Several EO Accelerator participants (accelerants) have asked me this year about setting up a board of advisors. In addition, the board of advisors topic was brought up again a couple days ago in my post What Should I Write About? I view advisors, both formal and informal, as very important even though I’ve employed informal advisors much more than formal advisors. I’ve also been an advisor to several companies.
Here are my thoughts on a formal board of advisors for startups:
- Advisors should fill gaps in expertise (e.g. sales, marketing, services, support, operations, engineering, finance, etc) and/or be able to make key introductions to customers, partners, and investors
- Advisors should meet quarterly or bi-annually as a group over a nice dinner as well as individually at least once between meetings
- Advisors getting to spend time with other high-quality advisors, in addition to the entrepreneur(s), is a big part of the advisors’ experience
- Advisors should be asked to commit for one or two years, but not typically more as the needs of the startup change over time
- Advisors should not be compensated with cash but rather with equity (e.g. .1% – 1% depending on what they bring to the table with the norm being closer to .25% of the startup) along with the opportunity to invest in each round
- Advisors that are also investors are ideal as they have more skin in the game
My recommendation is to seriously consider advisors and know that it is like anything where the more you put into it the more you’ll get out of it.
What else? What other advice do you have regarding startups and a board of advisors?