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 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. Advisory “boards” 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?”
In a theoretical world, 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, but 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 generally don’t meet and typically do only the minimum paperwork required by law. For a bootstrapping company struggling to build a prototype or find a product market fit, a formal board is functional overkill. Typically, raising outside funds (debt or equity) 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 with key customer introductions or investor connections or critical industry credibility.
Why? Because a good advisory board is more focused on mentorship, growth, development and strategy, rather than reporting, governance, controls and the avoidance of downside risk. A great corporate board will try to focus on growth and development too, but as noted, they are not up and running in the early days and even when they are up and running, their governance responsibilities cannot be avoided, and can get in the way or at least take up a fair amount 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 mentor 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? Well, why do you need to choose? 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 have, 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 get by networking. Since they can make an incredibly big difference, pursue great advisors with vigor. Assess where you are weak and need help, then ask everybody you know for suggestions on people who can help. Meet them see if they are a fit – even if they are not, the meeting will probably be helpful, and if its not, it is still valuable networking.
In selecting advisory board members, look for chemistry with you, passion for what you are doing, capability to help, time and willingness. In some cases, there will be an exception for people who are really just lending their name and credibility and don’t contribute much time beyond the very occasional consultation – more on that below. But for the most part, you are looking for people who want to jump in, help out, and be there for you.
Chief Synthesizing Officer. One note of caution: in running around and seeking all this advise, keep in mind that it is just advice. People’s opinions. It’s your company, it’s your vision, and you are the one who has been listening to the customers. Consider the case of new parents. The first couple times they go to the pediatrician, the doctor is undoubtedly the expert – the parents have no idea how to operate their new infant. But after living with their baby for a while and getting to know its quirks, the parents gradually begin to have increasingly strong instincts about what is going on – gas bubbles or something really wrong. Same thing happens with your company. If an advisor tells you to go 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 talk you into ruining your dream.
In terms of setting up an advisory board, I have already pulled together a list of key issues for you to consider in my post on The Power of Advisory boards, but I will list them here:
- Paying Advisory Board Members
- Length of Advisory Board Terms
- Making Your Advisory Board Work
- Use of an Agreement With Advisory Board Members
- Ownership of Ideas
- Other Legalities
Comments, questions or reactions to this post? Leave a note below and I will respond to your questions.
If you enjoyed this post, you might enjoy: The Long Road to Instant Success, Getting Off The Ground; Early Formation Economics, Delusional Economics, That Vision Thing, The Power of An Advisory Board, Loch Ness, Unicorns & The First-Mover Advantage, Are Entrepreneurs Wild Risk-Takers?, What I Look For In An Entrepreneur, The Overture, Do The Right Thing, Should I Wait For A Technical Co-Founder?, and 20 Bootstrapping Ideas.
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