Creating an Engaged Advisory Board
How to set up your startup's advisory board that is engaged and useful
Advisory boards can be incredibly useful for startups, who often can use all the help they can get. We’ve benefited immensely from our advisory network at Belong.
There are multiple reasons to have an advisory board:
Domain Knowledge: Identify which aspects of your business are in need for advisors. Typically, in the early days these will be for functions that the founders either aren’t great at, or need to get to a competency level quickly. For example, you might have a PM with great experience building for one market, but you’re launching a global product and might need help there. Or you have an intern leading UX and need him to quickly upskill and don’t want to hire that $100,000 designer just yet.
In the early days, we got domain specific advisors like Anand, Sunit, Sid, Novex for product, design, marketing, engineering & HR during our early days to help our young team (we were all in our 20s) get domain specific mentorship. We only started looking at advisors that could help us with enterprise sales once we had become a little bigger.
Note: Don’t go after the “celebrities” here, unless they have the time. It’s important to go after those folks who’re a) within reach (via your network or extended network) b) have done what you’re trying to accomplish c) are genuinely excited about working with you.
Business Development: These advisors can be incredibly useful for B2B/Marketplace startups. It helps taking a structured approach here. Look at your GTM, sit with your sales, marketing and product teams and understand the customers you’re going after. Eventually certain industries or cohorts will come up, then prioritise basis GTM timelines or rank groups of customers via something like Crossing the Chasm.
In our case, we knew that broadly, in our case, these were (and in the same order) the major customer bases:
Internet Home Grown Scaleups
R&D Offshore Centres (further broken into: Internet/Software, Retail, Banking & FS & Professional Services, Others)
Retail / CPG
Banking & Financial Services (Domestic)
Others (Pharma etc)
And in addition there were 2 personas: CXO (CEO, CTO, CDO, CIO) or HR Leadership. The MD/CXO relationships were industry specific in most cases, and HR Leadership was homogeneous (meaning, as long as the person was well known, they’d know people from across the industries).
Within these segments, we then mapped the organisations (major industry bodies) or individuals to come up with a list of folks, and then devised a plan to get introduced to these people.
Note: Doing a network analysis here helps. The right people could also be folks selling into these industries (e.g a Partner at a consulting firm with an industry focus). And post identification, a reference check is a must.
Bonus: Customer Advisory Board: A customer advisory board represents your ideal customer/prospect. The idea here is to have people who you can have candid conversations around your product, its value, its short-comings etc, all of which can be used to improve your business. FirstRound has an excellent post on how to set up a customer advisory board.
This is more of an “outcome”. The advisors who’re here are typically either your angels, or folks from the other 2 categories. This is where founders of well known startups or industry CXOs come in. Basically folks whose name lends credibility to your startup endeavour in front of investors & customers. The best time to do this when raising your angel round. I get it that all money is green at the end of the day (and feels that when you’re trying to close), but a little proactiveness in finding people who can advise you on different aspects of your business can help. So if you’re an enterprise focused tech company, having an angel who was the CTO or VP Engg of an enterprise software will be useful. Or someone who’s seen near death experience with their startup or something else.
Engaging the advisory board
Great you’ve identified a list of potential advisory targets, and maybe even got introduced to a few. Now what?
Well, if they’re good folks, then the number one thing is to ensure that they’re excited about you/your company because these folks often have multiple options or are starved for time and for them to pick you means they’re giving up on something else. So don’t take this for granted. It’s important to think of this entire relationship as something you have to nurture.
At Belong, we developed a practice of Always Be Helping or ABH for short. Basically, anything you can do to help the other person. Give before you take. Here’s a possible way to possibly give before asking, when engaging with an advisor (click here for Google Sheet, if font is too small)
This sets a great foundation for a relationship of mutual trust and helps you differentiate yourself from the other companies trying to get a potential advisor’s time.
Engaging this board becomes important, otherwise it becomes a one-off engagement. People have tons of shit to do. Treating it like a funnel helps. Below is a snapshot of what it could look like.If font is too small, here’s the link to the google sheet
Compensating the advisory board
As you develop a deeper relationship with your advisory board, it always helps to compensate them in some form, just to show them that you value them and to keep interests aligned. Typically by the 3-4th meeting you know whether they’re a fit or not. And once you take their “serious help” a few times, and can see doing so often in the future, its the right time to draw up something and put it on paper.
You can compensate the advisors in Cash and/or Equity. (In addition: You could also let them invest in the company at a discount). This can further be broken into one off or recurring. Within recurring, it could be a mix of time based or performance linked.
Typically understanding what they’re inclined towards helps.
For BD related advisors, typically having a performance linked angle or a retainer helps. People who’re older (and have made it) will prefer a straight up equity, some of the younger people who’re in between roles or aren’t multi-millionaires yet, will prefer cash + equity which is understandable.
How much to compensate is the big question.
Typically, we created scenarios and tiers with levers. This is somewhat similar to how it’d be done with a sales person. You do X, you get Y. The more cash you give, the more concrete and granular you want your metrics to be. So it could be something like: If you help “influence” $XX of deals, we give you 10% of 1st year billings and anything above that number, its 20% of the 1st years billing with a $ZZ equity kicker.
Typically keep aside atleast 2-3% of the (undiluted) equity for advisors. By the time you’ve raised 2-3 rounds of funding, this represents about 1%-1.5% of the company.
Incase you’re a founder thinking about setting up an advisory network, or you’re a VC thinking about setting up an advisory for your portfolio or if you’re an executive looking to advise startups, would love to hear from you.