Now more than ever, startups have a ridiculous number of resources at their disposal when it comes to support for growing their companies. In cities all over the world, startup accelerators and incubators are popping up to offer resources to support entrepreneurial endeavors. Often, these organizations can take startups to the next level, typically in exchange for a sizable amount of equity.
But there's one potentially invaluable resource startup teams can build themselves, without investing a lot of capital or equity upfront: a company advisory board. Members of an advisory board can act as mentors for the leaders of a startup as they work to build their company. It's something I've had in place at Firebrand Group and it's been a tremendous boon to our consultancy's growth.
Facebook founder Mark Zuckerberg often cites Steve Jobs' mentorship as critical to the social media platform's success, but the evidence isn't just anecdotal. Analysts at Endeavor Insight found that roughly 33 percent of tech entrepreneurs in New York City who were advised by other top entrepreneurs went on to build their own successful companies. That number was significantly lower for all other entrepreneurs.
A helpful advisory board can be just what a startup needs to lead it in the right direction.
Learning from the best
Unlike a board of directors, which consists of shareholder members with the authority to make key company decisions, an advisory board isn't a formal entity. Your advisors don't officially work for your company, but they can help you make important decisions and influence the way customers, competitors, and potential investors view your organization.
PlumSlice Labs, a growing tech company that offers web and mobile applications for product management in the retail space, recently introduced its first advisory board to help it better serve customers and chart a course for continued growth.
The PlumSlice advisory board is enough to make any tech firm jealous. It includes Karenann Terrell, GlaxoSmithKline's Chief Digital & Technology Officer and former CIO for Walmart; Denise Broady, CMO of WorkForce Software and an SAP marketing veteran; and Andrea Weiss, an entrepreneur and CEO of Retail Consulting Inc.
Founders everywhere should take note of PlumSlice's move. Its advisory group's collective background -- from working with Fortune 100 companies to startups -- gives PlumSlice a huge boost in market credibility and provides its team with access to a broad range of experience.
"If you were putting together an Olympic dream team to envision the next frontier of omnichannel selling and digital interaction with the consumer, these executives would definitely take us to the podium for gold," says PlumSlice CEO Abnesh Raina.
It's not just PlumSlice that has reaped the benefits, of course. "I fully trust in my board members and their experiences," says Tasso Argyros, founder and CEO of leading enterprise Customer Data Platform ActionIQ. "They can spot patterns, errors, and opportunities before others do." Argyros emphasizes the importance of having a strong, long-standing relationship with your advisory board. In his case, he's known ActionIQ's board members for over 10 years, leading to a good deal of trust and mutual respect.
Building successful boards
While every entrepreneur would love to work with a team of renowned domain experts, putting together an advisory board is far from an exact science, and choosing the wrong people to advise your company can have severe consequences.
As you build a list of potential candidates for your board, keep these factors in mind:
1. Board Size: Be selective when choosing your advisors. As you build your company, many people will give you advice, but you won't need -- or want -- all of it. Depending on how far along your startup is, an advisory board of five or fewer members who have the skills and experience you want should be plenty.
2. Compensation: You will most likely have to offer some amount of equity to advisors, so before approaching any candidates on your list, determine how much you are willing to give. Advisors typically receive anywhere from 0.25 percent to 2 percent equity. If a candidate has expertise that will be a significant asset to your company and is willing to be highly involved, consider giving more.
But equity shouldn't be the only thing bringing advisors to your company. Amit Avner, founder and CEO of real-time audience data firm Taykey, says, "Don't hire anyone for an advisor if they want to be hired as advisors. The best ones, and the only ones that perform, are people who just want to help you." Avner advises to let these individuals help you over time, and if they wind up providing true value, only then should you grant them equity as a token of appreciation.
3. Advisor Traits: The people you include on your advisory board shouldn't just be experts in their fields -- they should be people you actually want to talk to. Evaluate your company and identify your current weaknesses, then search for advisors who could fill those gaps. The people you approach should have industry connections and be respected in their fields. Moreover, if you're enlisting the help of well-known candidates, you'll have an easier time pitching other candidates on your list.
Thomas Walle, co-founder and CEO of Unacast, the world's largest proximity data platform, believes there are two types of advisors on an advisory board: "the ones that wait for you to call them and ask for advice, and the ones that proactively follow your business and share insight and advice along the way." Bringing the latter on board and setting expectations about their level of involvement early on is, for Walle, "the way you truly can get committed advisors that will support your company."
4. Frequency of Meetings: When seeking candidates for your advisory board, make it clear you won't be asking for a ton of their time. Even a few meetings over the course of a year could be beneficial to your company. When discussing the time commitment you're looking for, pitch these meetings as opportunities for potential advisors to work with other influential members of your board. You don't have to hold meetings at regular intervals (and some potential advisors might not want to), but be clear about the logistics of the relationship.
If you aren't quite sure whether you're ready to recruit an advisory board, consider joining another company's board. You'll make connections and apply your own expertise to a company's growth, giving you a better idea of how the relationship works.
Likewise, if you have peers with expertise in your company's weaker areas, consider asking them to help you in your search. Finding the right advisor can be a lot like finding a job. Be sure to tap into your personal network and seek referrals when possible so you can find the right fit.