Each board is different…choose carefully and use correctly
Most of the new founders I’ve ever met roll their eyes when I suggest that they form an advisory board. One of the main reasons people found their own companies is to have supreme magisterial control over their empire. They certainly don’t want the obligation of reporting to and taking advice from some outsiders. They certainly don’t want the extra work and commitment that would be required for an effective use of a board. However, this weekend I decided that from now on, when a founder rolls their eyes at my suggestion, I’m pretty sure I’ll say “Bully for you! Best of luck with your venture! I’m sorry I’m not interested in helping you and I’m certainly not going to consider funding you.” I mean it. From now on, my clients are gonna form an advisory board of some type and we’re going to use them. I’m not suggesting that you let some other people run your company…I’m not talking about a Board of Directors with fiduciary responsibilities to the shareholders of your company. Occasionally, those shareholder-responsibilities can run counter to founder-responsibilities. I’m simply talking about a group of 3-5 people that are willing to spend 3 hours with you 4 times a year and provide feedback and advice and connections and an occasional smack with a 2×4 upside your head (of course, that is a different kind of board). Here are some quick thoughts about creating an effective and legit advisory board:
TechonomicMan Advisory Board Rule #1: Do NOT simply collect advisors. It’s not impressive that you list 17 names on a slide in a powerpoint titled “ADVISORS.”Some faculty member that once told you ” you have a great idea, there” is not an advisor…it’s a person being polite. An advisory board is also not a group of people scattered all over the world that never gets together in person or, at a poor 2nd best, via video call. Making a phone call to an advisor who is expert in some area of your business 3 or 4 times a year on that subject is not an effective use of their time. By keeping advisors in one-on-one conversations only, forces them to miss valuable context and prevents deeper discussion that would be gained from having that person in a room with several others. And you may miss the very best of their experience by not allowing them to feed off the ideas of others. Bring the group together regularly for maximum effect.
TechonomicMan Advisory Board Rule #2: Do NOT call an advisory board meeting only when there is a crisis. If you are down to 2 weeks of cash for payroll and haven’t spoken to someone you’d consider an “advisor” for nine months…you are not only a bad entrepreneur, you are a jerk. A smart entrepreneur doesn’t “use” an advisory board; she “engages” it. Treat the people you consider to be professional advisors in a, you know, professional way. It isn’t hard: A) Put meetings on a calendar 1-2 months in advance; B) Send update material to your advisors 1 week in advance; C) Have a high level agenda for the 3-hour meeting to touch on major aspects of your business (eg. sales/marketing and pipeline; product development; organization and staffing; financials and capital). This professional approach not only makes you a better founder, but it is more likely to get the best out of your advisors.
TechonomicMan Advisory Board Rule #3: Speaking of getting the best out of your advisors, yes you should provide some form of remuneration to the advisors. If they are not already shareholders, they should be provided with at least a token amount of equity. Nothing dramatic, just a few hundred to a few thousand dollars worth is appropriate, depending on your situation. If you do bring them together in person once or twice a year (and meet online the other times), and there is travel or overnight stay involved to make the visit possible, offer a small amount of expense reimbursement. This is probably $100 if you are bootstrapping and pre- or very early revenue. It is probably closer to full expense reimbursement if you are up and running and more of a going concern. Talk to your attorney or accountant for the best way to establish these policies.
You’re making dozens of tiny and several large decisions every week as the founder/CEO of your company. And, I’m guessing that as a founder of tech company, you have a hard time staying focused on the mission at hand. This combination of accumulated decision-making and a hyperactive and creative mind, make you a perfect candidate for an advisory board. A well run, healthy advisory board not only provides a way to help you gut-check some of the more important specific decisions in your company, but it will also help you recalibrate your company strategy and mission a few times during the year. “Measure twice, cut once” is the old woodworkers adage regarding boards. For the tech entrepreneur, I hereby declare the mantra to be “the cut of your company can be measured by the effectiveness of your advisory board”. Or something like that.
Wayne Barz is Manager of Entrepreneurial Services for Ben Franklin Technology Partners of Northeastern Pennsylvania. Follow Wayne’s blog at www.TechonomicMan.com or on Twitter @TechonomicMan.