize that a well-structured advisory board can significantly benefit your startup in the long run.

Maintain regular and meaningful communication with your board. Keeping advisors informed prevents disengagement and ensures they are up-to-date with the company’s progress and challenges.

Take advisors’ input seriously and act on their recommendations when appropriate. Avoid becoming defensive or dismissive of constructive criticism. This openness to feedback enhances the board’s effectiveness.

Trust your advisors’ judgment and avoid micromanaging their contributions. Allow them to operate independently and bring their expertise to the table. This trust fosters a more productive advisory board.

In summary, while forming an advisory board involves careful planning and clear communication, the benefits it brings can be invaluable. By following these guidelines, a tech startup can effectively install and leverage an advisory board to navigate challenges, seize opportunities, and drive sustainable growth.

Should you pay your advisors?

Paying advisors can be a nuanced decision and depends on various factors such as the stage of your startup, the value the advisors bring, and of course your budget. Here are some considerations to help you decide:

Reasons to (not) pay advisors

• Compensation can help attract experienced and high-profile advisors who might otherwise be too busy or uninterested in unpaid roles.

• Offering payment shows that you value their time and expertise, which can enhance their commitment and involvement.

• Paid advisors may feel more obligated to contribute effectively and attend meetings, knowing they are being compensated for their efforts.

• If you look for advisors that believe in your mission and/or have a personal connection to the founders, they might volunteer pro bono, at least during the first phase.

  
  

Forms of compensation

Offering equity can align advisors' interests with the long-term success of the company. However, as equity is your crucial currency, you should probably not do this. You could give the advisors the possibility to invest, preferably as a CLA (Convertible Loan Agreement) to create this alignment.

An alternative is to pay advisors on a per-meeting basis ensures you only pay for the time they contribute, which can be more manageable for early-stage startups. Ideally you agree to start with a one year trial period where advisors are willing to volunteer their time and expertise and no compensation is given. After evaluation and provided there are enough funds, you can start compensating in year two.

Whether or not you pay your advisors, it is crucial to set clear expectations regarding their role, time commitment, and deliverables.

In summary, while paying advisors can attract top talent and demonstrate the value you place on their contributions, it's essential to balance this with your startup's financial capabilities and strategic needs.

2024-08 Coach - Team - Advisory board.pdf

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