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Advisory boards, comprised of experienced mentors and industry experts, offer a distinct strategic advantage that can be pivotal in steering a startup toward success. The expertise, insights, and connections that advisors bring to the table are often the missing puzzle pieces that founders need as they navigate the complex journey of launching and scaling a new business. In this article, we go into the key reasons why startups require advisors, recruiting and cultivating the best advisory team, defining roles and expectations, maximizing advisor engagement, and real-world case studies that illustrate the transformative impact of well-structured advisory boards.
Why Startups Need Advisors: The Strategic Advantage
For early-stage startups, advisory boards can provide a key strategic advantage. Advisors offer insights and expertise that founders simply don’t have access too, especially when they are first getting their business off the ground. According to CB Insights, the #1 reason startups fail is a lack of market need for their product. Advisors with industry experience can help identify target customers, evaluate product-market fit, and assess the viability of a startup’s business model.
Advisors also provide operational expertise to help startups scale. As startups grow, founders often struggle with challenges like hiring key executives, refining their sales process, optimizing marketing strategies, or raising additional funding. Advisors who have guided other startups through similar challenges can provide invaluable advice to help their companies sustainably navigate growth.
Connections and Potential Partnerships
Finally, advisors bring connections that open doors for startups. They can introduce potential partners, customers, executives, and investors. According to a Kauffman Fellows survey, over 50% of startups find advisors and board members through networking and introductions from other advisors. These connections are vital for early-stage companies still building their networks.
With so much at stake, it’s not surprising that startups with engaged advisors and board members tend to outperform their peers. According to Kauffman Fellows, startups with three or more advisors are 63% less likely to scale prematurely and 188% more likely to achieve high growth. For early-stage startups, recruiting experienced and well-connected advisors may be one of the most strategic moves founders can make to set their company up for success. The expertise, operational guidance, and connections advisors provide are invaluable resources for startups looking to navigate challenges, accelerate growth, and achieve scale.
Build Your Dream Team: How to Recruit the Best Advisors
The key to building a powerful advisory board is recruiting the right advisors. Focus on candidates with relevant industry experience, valuable connections, and a passion for mentoring startups.
Start Listing Key Areas of Expertise You Need
Start by listing the key areas of expertise you need, like marketing, finance, technology, or industry-specific knowledge. Then tap into your networks to source candidates. Ask investors, mentors, and industry leaders for recommendations from respected executives they know. Attend industry conferences and events to connect with potential advisors in person. You can also contact authors and speakers you respect who frequently serve as advisors.
Evaluate the Candidates
Once you have a list of candidates, evaluate their fit. Consider their experience, networks, and enthusiasm for your mission. Meet with top candidates to assess chemistry and shared values. Ask about their mentoring style and expectations for the role. The ideal advisors will be genuinely interested in your success.
Determine Appropriate Compensation
Determine appropriate compensation, if any. While some advisors participate pro bono, offering equity, a stipend, or both is common. Equity, in particular, aligns the advisor’s interests with your startup’s success. However, the equity should vest over time based on continued participation to ensure the advisor’s long-term engagement.
Highlight Strategic and Personal Benefits of Advising
When recruiting, highlight the strategic and personal benefits of advising your startup. Emphasize opportunities to shape an innovative company, gain exposure to new technologies or business models, and mentor entrepreneurs. Startups have recruited exceptional advisors by appealing to their passion for building and creating. For example, a robotics startup recruited leading university professors by engaging them in discussions about the future of technology. An apparel company attracted the former CEO of a major retailer by inviting her to help reinvent the shopping experience.
With the right pitch and tapping into candidates’ interests and motivations, startups can build an all-star advisory board. The key is finding advisors as passionate about your business as you are. Engaged advisors will open doors, anticipate obstacles, and propel your startup to new heights.
Define the Role: Set Clear Expectations Upfront
One of the biggest mistakes startups make is failing to clearly define the role and responsibilities of their advisory board members. With concrete expectations set upfront, advisors may be clear about how they can best help, feel underutilized, or have unrealistic assumptions about the time required.
