We have an awesome advisory board at SmartHippo and I often get asked how we set it up and how we leverage the people on it. If you run a startup, particularly if you’re early stage, a good advisory board can be one of the best investments you can make.
Here are some tips on how to make it work:
Who to include on your advisory board
- Thought leaders or other well respected people in your industry.
- Door openers who can introduce you to customers, channel partners or investors.
- Superstars who you wish you could have on your management team but can’t afford.
- Strive for a balance of people with different areas of expertise who may not all think the same way.
Who not to include on an advisory board
- Token individuals who are there just in name but who aren’t actually engaged in your business. You don’t want someone conducting diligence on you or your company to call up an advisor only to find out they don’t remember who you are.
- Angel or institutional investors who have not invested in your startup. This doesn’t send a good signal, since if they really believed in you they would have invested.
Receruiting and compensating your advisory board
Most people will be flattered to know that you see them as an authority in your industry and will be open to learning more about your business and providing you with feedback. At this point, the easiest way to get people to join your advisory board is just to ask.
If you’re early stage, you’ll typically be compensating your advisory board in stock options. 1/4 to 1/2 point of equity, vested over four years is a good guideline.
Getting the most out of your advisory board
Remember that your advisors are busy full time with other things. Respect the value of their time and be as specific as you can with requests you send their way. (i.e. “I’d like your feedback on our go to market plan” or “Are you able to introduce us to a C-level executive at company X.”)
For many advisors, aside from the longer term payoff from stock options, meeting and learning from other smart people can be a big motivator. At SmartHippo we also make it a point to organize an annual advisory board meeting where we fly all of our advisors into town and combine a day of updates and strategy meetings with social events. Make it fun!
Does your startup have an advisory board or are you thinking of setting one up? Share your experience in the comments below.