I’ve received a number of offers/requests to sit on advisory boards of start ups. I’m flattered that somebody would think enough of me to ask. Advisory boards can help with important aspects of a young company’s growth. Items such as dealing with obnoxious VCs, pricing models, and good sounding boards for ideas are all things you can get solid help on without the overhead of a formal board of directors.
I generally will do unofficial advisory work and keep my name off the mast head so to speak. I do it this way so the entrepreneur doesn’t have to explain why they have a VC on the advisory board without that VC actually investing. It can be an uncomfortable position for the company so generally I’ll work behind the scenes and count it as giving back to the industry.
Here are some suggestions as you form up your own advisory board:
Go for the big names – Not
I know just shy of a billion people will disagree with me, but sometimes grabbing a super star from wherever just so you can have the name on your slide presentation may not be the right use of the board slots. It may come as a surprise to you but VCs (at least my firm) do call advisory board members and we do grill em about the company. I’ve lost count of the number of times I’ve called a famous person only to get, err, uhh, oh yeah, nice kids. So, in general, get people who are as passionate as you and willing to help out with advice you can use.
Pay em – Stock not cash
Advisory board members should be given stock or options and you should keep them ‘topped up’ so the compensation stays meaningful. People’s time should be respected and value should be placed on their efforts. This, in my opinion, is critical for the next suggestion.
Hold em accountable
An advisory board is just that; advisory. This doesn’t mean, however, you shouldn’t management them just like any other resource. If you are giving them options which vest and they believe there is value in your company, make them work for the options. Have specific objectives for your advisory members that go beyond eye candy and measure the results. Of course, no results, no pay/options just like any other person who is getting a piece of the company.
As an early stage company, before the formation of a governing board of directors, an advisory board can be very valuable from a number of fronts including you getting to practice some of the board formalities.
Hi Rick,
Great blog - I really get a lot out of it. Two quick questions for you about this advisory board post.
1) how much stock (and vesting period) is 'typical? (I don't want to insult someone!)
2) Do you recommend getting the advisory board together - or instead just use the individual members (say there are 3) as individual sounding boards, maybe meeting with them individually?
Thanks for any advice you might have - I'm right at the point of trying to start putting an advisory board together. Keep up the great posts!
Best,
Chris
Posted by: Chris Patton | May 11, 2006 at 05:42
Hi Chris,
Thanks for stopping by. The advisory boards that I'm involved with meet as a group and are available to the founder/ceo as required. The meeting together approach generally is a good thing for brainstorming, etc.
The stock option amount would vary on company and circumstances. The vesting would typically be the same as the plan for the company's employees.
Posted by: Rick Segal | May 11, 2006 at 06:28