You know how they say startups take a village? Well, creating an advisory board can be an excellent way of forming your village—and improving the quality and quantity of the guidance you’re getting.
What an Advisory Board Is (And What It Isn’t)
Think of an advisory board as a formal collection of mentors. Advisors provide individual expertise, give you advice, introduce you to valuable contacts, and tell you when you’re potentially making a mistake.
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Many people confuse an advisory board with a board of directors. However, they’re completely different—a board of directors consists of people who act as shareholder representatives and have certain legal and business powers (including firing the CEO). An advisory board doesn’t have any official authority.
In addition, any company can have an advisory board, but they’re not mandatory. Public companies, on the other hand, are required to have a board of directors.
And while advisors typically meet with the company leaders intermittently, the board of directors must meet at scheduled times.
You should look for people that can flesh out the areas of business with which you’re least familiar. Let’s say you’ve got a ton of experience in product development, but very little in brand communications and PR. You’d probably want to find an experienced communications and PR strategist to join your board.
By picking advisors who can “round out” your team’s knowledge and capabilities, you’ll ensure that your business can grow in every aspect—not just the ones you and your employees know. Plus, when it comes time to hire, say, a head of marketing, your advisor can give you his or her expert opinion on the candidates.
If possible, you also want your advisors to have experience, background knowledge, or an interest in your industry. Imagine you’re the founder of a startup making robotics for the restaurant industry. An advisor well-versed in robotics can tell you the liability and risk insurance policies of which you need to be aware. A different advisor who’s done a lot in food service can help you navigate the supply chain.
In addition, you also want to ask people who seem to genuinely love your product. Being an advisor is time-consuming—someone who’s passionate about what you’re doing will be more mentally and physically present.
That eliminates a ton of candidates. And there’s still one more important consideration: How well-known are your potential advisors?
Like when you get a prominent VC firm or angel investor to fund you, securing “big name” advisors will give you instant credibility within the entrepreneurial community.
After considering all these factors, make an advisor wishlist of 20-25 people. And we do mean “wishlist": Don’t worry if some of them seem out of reach!
Approaching Potential Advisors
Some of the people on your list may already be acting as advisors, just without the title. They’re the easiest to ask: Tell them how much you appreciate their advice, then say you’d be honored if they’d consider joining your advisory board.
Strangers are a little more difficult, for obvious reasons. Use LinkedIn to see if you have any mutual connections. If you do, ask that person to introduce you. If you don’t, try cold-emailing the potential advisor.
Check out this sample email:
My name is your name, and I’m the founder/CEO of startup, a company that 5-10 word explanation. I’m reaching out because I know you… have 20+ years of experience working with healthcare startups/successfully scaled your company from two employees to 2,000/are an expert in financial tech, etc.
I’d love to buy you coffee or lunch (at your convenience, of course) and get your feedback on startup name’s product/service/roadmap/growth strategy/other.
A couple of notes:
- Meeting in-person is ideal, but if you don’t live nearby and you can’t afford to fly out to see them, suggest a video call instead.
- Do not ask them to sign an NDA—you’ll come across as presumptuous and ignorant.
- Don’t say you’re reaching out because you want them to be your advisor. A) You don’t know if you want them yet, and B) That’s like asking someone to be in a relationship with you before your first date.
Out of the 25 or so people that you email, expect to hear back from around 15.
Meeting Potential Advisors
At the meeting, you should give a well-prepared pitch or—preferably—a product demo.
While they’re giving you feedback, measure how excited or interested they seem. Are they asking relevant questions and honing in on the right areas? Even if their advice is off-base, remember that they’re working with far less knowledge of your startup than you are.
At this stage of the game, professional chemistry and passion is more important than jaw-dropping wisdom. Of course, as they learn more about your company, their counsel should get better and better.
You should also remember that sometimes, the best advisor is one that challenges you. Being forced to examine your assumptions, take risks, and make dramatic changes is hard, but usually, it’s worth it. So if you’re sitting down with someone who’s blunt and a little aggressive, don’t automatically write the person off. He or she could turn out to be your most valuable advisor.
Sealing the Deal
After your conversation, send them a warm email thanking them for their time and advice. If you’re doing anything differently because of what they told you, definitely mention that. You should also try to provide value to them. Is there anyone you can connect them with? Have you read anything recently that’s related to their space? Are you going to any industry events they might be interested in?
