I am frequently asked about Advisory Boards. How do they differ from governing boards? What do they do? What’s the ideal composition? How do you compensate advisors?
I'll take each in turn.
Advisory board v. board of directors. An advisory board is a committee of typically 4-10 individuals who lend their expertise, networks, and cachet to the organization, without taking on the fiduciary and legal responsibilities of a governing board. In either case, board members are expected to be ambassadors (e.g. walking billboards) for the organizations.
Identify what you don’t have but need. What expertise do you need in order to take your organization to the next level? Some examples may be: looking to ink strategic partnerships, improve customer acquisition, scale operationally, drive down costs, personify your target market.
There will be less obvious gaps. Notice what tasks you and or your team say: “I know that's important, but I'll deal with it later” but then never do. Most of us have things we worry about almost obsessively. Those things get done. But make sure you have an advisor that worries about the things you don't care about. Forever etched in my brain is a conversation with Goldman Sachs when we launched Rose Park: far more investment funds go belly up because they can't operate a business than because they can't manage money.
Find people who can do those jobs. Make sure you trust them. Once you've done the hard work of identifying what you skill sets you will need to scale your business, or simply take it to the next level, make sure you can articulate what you are looking for — elevator-pitch style. A distilled ask will make it easy for you to tap into your network of both strong — and weak — ties.
Be aware of an inclination to bring on more experienced versions of you. These are the people you most admire. You may even want to be like them when you grow up. One of these individuals is good — they can act as an in-house mentor, but the more overweight you are on expertise you don't need, the more likely you'll underweight expertise you do need.
More importantly, because your advisory board members will have core competencies that are complementary to yours, they will know things you don’t, which means you may feel vulnerable. You need safe, so you can ask stupid.
One CEO was motivated to bring me on board, in part because I'm his target demographic and have a social platform. But also, he trusts me; we have known one another for nearly a decade. You want advisors who have expertise and yourblind side.
Make specific asks. Now that you have the people you know you want — and you trust — make specific asks. Some examples could be: ‘I would like to know I can e-mail you or call you with questions, and you will respond within forty-eight hours.’ Outlining requests with a timeline is also helpful: review my financials once a quarter and make suggestions for KPIs; review our RFP for a new technology platform; make recommendations around customer acquisition; refine our investor pitch; connect us with media outlets or strategies; introduce us to prospective investors.
Give your advisory board members their due. Because you are drawing down on a hard-earned store of expertise, it's important to find ways to compensate your advisory board members. A typical equity allocation is 25-50bps (25-50 percent of 1 percent) of equity per advisor; sometimes with a vesting period. Also common is cash compensation, or a stipend that can range from a few hundred dollars per quarter to several thousand. Depending on what your company does or who is on your board, on occasion, your product may be even more valuable than cash.
Finally, find people who love your company. Because advisors can be among your most important advocates, hunt for people who think you are the bee's knees, who love your product, and would likely tell people about you, even if they weren't on the board. Paraphrasing the Beatles, you really can't buy my love. If it's not just a little personal, you're not in business.
This post originally published at linkedin.com