How to Build a Bench or Advisory BoardJul 6, 2021
Startup Boards for CEO’s Series: Post 9 of 10
Advisory Boards can be great sources of help for entrepreneurs. They can also be great things to participate in for people who want to understand and become involved in startups. And while the potential is there for entrepreneurs and others to create a win-win, advisory boards can be incredibly frustrating!
I did a terrible job with formal advisors at Return Path and I am trying to learn from that experience and do things differently at Bolster. At Return Path, I threw a small option grant at a large number of people – probably over a dozen – in the hopes that that would make them more likely to take my phone calls if I had questions for them and more likely to think of and refer talent and customers to us. With maybe one or two exceptions, this was a complete and utter waste of equity and effort.
At Bolster, I’m trying the opposite approach. I have a very small number of advisors, and all of them invested in the company, so they have skin in the game. Unlike my Return Path advisors, the Bolster advisors are all deeply relevant to everything we are doing. I’m also being much more intentional and proactive in interacting with the Bolster advisors. I’m trying to work with them systematically, either 1:1 or in groups, and I’ve charted out all their strengths and areas where they can contribute. I’m tracking when I talk to them and what I talk to them about. I’m introducing them to members of my leadership team. And we are getting a ton of value out of the relationships already, only a few months in.
Here are a handful of quick tips that distill my learnings. If you are building an Advisory Board, the best thing you can do is to think of it as a shadow or parallel Board of Directors. In fact, a number of CEOs I know think of their advisors as their bench or training ground for future board members. It’s a great place to try out someone as a potential director and get to know them.
- Figure out what kind of Advisory Board you want to build — is it one that functions as a group, or is it one that’s a collection of individual advisers, and a Board in name only?
- Clarify the mission, role, and expected time required from advisers on paper, both for yourself and for people you ask.
- Be prepared to pay for people’s time somehow (see below).
- Figure out the types of people you want on your Advisory Board up front, as well as a couple of candidates for each “slot.” For example, you may want one financial adviser, one industry adviser, one seasoned CEO to act as a mentor or coach, and one technical adviser.
- Aim high. Ask the absolute best person you can get introduced to for each slot. People will be flattered to be asked. Many will say yes. The worst they will do is say no and refer you to others who might be similarly helpful (if you ask for it).
- Work your Advisory Board up to the expectation you set for them. Make sure you include them enough in company communications and documents so they are up to speed and can be helpful when you need them. Treat them as much like a Board of Directors as you can.
Along those lines, in Startup Boards, Brad Feld and Mahendra Ramsinghani have a great table and description of the differences between an Advisory Board and a Formal Board:
Attributes of a Useful Advisory Board Member.
While some attributes of a useful advisory board member will overlap with a good board member, an advisory board is fundamentally different than a board of directors. The board of directors works for all shareholders, while the advisory board typically works only for the CEO. Following are some of the things a useful advisory board member will bring to the table:
Ability to complement the formal board member and investor skills and mindset. It’s important that an advisory board member understand that they are playing a different role than a board member.
Long-term commitment. Creating a successful company takes a long time. While advisory board members can have short-term impact, they are much more effective if they have a long-term view to the development of the company.
Creative thinking. The CEO and members of the leadership team need as many creative inputs as they can get. While some of this can come from the board of directors, it’s often limited by the dynamics between the board and a CEO. An advisory board member can be an important source of out-of-the-box thinking.
Responsiveness. Rapid response is critical—CEOs will be looking for specific help from advisory board members, and responses beyond a few days will be useless. Emotionally stable and positive attitude. The CEO already has enough pressure from all areas of the business. The advisory board can be a safe, comfortable place for the CEO to explore specific issues and get direct advice and feedback.
Can invest some cash in the company and have skin in the game. Upfront Ventures partner Mark Suster writes in his blog, “Even getting $10,000 out of someone who’s already a millionaire and super successful gets you emotional buy in. Therefore, you’re more likely to get value.”
Selecting Advisory Board Members.
In his book The Four Steps to Epiphany, Steve Blank suggests that a startup should recruit five different kinds of advisory board members at various stages of a company’s evolution.
1. Technical: Offers product development advice.
2. Business: Offers business strategy guidance.
3. Customer: Offers direction on product features/value proposition.
4. Industry: Brings domain expertise.
5. Sales: Counsels on sales tactics and demand creation.
I’d add to that list other things like HR, privacy, and diversity, but the point is that you have much greater latitude in choosing the key skills that make the most sense for your company and your challenges.
Blackberry vice president T. A. McCann suggests that you start by identifying the skills you need to be successful as a business. Then list the skills of your founders and your board members. Use the information to determine where you have gaps, and add advisory board members who fill in those gaps. In cases where your investors have little or no domain knowledge about certain aspects of your business, an advisory board can be a huge asset.
Adam Rodnitzsky, ShopperTrak’s director of product marketing, says, “We were engaging with the customers and knew much more about the space than anyone—the founders were the de-facto experts. But enterprise sales were our weakness. To address that, we got an adviser who knew all the challenges involved in the constellation of enterprise sales decision making. We had no appreciation for these challenges, but our adviser was a tremendous asset.”
Challenges of Advisory Boards.
While an advisory board can be helpful, it can also have dynamics that are dysfunctional, either at the specific adviser level or at the overall advisory board level. For starters, advisers might be excellent contributors as individuals, but not as a fully integrated functioning group. IronPort Systems co-founder Scott Bannister says, “At IronPort we had advisers, but not an advisory board. One adviser actually came to most board meetings despite having no seat, observer or otherwise. Another provided management and HR advice to the CEO. And we encouraged executives to have their own advisers as well. I think this works better than thinking of them as a board of any sort.”
Advisory board members will have different levels of individual engagement. As founders, you have to define your expectations and make sure the advisory board member shares this. Many advisers sign up with immense enthusiasm only to vanish after the stock option agreements have been signed. Be clear on expectations, time commitments, and how you measure the advisory board members’ contribution. Make sure you understand any conflicts in advance. Great advisers will often be engaged with multiple startups. This can generate conflicts with regard to time, attention, or confidentiality. Advisers who function with high integrity will maintain confidentiality and respect your ideas, while others will be less careful. It’s your duty to understand these conflicts before you sign them up. As a founder or CEO, you have many competing priorities. While having an advisory board may be useful, make sure you are committed to spending the time to cultivate and maintain the relationships. In the absence of your attention, the advisory board can turn into simply a list of names on your web site.
Believe me, I know from first-hand experience that if you don’t manage your advisory board well, you’ll get no value from it. But when it goes well…it can be immensely helpful. It’s much easier to have an informal relationship with an advisory board member since you’re not constrained by governance, by-laws, and other policies and procedures.
-Matt Blumberg, July 6, 2021