Aspiring entrepreneurs sometimes ask if I have any ‘tips’ or ‘tricks’ on starting a company. My response is usually “it depends” – since startup concepts vary so widely, my answer will typically be very different for a biotech startup that requires millions of dollars in funding to get things started compared to a educational nonprofit startup. Despite this, the one universal “tip” or “trick” I have shared with nearly all entrepreneurs is the importance of selecting a good board of advisors.
First, let’s get one thing straight: a board of advisors is NOT a board of directors. The latter is a legal requirement for corporations, whose responsibilities are clearly defined by law. A board of directors is usually just referred to as “directors” and the number and kinds of directors is an important component of a corporation.
In contrast, a board of advisors is not a requirement, and many corporations do not have one. If you as CEO decide to have a board of advisors, it is pretty much up to you and the other directors (who make decisions about issuing equity) to decide who to bring on your board of advisors, how many people to bring on, how each advisor should be compensated, what the rights and responsibilities of each advisor are, etc. There is a huge range of what it means to be on a company’s “board of advisors” – both in terms of compensation and in terms of involvement. Since there is no legal requirement or guidelines to what your board of advisors consists of, it is a great opportunity for you as CEO to get creative here and capitalize on your strengths to compile an awesome board of advisors that will help you build and grow your company.
I’ll pause for a moment to illustrate this with a personal example. In October of 2010, when my startup Sportaneous was barely more than an idea, my co-founder and I were pitching to a group of people in San Diego and Bill Walton (NBA Hall of Famer) happened to be in the room. Although normally that would have been a fun situation, which may have warranted asking Bill for a photo or autograph, we decided to be bold and approach Bill to tell him about our startup and explain why we thought it was the next big thing. We ended the conversation with “Bill, we know how busy you are but we really think you could help us take this to the next level. We’re forming our board of advisors now and bringing a few people on in an equity capacity and would love to get your advice and help if you have time.” Although I later discovered that Bill is one of those rare people in the world who honestly wants to help people just to help them (and not for his own interests), being bold worked! We set up a meeting in the next few days and since then he has been a member of our Board of Advisors.
I can’t overemphasize how helpful it was to get someone like Bill (and our other key advisors) early on. When I pitched Sportaneous at various startup competitions in the early days, seeing Bill’s name on the first slide got all the VCs in the room to stop checking their Blackberries and listen. Similarly, as we have gained traction and grown, Bill and our other advisors have been integral in getting us introductions to people that otherwise would be very difficult to reach, and for various pieces of genuine advice.
To conclude, I’ll summarize my thoughts on the importance of an advisory board:
1. It costs you the entrepreneur very little – mainly the time/energy it takes to reach out to the people you want, and the small chunk of equity you carve out for your advisory board.
2. It often costs the potential advisor very little, which can be a selling point for you. Even a 30 minute meeting or phone conversation every month will go a long way for you, and that is pretty manageable for even the most busy/successful people.
3. It benefits you the entrepreneur in three main ways: (1) it gives credibility to your startup early on; (2) your advisors can often make introductions that would otherwise be difficult to get; (3) the advice you get from people that have succeeded in the industries you are targeting will be invaluable.