How to Clearly Define Roles and Responsibilities
To avoid these issues, startups should establish formal advisory board agreements with each member. These agreements should specify key details like:
- Time commitment: Be clear about how much time you expect advisors to commit each month or quarter. For example, you may ask for 2-4 hours of their time for attending board meetings, reviewing materials, and providing feedback. Specify if any additional time may be required for mentorship or networking.
- Responsibilities: Lay out the specific ways you want advisors to contribute, e.g. attending and actively participating in board meetings, reviewing key documents or strategies, introducing potential partners or investors, mentoring executives, etc. Be as detailed as possible.
- Equity or compensation: Offer advisors fair compensation for their time in the form of equity, cash stipend or a combination. Equity of 0.1-1% for a 3-year term is typical. Be transparent about the vesting schedule. For pro bono advisors, provide other non-cash benefits like networking, visibility or mentorship opportunities.
- Confidentiality: Require advisors to sign a non-disclosure agreement to protect sensitive information. Be very clear about what they can and cannot share externally.
- Term: Establish a fixed term for the advisory role, e.g. 2-3 years. This provides a natural point to revisit the relationship and make any changes to the agreement or composition of the board.
With a well-crafted advisory board agreement, startups can feel confident delegating meaningful work to their advisors and trusting them to provide the support needed to fuel growth. The agreement also gives advisors clarity about what is expected of them so they can provide maximum value. A good agreement sets the foundation for a highly productive long-term relationship.
Engage and Empower: How to Maximize Your Advisors
The real work begins once you have recruited your dream team of advisors. To maximize the value of your advisory board, you must fully engage and empower your advisors. Start by preparing them thoroughly before the first meeting. Share materials on your startup’s vision, strategy, key milestones, and challenges. Give advisors time to review these materials and come prepared with questions and input.
Run Meetings Efficiently
Run meetings efficiently but leave ample time for open discussion. Have a clear agenda that allocates time to your most pressing issues, but remain open to exploring other topics that advisors see as priorities. Encourage advisors to share their perspectives, ask probing questions, and debate options. Make the most of the collective expertise in the room.
Follow Up with Meeting Summaries & Next Steps
Follow up after each meeting with a summary of the next steps, priorities, and any requests for advisors. Keep the conversation going in between meetings by providing regular email updates on key accomplishments and challenges. Ask for quick input or introductions as needed. The more you engage your advisors, the more helpful they can be.
Empower Your Advisors
Empower your advisors to roll up their sleeves and provide maximum value. Give them opportunities to leverage their networks and connections on your behalf. Ask them to review key strategies and documents and provide written feedback. Consider pairing advisors together or with your team members to tackle specific challenges. The most effective advisory boards are an extension of the team rather than an outside group.
Build personal relationships with each advisor. Take the time to understand their motivations, skills, and work styles. The closer your relationships, the more effective your working dynamic will be. Strong personal bonds will also make your advisors more willing to go above and beyond when needed. With the proper preparation, execution, and follow-through, you can build an advisory board that is fully invested in your startup’s success. An engaged and empowered advisory board will become one of your most valuable assets.
Advisory Board Case Studies: Lessons from the Front Lines
One startup that built an effective advisory board is TheSkimm, a digital media company founded in 2012. TheSkimm’s co-founders, Carly Zakin and Danielle Weisberg, recruited advisors with experience building successful media companies, including executives from BuzzFeed, Refinery29, and more.
TheSkimm – Navigate Key Business Challenges
TheSkimm’s advisors helped them navigate key challenges like building a business model that relied on sponsorships and partnerships instead of traditional advertising. They made introductions to influential contacts and partners and advised TheSkimm on their marketing and product strategies. With the support of their advisors, TheSkimm grew from a small newsletter into a multi-platform media company, reaching over 7 million daily readers.
Square – Advisors of Influential Leaders
Another startup that benefited from advisors is the mobile payments company Square. When Square was founded in 2009, the company built an advisory board that included influential leaders like Larry Summers, the former Treasury Secretary, and Vinod Khosla, the founder of Khosla Ventures.
