As you complete your round of financing, you will undoubtedly talk with investors about forming a corporate board. You will also have any number of advisors who will not get seats on your corporate board. Enter the concept of the advisory board. Oftentimes new entrepreneurs are confused about the difference between advisory boards and corporate boards of directors. This is justified; there is some conceptual overlap. But they are very different.
Think of it as a superset/subset relationship: a good board will provide some of the advice and guidance of an advisory board, but corporate boards also provide much more, including essential corporate governance, oversight and controls which are not the provenance of an advisory board.
Corporate boards regularly meet face to face, whereas advisory boards generally do not except on infrequent occasions. In fact, advisory boards may not even be "boards" at all. They usually consist of individual advisors who have one-to-one relationships with the CEO and provide guidance and advice through less formal channels.
Once entrepreneurs grasp these distinctions, their first questions are: "Which one do I need, and when do I need it?"
Theoretically, a company would have a functioning corporate board right from inception. And technically it does under the law of the state in which it is formed. However, at the beginning there are usually a bare minimum number of board seats, and they are typically held by the officers. These "day one" boards usually don't meet and typically do only the minimum paperwork required by law. This is sufficient for a bootstrapping company struggling to build a prototype or find a product market fit, because a formal board is functional overkill. Typically, raising outside funds or gaining meaningful revenue are the triggers for beefing up a corporate board of directors.
Advisory boards, on the other hand, can be an essential source of advice, guidance, technical know-how and industry connections from day one. The power of an advisory board is hard to overstate - in some situations, they can absolutely make your company by providing key customer introductions, investor connections or critical industry credibility.
A good advisory board focuses on mentorship, growth, development and strategy, rather than reporting, governance, controls and the avoidance of downside risk. Although a great corporate board will try to focus on growth and development too, they are often not up and running in the early days and even when they are up and running, their governance responsibilities cannot be avoided, and often get in the way of or take up the majority of board time. So, in the early days the advisory board is the only game in town for mentorship and advice.
Who are these advisory mentors? There are three kinds of mentors you might consider for your advisory board: (1) industry mentors, who know your industry or technology and can give strategic advice and make introductions; (2) company-building mentors, who have been through the process and can help with the generic issues associated with building a startup; and (3) personal mentors, who are more like life coaches who take an interest in you and your personal growth and help you find your voice as a leader and deal with the sticky situations which inevitably arise.
Which one should you get? The better question is, why choose just one? You need to grow, your company needs to develop, and you need customers, right? You cannot choose amongst those priorities, so why choose only one type of mentor? If you could use the help, find each kind of mentor. Leading as startup is a lonely and overwhelming job, with big ups and big downs. Having some coaches to help you keep your perspective can be invaluable.
How does one go about finding these advisors? Some you'll already know, even if you didn't call them an advisory board member by name. They could be former professors, former bosses, relatives with industry connections, other people who know you well. The rest you find by networking. Since they can make an incredibly big difference, pursue great advisors with vigor. First, assess where you are weak and need help. Then ask everybody you know for suggestions on people who can help. Meet with them to see if they are a fit. Even if they are not, the meeting will probably be helpful, and invaluable for networking.
In selecting advisory board members, look for chemistry with you, passion for what you are doing, and capability, time and a willingness to help. Where you may make an exception is for people who are just lending their name and credibility and who won't contribute much time beyond an occasional consultation (more on that below). But for the most part, seek people who want to jump in, help out, and be there for you.
Become a Chief Synthesizing Officer
One note of caution: As you seek all this advice, keep in mind that it is just advice. Others' opinions. It's your company, it's your vision, and you are the one who has been listening to the customers. The situation is analogous to becoming a new parent. During the first visits to the pediatrician, the doctor is undoubtedly the expert - the parents have little knowledge about their new infant. But after living with their baby for a while and getting to know its quirks, the parents have increasingly strong instincts about what might be going on. The same thing will happen with your company. If an advisor suggests going in a direction that is strongly against your gut, get a second opinion. Maybe a third. Synthesize what you are hearing with what you know about your customers and what you are seeing in your market with your own eyes. Don't let anyone talk you out of your dream or into ruining your dream.
Advisory boards can be a huge asset if you take the time to build and utilize them.
Next up we will talk about the key issues for setting up and working with advisory boards.