March 9, 2010

Building a company is not something that should be done alone; it’s also something that shouldn’t be done without guidance. While many entrepreneurs are busy finding the right co-founders and hiring the right employees for their team, first-time entrepreneurs often forget to put in effort to bring in great advisors and board members.

Having a strong advisory board and/or board of directors can provide immeasurable value to your startup; I think few would dispute that. The bigger trouble often comes in finding the right people that will fill the role of advisor.

Having your best buddy on the board will probably teach you nothing and do you no good. Having a technology luminary that never answers your calls is even worse. So how do you find the right people, and more importantly, how do you find people who will have passion for what you are doing?

My advice:

1. First dig into your current network and bring on someone you know and trust. Your mentors almost always make great advisors because they care about you and your success.

2. After you bring on mentors, reach! Build relationships with the people you really want to be your advisors. Network, chat with them, tell them that you want to pick their brains on entrepreneurship. You’d be surprised how often people are willing to help.

3. Advisors aren’t just for advice; they are also for connections and recognition. Mark Zuckerberg had a lot of leverage when he could say that Peter Thiel (Co-founder of PayPal) sat on Facebook's board during the early years. These are the types of people that get others interested and make key introductions that can push the company forward.

4. Diversify: bring on technology, business, media, venture capital, and other leaders so that you have a diverse array of advice and insight to rely upon.

5. Make sure to bring on people who will challenge you: many employees won’t challenge your higher-level strategy, so it’s often up to your board to give you a reality check.

6. Consider giving advisors a small piece of your company. Here’s the reason: without equity, your advisors have no stake in your success. Unless they’re emotionally invested in you, they have little incentive to return your calls, even if they’re your advisors. Now with a small piece of the company (maybe ¼ of a percent), they are tied to the success of your company. In a way, it makes them employees that are there for you.

If you’re still uncomfortable with the idea, another alternative is to bring in more people during an angel funding round – bring in people who you want to be advisors and board members and convince them to invest, even a small amount, and give them equity in return. This is essentially what 37signals did to bring Amazon CEO Jeff Bezos on board as an advisor.

7. Just ask. I sit on a few boards, and every time it was them who approached me. Don’t wait for the right moment; just go for it. Again, you’ll be surprised by who will say “yes!”

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Join the conversation ( 7 )

• WILLIAM BUBENICEK 2 years 1 months and 14 days ago

  

  I couldnt agree more with this article. Going further, an advisory board should be an ongoing work in progress. As a startup, you may start with a mentor and then begin adding advisors as you grow and face new challenges. We "upgrade" our board as needed. Another important element is diversity (once you get past 1-2 members). So while it is true that you may want someone who has been there before as your mentor, you may want a corporate person or similar to mix up the crowd. The diversity can create good conflict and generate new ideas.One thing we found in building my last company, advisors are not always easy to find and they seem to be less accessible to companies that are smaller and less networked. In response to this, we developed www.boardmybiz.com, a site that provides matching services for small business owners to match to advisors that are best suited to their businesses needs. We hope to provide even more accessibility to best practices, to every entrepreneur out there. We are always interested in candidates to help small businesses, so if you are someone who wants to help out, visit us and register. All the best!Bill

• Nathan Beckord 2 years 2 months and 4 days ago

  

  Good post. I particularly like your strategy of first reaching out to mentors. I hadn't thought about this approach, but it makes sense to get a few folks who already know you on the Board before reaching out to the big guns. I believe that building an advisory board is one of the greatest yet under-utilized tactics available to a startup. I have served on several advisory boards, and also recruited advisors for a handful of startups I've been involved in, and in 95% of the cases, it has been a great experience-- well worth the equity it costs. Plus it's relatively low risk (most equity based advisory agreements have a vesting schedule, which protects the startup if the relationship doesn't work out). I also agree with the first comment above that identifying your challenges and finding advisors with those skills is key. No use finding clones of yourself who will only serve to corroborate your existing assumptions and thought processes. Get diversity of experience on the advisory board, and as a whole it will be healthier.One last note-- this is a favorite topic of mine and I wrote a pretty detailed article about it called "The Care and Feeding of Advisory Boards" if you're interested: http://www.seedstagecapital.com/2009/09/care-and-feeding-of-advisory-boards.htmlThanks-- Nathan Beckord, VentureArchetypes LLC

• Umberto Righetti 2 years 2 months and 17 days ago

  

  Great article Ben. As an employee I always believed in seeking out the very best mentors from whom I could quickly learn the skills I lacked in business. I then joined a startup to marry my broad business advisory skills with the vision of an amazing technology luminary. When it was time to take a successful Aussie brand to the world I reached out to the former CEO of one the most successful brands Australia has ever exported. The time we spend together every few months is the greatest learning experience I could ever hope for. We will be forever grateful that he spends this time with us. He doesn't want money, equity or a board position, solely does it because he shares and loves our vision to revolutionize the funding of sport.

• Francisco Vega 2 years 2 months and 18 days ago

  

  Interesting article however, I don't share the idea that important advisors will be inclined to received share revenues. One of the most important quality of any advisor is that he will not only provide you with his expertise but the startup company will benefit directly from his brand-name. Make sure to get the best brand name for the money you are paying would be my advice.

• Robert Rogers 2 years 2 months and 19 days ago

  

  Thanks for the insights! Good mentoring and advising is critical for the success of any small business. More than anything, find the people who motivate you succeed or who fit certain needs within your business structure. It is always great if you can create an advisory board of those individuals, evaluating how the team can be most effective.

• Alex Stojanovic, PhD 2 years 2 months and 19 days ago

  

  Startups can be tricky. You have 2 very different roads to take when choosing a board / advisors: experience or youth. Depending on your industry, there is both a smart and poor decision to make. I recently attended a lecture in Chicago by a renowned investment banker / angel investor. He likes investing in and working with 'youth' because of the energy and innovative nature of such individuals.

• PAUL ROSENFELD 2 years 2 months and 20 days ago

  

  Great piece Ben. I think you left off the #1 piece of advice: Identify your biggest challenges (eg, sales, distribution, etc) and target advisors who did exactly what you need done at the exact stage you're at. No use getting an EVP at Big Co. to help who has no experience at Start-up Co. ... Best, Paul