Advisory Boards for Startups

The more I blog, write, and teach about entrepreneurship, the more individual entrepreneurs ask me for help and advice. On average, I think I get 2-3 requests per week for personal help.

While I enjoy doing this a great deal, I’ve decided that the first advice I will give every entrepreneur is to form an advisory board of perhaps 6-10 successful people, to meet with them regularly, and to use their collective wisdom to help solve every business problem.

In fact, I might tell entrepreneurs that I won’t help them until they’ve formed an advisory board. An advisory board can help them be accountable for the advice they receive from me and others. If I’m taking 1-2 hours several times a week to counsel different entrepreneurs, what chance is there that they will act on my free advice? But if they have a board to update monthly, chances are they will be far more serious about acting on the advice they are getting.

One of the reasons to meet monthly with a board of advisors instead of asking for individual advice from “mentors” one at a time is that in a group setting the chances are high that the advisors will start feeding off one another and soon you’ll have a boatload of excellent advice, offers to open doors and take assignments, and emotional support for you and your company’s mission.

I serve on a few boards, with some very talented and unselfish people. I am finding tremendous value in these meetings. (The advice not only helps the CEO, but I think advisors can learn a lot from each other as well.)

I’ll be working on a future article about the power of advisory boards; but in the meantime, Gary Williams wrote an excellent article for the Deseret News about advisory boards. He and I are on the SilentWhistle advisory board and enjoyed a tremendously productive meeting today with CEO Adam Edmunds. (If you want to comply with certain Sarbanes-Oxley requirements by providing anonymous feedback channels for your employees, check out SilentWhistle. More and more publicly traded companies are using their service, including MyFamily.com and Overstock.com).

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4 Comments

  1. Excellent post.

    I deal with this exact issue (but on a much smaller scale than you). As an angel investor and informal startup advisor, I find it difficult to ignore requests for personal advice/guidance.

    Making an advisor board a requirement is not a bad idea. However, one of the issues (for entrepreneurs) is that putting such a board together is not always easy. If you end up figuring this all out (and enforcing your rule), please post a follow-up article. Would be very curious to hear how it turns out for you.

    Thanks for all the great articles.

  2. Joe Foote

    Hi Paul – thanks for all of the great content on this site…
    I am in the process of planning an advisory board (in part to meet your pre-requisites for entrepreneurial advice!) and I am not sure how to handle the remuneration side of things. The article you’ve linked suggests stock options, but I don’t really have a feel for how this would work i.e. the number of shares etc. The business is also in the planning stages, but will be bootstrapped in a big way! No company incorporated just yet, and it will be based in New Zealand.

    Brad Feld’s thoughts for board members:
    In general, I have a set of simple rules for board member compensation:
    * 0.25% to 1.00% vesting annually over four years
    * Single trigger acceleration on change of control
    * Clear understanding as to how the vesting will work if the board member leaves the board
    * No direct cash compensation
    * Reimbursements for reasonable expenses
    * Opportunity to invest in the most recent financing
    http://www.feld.com/blog/archives/2005/04/compensation_fo.html

    I’d really appreciate any comments or thoughts!

    Thanks in advance
    Joe Foote

  3. Business opportunity

    Hi Paul:

    It is exciting for me to discover your blog because it is overflowing with very interesting business issues.

    The problem is not getting advice from a mentor or advisory board. These days, information is surplus.

    The problem is the quality of the information.

    New businesses don’t fail because they couldn’t get advice from advisory boards, but due to some other factors.

    One of the biggest mistakes people make when starting a new business is that they usually don’t do enough market research to know before hand how much demand there is for the product or service they wish to create and market.

    Poor business plan and inadequate advertising are also the other contributing factors for failure.

    That is why most new businesses don’t last long and go belly up and are forced to close.

    Ikey Benney

    http://www.maychic.com/SearchResults.html

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