Guidance on Regulatory Issues and Partnerships
Square’s advisors provided guidance on regulatory issues, partnerships, and their business models. They helped build credibility with investors and made valuable introductions to new partners and board members. Within two years, Square had raised over $141 million in funding and built partnerships with companies like Starbucks.
The experiences of TheSkimm and Square show how startups can overcome key challenges and accelerate growth with the help of strategic advisors. Their advisors provided targeted support and advice from industry experts that would have otherwise been difficult to access. The advisors also opened doors to new opportunities, strengthened their credibility, and supported their evolution into successful media and fintech companies. By following their examples, startups can build advisory boards that fuel sustainable growth and long-term success.
Startup Success: How Advisory Boards Fuel Growth
Advisory boards are instrumental in helping startups achieve success and scale. According to research by the Kauffman Foundation, startups that engage advisory boards raise 30% more funding and grow three times faster than those without. Advisory boards provide startups with strategic advice and connections to overcome obstacles and accelerate growth.
Jane – Advisors Introduced Founders to Key Investors
For example, social ecommerce startup Jane raised $2.3 million in seed funding in 2018 with the help of advisors who introduced the founders to key investors. Advisors also guided the company to pivot their business model, helping them gain traction and land major retail partners. The startup grew from 3 to 25 employees within a year of launching their advisory board.
Digit – Series A Funding to Create New Product
Likewise, fintech startup Digit raised $11.3 million in Series A funding in 2016 shortly after forming an advisory board. With the support of their advisors, Digit rolled out new product features, signed key banking partners, and expanded into new customer segments. CEO Ethan Bloch said, “Our advisors have been instrumental in our success. They’ve helped us navigate strategic partnerships, new market opportunities, and key business decisions. They provide the insight and experience we need to scale.”
How to Measure the Impacts of an Advisory Board
To measure the impacts of an advisory board, startups should track metrics like:
- Funding raised and sources of new funding connections
- Growth in customers, users, revenue, employees, and business partnerships
- Progress made on key milestones and priorities with the help of advisors
- Cost savings and efficiencies gained from advisor guidance
- Surveys to gauge how much founders value the strategic advice and support of their advisors
Startups With Advisory Boards Have a Competitive Advantage
The bottom line is that startups with engaged advisory boards have a competitive advantage. They can leverage the expertise and networks of seasoned advisors to overcome obstacles, forge new opportunities, and achieve high growth. Building an impactful advisory board is well worth the investment for any startup.
Could you provide more details on how an advisory board can help a startup in making pivotal decisions at different stages of their growth journey?
An advisory board can be instrumental in guiding a startup during various stages of growth. When a startup begins, advisors can help identify opportunities and potential risks, guide the product-development process, and evaluate market trends. They can provide insights on drawing a road map and setting concrete, achievable goals. As the startup grows, the advisory board can offer strategic help with challenges like recruiting key executives, acquiring customers, and fundraising. When the company is ready to scale or explore new markets, the advisory board can provide valuable support in devising expansion strategies and facilitating connections for potential partnerships.
In addition to tools and resources, can you share more about how to keep advisors continuously engaged and motivated towards the success of a startup?
Keeping advisors engaged requires close communication, recognition, and alignment with the startup’s vision. Regular meetings provide an opportunity for the advisors to stay updated, share their insights, and feel their contributions matter. Outside of meeting times, sharing updates, achievements, and challenges with the advisors serves as an effective way to maintain their engagement. Also, startups should ensure that advisors understand and connect with their vision, goals, and values, which will make them more committed. Recognition of their contribution and influence on the startup’s success can be a significant motivator.
How can a startup evaluate the effectiveness and allow for potential changes within the advisory board during its life cycle?
Evaluating the effectiveness of an advisory board involves gauging metrics such as delivered outcomes, alignment of advice with the startup’s goals, and satisfaction among the founding team. Regular feedback from both sides can be helpful in identifying any gaps and addressing them in time. Additionally, startups should maintain a flexible approach toward the board’s composition, recognizing it to be a dynamic entity that may require changes according to the company’s evolving needs. It could involve amending terms, discontinuing relationships that no longer serve the growth of the startup, or adding new advisors with expertise in relevant areas.
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