On the Origin of Startups: A Series on Building a Company
Look for what’s missing. Many advisors can tell a President how to improve what’s proposed or what’s gone amiss. Few are able to see what isn’t there. – Donald Rumsfeld
The process of building an advisory board may seem straightforward but can be fraught with missteps, misunderstandings, unrealistic expectations, or simply poor chemistry.
Lev and I recognized early on that we needed individuals with complementary experience to:
- Provide critical feedback
- Validate the value of our product
- Make introductions to customers
- Introduce us to those who could help us fundraise
Advisory boards are just that: they are a group of individuals who can provide your organization with strategic advice based on their business knowledge. You want advisors who will offer you assistance in times of need and can provide unbiased insights that will help you grow your business. In this article, I will share some of the lessons Lev and I have learned over the past few months as we built up the advisory board for rMark Bio.
Identify your tactical needs versus relationship needs.
In an ideal world, we would have an all-star CEO or financial guru sitting on our advisory board. But every entrepreneur needs to take into consideration the specific role a newly hired advisor will play on their startup’s advisory board. Is this an advisor who offers tactical advice to help your company get off the ground? Or are you in need of an advisor who can offer you access to their business or investment relationships?
Individuals Who Bring Tactical Advice
If you seek tactical advice for your startup, you’ll want to look for an advisor who has previously worked at a startup and understands your current needs. Startups have specific challenges that established organizations do not, and you want an advisor who can navigate the world of entrepreneurship.
Consider the following example. You’re an entrepreneur bringing your idea to market, and your startup needs someone who can help you vet your revenue model and customer acquisition strategy. Suppose you find someone who is a customer acquisition genius and has scaled businesses with established corporations who have strong customer bases. This individual has grown multiple organizations from hundreds of customers to thousands, and built out the operations to support this growth. For a startup looking to acquire its first customer, this individual is going to be a poor fit for your advisory board. If this advisor has never gone through the process of building a customer base from the ground up, there will likely be a translation issue and he or she will not provide much help to your business.
Lev and I have discovered that, regardless of an individual’s “name recognition”, the best tactical advisors have been in our position before and are able to offer genuine, practical guidance based on what has worked for them.
Individuals Who Bring Relationship Advice
Sometimes you want advisors who can has a network of individuals in your specific industry. In our experience, we’ve found many advisors who have a wealth of connections in the investment space but the key is to identify who knows investors that invest in your market. Just like recruiters interview potential job candidates, seeking the “right fit”, you want to interview your potential advisor to make sure they can provide you with valuable relationship advice. Here are several questions we’d suggest asking when you meet with an advisor:
- What types of industries and markets do their investor relationships typically invest in?
- What stage of fundraising do these investors like to engage in (i.e. Angel, Seed, Series A)?
- Have they personally worked with or received investments from anyone in their network?
- Is their network geographically relevant to yours? (important for Angel investors)
3 Additional Things to Keep In Mind:
Your advisors have other things going on besides working with your startup, such as their own lives and careers. Do not confuse your advisors with your employees; be mindful of this distinction! Set your expectations properly from the beginning and clearly communicate what you expect from your advisors. While asking your advisor to write your business plan or go-to-market strategy is unrealistic, asking your advisor to provide specific insights into those plans created by your team is a reasonable expectation to have. Remember: your advisor is making time in their day to assist your team, so it’s important to respect all the other obligations they already have.
Chances are, you already know your advisor or met them through a recommendation from a mutual acquaintance. These individuals are likely not going to become an advisor at this stage for the money; some may only be interested in helping you because the industry you work in is appealing to them. In reality, the 0.25 – 1 percent of stock you offer does not make your company a top money-making priority for your advisor so you will need to find some other way to add value to your advisor. We have found that most advisors who agree to work with startups are interested in maintaining their network and/or paying it forward from their previous successes.
As with anyone in business, you must respect your advisor’s time. This is especially important because your advisor is most likely squeezing time into their already packed schedule to help you with your business. To avoid wasting time, we’ve found it useful to email your advisor a list of materials or topics to discuss a few days in advance so they can review and digest the information before a meeting. While this information is sometimes incomplete and even “half-baked”, it gives your advisor an opportunity to begin thinking about the next conversation you have with him or her.
What are some other tips you have for building your advisory board? We’d love to hear your thoughts and what has worked for your company in the past.