Since becoming part of the Founder Institute I have been really fortunate to have met and interacted with some of the best, smartest and knowledgable entrepreneurs I have ever had the good fortune to meet. We have been advised to put together a formal advisory board to assist us in our journey to reach product/market fit. I have always been a big fan of having mentors, mentors are vital to give advice and help keep your business from making expensive and avoidable mistakes. Building an advisory board however, needs to be given a lot of thought and is not another line item on your to-do list. Some advice I am following and steps I am taking are:
1. Recruit advisors with specific objectives: You need to research and spend a considerable amount of time up front to determine critical objectives that need achieving early in your venture. To accelerate reaching these milestones, search for advisors who have specific domain knowledge in specific areas and who will act as catalysts. This provides the advisor with a specific area to concentrate on and will be mutually beneficial.
2. Compensation: Advisors are usually given anywhere between 0.25% to 5% equity stakes depending on their involvement and stature. On the flip side, some advisors may not be interested in equity and a prior agreement about a small settlement in cash or a deferred payment plan can be established. Some advisors do not expect anything and for such a situation, you should be the one picking up the cheque during meals and showing gestures of gratitude for the time the advisor spends with you.
3. Small Groups: It is best to keep your roster of advisors limited to a group of 3. There are several reasons for this; for example, when organizing a communal meeting it is usually challenging to manage a larger size group due to calendar conflicts etc. Too many advisors could result in “too much advice” which could in turn paralyze you, instead of helping you to move forward.
4. Legal Agreements: When taking someone on as a formal advisor, it is best to get your law firm to draft an agreement. It is suggested that formal advisory role positions be kept to a maximum of 2 years, after which they could be renewed. This gives the entrepreneur a way out if things are not working well. If equity is involved, be sure to vest it over the period of the agreement and lastly, if required, get the advisor to sign an NDA if you think he/she may be interacting with other companies where there might be a conflict of interest.
Will keep everyone updated on how I go about structuring this process, will also post the specifics when completed.