Here’s a template:
Thank you so much for meeting with me yesterday. You gave me some really insightful feedback—after hearing your thoughts on subject, I’ve decided to… related course of action. If there’s anything I can do for you, please let me know.
Also, I was wondering if you’d like me to introduce you to person. I think he/she could be a great asset for you because…
Thank you again,
Note: To really wow a potential advisor, figure out what they like to read (either by checking out their blog, finding their GoodReads account, or seeing which books they discuss on social media), and send them something appropriate. For example, if someone recommends Keith Ferrari’s “Never Eat Alone” on Twitter, he or she would probably enjoy “The Start-Up of You,” by Reid Hoffman.
Also, remember that whether or not someone responds is a good indicator of how busy they are—and thus, how available they’d be to help you.
After a week or two has passed, send them another message asking for a second meeting. Since an advisor position is a big commitment on both sides, having more face-time before you formally ask is important. But let them know why you’re asking again, so they don’t think you’re being overbearing.
Here’s an email template:
I hope you’re having a great week. I saw one of the startups you invested in went public/you were honored at an event/your blog post went viral—congrats! I was wondering if you had time for another meeting. We’re currently in the process of finding people for our advisory board, and I was hoping that you might be interested. As I mentioned previously, you reason why he or she would be such an ideal advisor.
If this role is something you’d consider, we can talk about the details (including equity compensation, your schedule, etc.) during our meeting.
Looking forward to your reply,
Let’s say you send this email to 10 of the 15 people you met with previously. If all goes well, eight of them will accept the second meeting.
Now that you’re both aware of the potential relationship, you can ask direct questions about their mentorship style.
You’ll probably want to know:
- What are their business strengths/where do they feel they can add the most value?
- How much experience do they have with… (insert one of the the biggest challenges you’re facing)?
- Where do they see your startup going? (You want their vision to be pretty close to yours, for obvious reasons.)
- If they could change one thing about your revenue model, pricing strategy, marketing plan, company structure, what would it be? (Use this to gauge how helpful their advice will be.)
- What’s their preferred communication style? (Does it conflict with how you like to communicate?)
- Have they ever worked with an advisor, and if so, what did they like/dislike about the experience?
- Have they advised anyone before? (If they say yes, ask if you can speak to those founders. That’s the best possible way of screening an advisor.)
- How much time can they devote to advising you?
- Would they like to be compensated in equity or cash?
- Why are they interested in your company?
Most advisory boards have three to five members. Any less, and you won’t have a diversity of opinions and skills; any more, and you’ll face the “too many cooks in the kitchen” problem.
After you’ve conducted your second meetings, it’s time to figure out whom you’ll officially ask.
You also need to make some decisions about the specifics of your board.
First, how much equity are you going to give each member? The standard amount ranges from 0.25% to 2%, depending on the advisor’s profile, time commitment, connections, as well as how far along your startup is.
(Check out this chart for a detailed breakdown of how much stock to allocate.)
Shares usually vested over two years (with no cliff) to ensure that the advisor has a semi-permanent interest in the company’s success.
While you have the option of paying advisors in cash instead, this practice is typically discouraged. Not only does having equity give advisors a literal stake in your startup, but the advisor-advisee relationship is very different from the employer-employee one and should be compensated differently. Plus, you’re a young company—which means you’re probably low on cash.
But if, for whatever reason, you decide to go the cash route, you should expect to pay $1,000 to $5,000 per advisor per meeting (again, depending on how much they’re bringing to the table and what stage your startup is in.)
Second, you should also figure out exactly what you’ll be asking of each advisor. Do you want to call or meet with them on an as-needed basis? Are you going to set up monthly or quarterly meetings? Will you ask all of your advisors to be present at the same time, or will you meet one-on-one with all of them?
Once you’ve discussed your needs with your co-founders or executive team members, create a contract. This document will help you keep your advisors accountable. And you don’t have to create one from scratch—this Founder Advisor Standard Template Agreement from Founder Institute should take less than 20 minutes to fill out.
After all parties have reviewed and signed the contract, you’ll have officially created your startup advisory board. Now you can get to the good part: Getting advice!