4 Things to consider when selecting “Advisors” for your start-up

“No man is so wise that he can afford to wholly ignore the advice of others.” Said James Lendall Basford (1845–1915). Although meant for individuals, the words are equally relevant for start-ups. Building a great product or acquiring customers may be difficult but building an effective advisory board is relatively a low hanging fruit. Despite it, many start-ups today goof up on this. Presenting tips on four key aspects (Why, Who, Where & How) of forming your advisory board.

Why Advisers?

Advisers can help a start-up in two fundamental ways:

  • Bridge Gaps in Skill / Expertise – The founders or existing team may not have depth or breadth of experience needed to successfully run a business.
  • Establish credibility – Strong advisory board helps you attract customers, partners, employees, investors and lot more to get your business off the ground. Choosing the right advisers will help you establish credibility.

“Team” is undoubtedly the single most important things that is essential for business success. Advisers help in strengthening the team. Most investors read the “Team” section first thing in a business plan.

Who to consider?

When asked to form an advisory board, general tendency is to on-board friends, ex-colleagues or powerful relatives. There is nothing wrong in it, but the decision needs to be taken more rationally by considering the following aspects in the profile of adviser:

  • Type of Experience – Select somebody who has worked in / with start-ups, helping them scale up from nothing to large successful ventures. It is better than having somebody who is at the mid/senior management in a large MNC as such a person may not know how to scale up with limited resources & budget.
  • Skill or Expertise – Adviser should bring in skills or expertise which is missing in your company. If the team is strong in technology, it is better to have advisers from the business side and vice versa. Some of the areas in which advisers typically needed are:
    • Technology
    • Customer Acquisition
    • Product Management
    • PR
    • Finance & Compliance
    • Operations / Logistics – in case it is critical for your business
  • Time Commitment – An average adviser spends 20-40 hours per year with a start-up. So, make sure the adviser can commit this kind of time.
  • Time Horizon – While it is good to have long term vision, but while selecting advisers, focus on getting people who can meet your short-term needs (6 months to 1 year). When formalizing an agreement with adviser, it is also better to define an end date for the relationship, after which you can “renew” it based on the value add that you receive from adviser.
  • Potential Conflicts – Lastly, make sure there is no potential conflict in seeking advice from the adviser. If the adviser is associated with your competitor in any way or the advisers are advising firms which are direct competitors, it can be a source of potential conflict.

Where to find?

Some of the places where you can look for advisers are:

  • Incubators / Accelerators
  • Events – Industry conferences / Training workshops
  • Friends & Family
  • College Alumni Network – e.g. Alma Connect
  • Past Employers
  • Online Portals – MicroMentor.org
  • Angel List or LinkedIn
  • Start-Up Groups on Facebook / LinkedIn

How much to compensate?

Three compensation mechanisms are popular for compensating advisers for their time / expertise:

  • Pay Nothing – it may sound absurd but it is very much possible. Many successful experts want to give back to the community and so may agree to advice for free.
  • Cash Compensation – you may make small cash compensation to advisers to cover the expenses incurred in attending meeting and for their time.
  • Equity – Average start-ups give out 1% to 2.5% of equity across all advisers

Find more about our Business Plan Offering

References

  1. https://www.entrepreneur.com/article/229956
  2. https://scalablestartup.berkeley.edu/2013/09/10/five-things-to-consider-when-selecting-advisers-for-your-startup/
  3. https://www.entrepreneur.com/article/71684
  4. http://founderdating.com/the-biggest-mistake-you-can-make-with-advisers/

 



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