Startup advisory boards
I’ve sat in more than a few meetings in recent months defending the value of advisory boards for startups. There’s a line of thinking out there that startup advisory boards are a waste of a CEO’s time and a waste of the company equity that’s granted to these people. I wholeheartedly disagree.
Like anything, startup advisory boards give you back as much as you invest into them. Many advisory boards end up being a total waste of time and equity because they’re mismanaged or simply unmanaged and this propagates a line of thinking that they aren’t useful tools. Appointing people as advisors and awarding them equity in a business without any meaningful follow up or call to action equates to doing the bare minimum. I would argue there's still some value here and it’s meaningfully more valuable than not doing anything at all. In these cases, a CEO builds an army of advocates (typically influential people in their respective fields) who are rooting for the business to succeed. I have friends who have assembled a laughably large number of “advisors” to their company for exactly this reason. The more people who are talking about your business and spreading the gospel, the better. In cases where advisory boards never meet, but exist nonetheless, they represent a network of experts who a CEO can call when they have a question or need advice. In doing so, a CEO expands their own network and by association, the network of their business. They also form networks of “support” for a CEO, if he/she chooses to use them this way. Generally speaking, more support surrounding a CEO is a good thing.
My view on the optimal case for advisory board formation:
Advisory boards should be carefully curated and formed with the value of each advisor clearly understood. Before awarding / accepting an advisor role, a CEO should articulate exactly what they want from the advisor and why they have selected them for the role. This sounds like a simple communication issue, but in my experience, it happens less than is should.
Advisory boards shouldn’t represent extra work for a CEO, as they often do. Rather, they should serve as a boost or crutch that a CEO can use from time to time when they need it. Whether they admit it or not, most CEOs can benefit from this.
Mark Suster suggests that CEOs should ask advisors to invest in the business for their advisory role rather than receive equity, as is commonplace in the industry. There’s wisdom in this suggestion. In a few of my portfolio companies, angels who have invested form a natural network of advisors who the CEO can call for help. In these cases, the privilege of investing is repaid with occasional strategic help from the investor. This past weekend, one such investor / advisor helped us with a recruiting effort.
Organize an event - at least annually - that makes advisors feel they’re part of the team. Whether you include advisors in a company outing or simply invite them all to dinner once each year, the more invested and involved an advisor feels, the more a CEO will get out of them.