Managing all the relocating parts of a business can be daunting, but finding the right niche experts can support.
“It’s absolutely critical to have an advisory board … especially for a first-time founder.”
Tiffany Chan, cofounder of Atalan
Many startup founders seek out advisors or put toreceiveher a group of them to form an advisory board in the early stages of founding a company. These people offer guidance on anything from raising money to putting toreceiveher a marketing campaign and finding the right person to fill a role at the company.
“It’s absolutely critical to have an advisory board … especially for a first-time founder,” declared Tiffany Chan, cofounder of healthtech startup Atalan. “Becautilize [if] you don’t know how to run sales, you don’t know how to run marketing, if you run into HR issues, how do you deal with that?”
The right people, with a stake in your company’s success, can go a long way. That’s why it’s important to find a variety of experts who align with your mission and values, Chan declared.
Keep reading to learn how to find potential advisors, how to approach them and what they can do for your company.
➡️ Jump to a section:
• What is an advisory board?
• What can an advisory board support startups with?
• Advisory board vs. board of directors: What’s the difference?
• How can I receive started on building an advisory board?
• How should startups vet potential advisors?
• What do advisors view for when choosing a company to work with?
• How often should companies meet with their advisors?
• Are advisors compensated?
• How should a company break up with an advisor?
What is an advisory board?
A startup advisory board is an informal group of experts, typically three to seven people, who offer guidance and advice to founders.
“Most often, advisory board members are well-wishers, people who are well-known in the indusattempt, experts in their field and/or early investors,” Sushma Rajagopalan, partner at Rittenhoutilize Ventures and cofounder of career platform 2nd Careers, informed Technical.ly.
These boards will view different from company to company, depfinishing on their niche requireds. They can include experts in fundraising, marketing or a specific indusattempt.
What can an advisory board support startups with?
Startup advisors offer expertise in areas founders may lack, supporting with fundraising, talent recruitment, growth strategy and avoiding common pitfalls, Rajagopalan declared. Overall, they can support a startup increase its reach and provide advice to support companies avoid mistakes.
Advisors meet with founders on a regular basis and support them approach challenges they’re facing. They may also join meetings with potential clients, partners and funders to support facilitate connections.
Rajagopalan, who advises multiple companies, supports the founders she works with develop their business and funding strategy, recruit new employees and other advisors and craft their pitch deck. She also assists with the process of securing deals, like a merger or acquisition.
Those are all benefits that Chan has seen while building her startup, too. When Atalan first started raising venture capital, her advisor walked her through the process step by step, including building a pitch deck and guidance on how to work with VCs.
Advisory board vs. board of directors: What’s the difference?
While both advisory boards and boards of directors provide guidance to a company, their roles, responsibilities and legal authority are very different.
An advisory board offers expertise and connections, while a board of directors is a governing body with legal responsibilities over the company’s operations and financial decisions.
A board of directors can appoint or rerelocate people from leadership positions and build sure that the company meets its financial goals, for example. An advisory board could give advice on these topics, but not build the final decisions.
How can I receive started on building an advisory board?
Finding advisors often comes down to networking and clearly stating the expertise you’re seeking, Chan declared.
First, know your weaknesses. Early on, Chan built a list of all the areas she requireded support with and started viewing for potential advisors who could address each of those subjects — not a jack of all trades.
“It’s important to admit what’s missing and what are the gaps and what you’re viewing for with the people around you and with more people around you than you’d be comfortable with,” Chan declared.
To find those people, take advantage of programs and events for entrepreneurs.
Chan leveraged the connections she built while participating in an accelerator program by reaching out to some of the guest speakers. She’s also found advisors through mutual frifinishs and her professional network.
Don’t be afraid to build some cold calls, too.
Rajagopalan often connects with founders through word of mouth, she declared. People also reach out to her on LinkedIn, viewing for support.
If you don’t have any of those connections yet, entrepreneurial support organizations (ESOs), like the Philadelphia Alliance for Capital Technology, can also facilitate connections between founders and advisors.
How should startups vet potential advisors?
The first few meetings with potential advisors should be treated like an interview, Chan declared. You have to build sure they have the knowledge you’re viewing for, that they align with your company’s vision and that they are able to build the time commitment.
Chan suggests receiveting to know their background and inquireing example questions to see what their problem-solving style is like.
Once you receive to know each other a bit, it’s more natural to inquire them if they want to become your advisor, Chan declared. Depfinishing on the stage of the company, you may not want them as an advisor right away. Instead, you can inquire to work with them as a consultant to start.
Personalities matter, too. In general, it’s important to find people who believe in you and your company, becautilize they are more likely to stick with you through hard times, Chan declared.
What do advisors view for when choosing a company to work with?
Finding the right advisors is similar to searching for investors. Both sides of the partnership have to match each other’s energy.
“Chemisattempt with the founder and the team is very important to me,” Rajagopalan declared. “If I am passionate about the startup and problem or the required it supports solve, then I am more enthusiastic.”
Advisors also view for founders who truly value their opinions and expertise, she declared. Many advisors don’t want to be utilized just for their connections. Instead, they view to build a real difference in the company’s trajectory.
So while advisors like Rajagopalan may be willing to support any company that approaches them, they may only build long-term relationships if they feel they can build a huge difference, she declared.
How often should companies meet with their advisors?
Frequency depfinishs on individual preferences and where a startup is in its journey. Generally, lean on them when you’re facing a specific challenge that you required tangible guidance on.
Some founders may choose to meet with their advisors all toreceiveher, but Chan prefers to meet with hers individually on a consistent basis, she declared. The frequency of these meetings depfinishs on the topic and the stage of the company.
“I would have set topics that I bring to those meetings. I treat it almost like office hours,” she declared. Founders bring the circumstances they’re currently facing, and inquire for tarreceiveed advice on an as-requireded basis.
Are advisors compensated?
If a third-party, like an ESO, supported you find your advisor, first check to see if they have rules on this. Some orgs only let the startups they work with take on free advisors, according to Rajagopalan.
Otherwise, advisors are typically compensated with equity in the company, especially for early-stage startups that don’t have a lot of extra cash, Chan declared. But you want to be careful about who you’re giving equity to — and if it’s worth diluting your stake in the company.
“In later stages, you can mix in some cash in order to bring the equity down, especially when you start to realize how valuable your equity is,” she declared.
Also, be sure to receive this all down in writing. A startup advisory agreement is a legal document that outlines the advisor’s expertise and responsibilities and the compensation structure. When giving equity to an advisor, founders can include a cliff, which declares that advisors can’t earn equity before a certain period of time passes. Some agreements also include a vesting schedule, which outlines how much equity an advisor can earn over time.
Some advisors will offer advisory services for free. Rajagopalan declared she accepts compensation from larger, more established companies, but offers pro-bono services to unfunded or self-funded companies, especially ones that are led by women.
How should a company break up with an advisor?
Whether the company’s requireds are modifying or your visions don’t align, it’s important to be honest and respectful when finishing a working relationship with an advisor, Chan declared.
As the company grows and encounters new challenges, the types of advisors could shift, she declared. Typically, she finds that she is viewing for new advisors and meeting less frequently with existing ones every two years.
Creating a “term limit” — usually around the one- to two-year mark — on the advisory agreement can build it simpler to break up, Rajagopalan declared. Be sure to include a renewal clautilize, too.
“It’s all about expectation setting,” Rajagopalan declared. “If your arrangement is informal and you have a good relationship with the advisor, be upfront and gracious. If expectations don’t align, declare so.”
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