As an African proverb that’s been cited by Warren Buffet and other business leaders states, “if you want to run fast, run alone. If you want to run far, run together.” It’s an apt saying for startup advisory boards too. Sure, you can retain all the equity for yourself and not have to communicate with or work alongside others if you go it alone, but you also won’t achieve the same heights of success you would if you create an advisory board. Doing so is not always easy, but we can help you figure out how to get started.
But first, the benefits: advisory boards can help founders reach their goals more effectively and more quickly – by providing the access, knowledge, experience, and insights needed to allow the startup to unlock new rounds of funding and begin to scale. They are also growing in popularity and as such, their adoption rate is increasing. In fact, according to the Advisory Board Centre’s latest State of the Market Report, the advisory board sector grew by 19% between 2020 and 2023. What’s more, of businesses employing advisory boards, 90% report that they had a positive impact on their company.
Mentorship & Support
Advisory boards generally serve four main purposes for founders – to provide support and mentorship, increase access and networking opportunities, to help them better understand their customers, and to learn more about their product and how it’s perceived in the market.
For founders who are looking for mentorship, an advisory board is a great place to start. Bringing on a former CEO, or other C-suite level executive, to the board who’s been in your shoes before, understands what you’re going through as a founder and can provide support from both a professional and emotional standpoint can help fill this need. According to a report Startup Snapshot developed in partnership with Intel Ignite, 72% of founders say the grind of running and growing a startup has had a negative effect on their mental health. So, the need for mentorship and support is real and widespread for founders.
Another benefit of having a former C-suite level executive on your advisory board is that they can open doors that are often otherwise closed to many founders. These executives not only bring vast experience and knowledge to a startup, but they also bring a large network from their previous roles throughout their careers. Thus, having seasoned people on the advisory board provides access to other executives and companies that then help the startup grow and level up.
Customers & Product Insights
Advisory boards can also be designed to help founders better understand their customers. In these instances, the board is comprised of members who are part of the company’s customer base, or an accurate representation thereof, if the startup is early-stage and still developing its customer base.
These customer advisory boards can help a startup build credibility in the market, and the members should be people who match the persona you are trying to reach. Once people become customers, you should also consider having them serve on the customer advisory board. While they get sneak peeks of new product features, you receive early market feedback and the opportunity to have the members take part in product roundtables and are able to refine your product roadmap more quickly and efficiently.
For these reasons, Intel Ignite implemented its own customer advisory board to help bring these benefits directly to the startups. Essentially, this initiative brought the startups closer to the market by bringing the market closer to them. However, our remit to the members of this customer advisory board was not to sugarcoat anything – while it can sometimes be difficult to hear, founders gain the most from unsolicited, straightforward feedback, and that is what they received through the customer advisory board.
In fact, the founders we have worked with say one of the best aspects of the Intel Ignite program is the access to Fortune 500 C-suite executives. They say this shaped their companies’ product roadmap and product-market-fit faster than they would have been able to do on their own. Several deals also came out of the founders’ interactions with the customer advisory board, because an advisor saw the value of the solution the startup was offering – something that likely would not have happened without the interactions through the board.
Should You Give Equity to Advisory Board Members?
So, you’ve identified the members of your advisory board and you’re ready to bring them on, now you may be faced with a new dilemma – how to compensate them for their time. Many founders struggle with whether or not to give equity to their advisory board members, but if you want to acquire and retain the top-level talent required to maximize the effectiveness of your advisory board, you’ll likely need to give them equity.
One way to accomplish this is to issue advisory shares – equity that is set aside specifically for advisory board members. While issuing these shares will dilute the founding team’s stakes, it’s also necessary to get the most out of your advisory board and make sure they are fully invested in the success of your company. These shares often vest over the period of time that the advisor works with the startup, and a formal agreement should be drawn up before the engagement with an advisor begins.
Choose Wisely
There’s more than equity to attract former C-suite executives to be part of an advisory board – often they are excited to help startups grow and be part of an innovative company that’s not reliant on the corporate structure they likely were part of for much of their careers. If done correctly, it can truly be a win-win situation for everyone involved.
That being said, you should choose wisely when starting to decide on the members of your advisory board. Don’t rush to add or accept people onto the board, as selecting for quality and the best fit for your company are the most important aspects. For instance, someone who was closely aligned with your market, recently left their position, or still has close ties to the industry would better represent you and your startup and help you build your brand more than someone who has been out of the market for a number of years.
Evolution of Your Advisory Board
Once you have your advisory board in place, the relationship is working and your company begins to grow, your relationship with your advisors will likely start to evolve. But, a note of caution – if your advisor is a former founder or CEO who is close confidant to you as a founder, the best advice is to do nothing – keep that relationship intact and keep your advisor close, as growth and unlocking new rounds of funding can be some of the most challenging times for a founder, and your advisor has likely been through it before.
If you have a customer advisory board in place, it’s a different story – you will want to make some changes to ensure that your board is evolving along with your company and that it continues to match your current customer profile and can help you stay ahead of market demands.
