Why you should build your startup’s advisory board sooner rather than later.
Advisory boards for startups vary in nature. In general, they’re a small number of experienced people who, for a fee and/or equity, act as a sounding board for founders when growing the business. Some advisors may also act as a NED (Non-executive director) in the company which means they may play a more formal role in decision making along with the founders.
When you’re a small start-up, with little to no users, with a small amount of funding (possibly just friends, family and Angel investors) and maybe pre-product launch, it’s easily to think “we’re too small, advisory boards are for established start-ups” or “I’ll think about building a board when we have tons of VCs invested”. However, it’s never too early to have the right people helping you stay honest about your product development, business model and most importantly helping open doors to funding.
…it’s never too early to have the right people helping you stay honest about your product development, business model and most importantly helping open doors to funding.
Below, I outline some key reasons why you’d want to build an advisory board.
Founders, and their early employees, may not necessarily be “experts” in the area they’re trying to solve a problem in — Brian Chesky of AirBnB had never worked in hospitality, Jack Ma wasn’t an e-commerce guru before starting Alibaba and I wonder how much of Mark Zuckerberg’s time at Harvard helped prepare him to run the largest social network in the world.
So, to fill the the “industry know-how” and “subject matter expert gap” an advisor know knows the space really well isn’t the worst person to have on your team guiding you on known unknowns. They might be grey haired and know the industry you’re trying to disrupt from an “old school” perspective, but this isn’t a bad thing.
Leverage what they know, how your old sleepy competitors work, what their weaknesses are, how to navigate regulation, “loop holes” etc . They quicker they can help fill the required knowledge gaps, the less likely you’ll spend time and resources learning industry mistakes, and avoiding dead-end strategies that may have been tried and tested in the past. This will help you make better mistakes, move faster and increase your odds of stumbling into a successful way forward.
Having advisors who have launched their own successful startup and/or worked in the venture capital space can be extremely helpful. Their insight will help you shape your business model to be “VC friendly” and get focused away from vanity metrics to ones that really tell you (and investors) whether your startup is growing.
Additionally, their network of VCs will mean no more cold emailing and staring at your empty inbox waiting for a reply. Warm introduction to VC partners from people they respect is a fast track to getting the meetings you when raising money. If you can’t raise money and VCs are not interested in your startup, at least this way you’ll find out within a several weeks rather than chasing VCs for several months. Or, you get the feedback you need earlier e.g. your unit economics need to be twice as good, you’ll save months of runway and have another shot at rolling the dice and going back to VCs with what they wanted to see.
In a similar vain, if your startup is B2B and/or requires partnerships to get off the ground, tapping into an advisors network can mean fewer cold emails to potential customers and increasing your chance, through a warm introduction, of securing your first few contracts, trials or partnerships.
Finally, advisors may be able to leverage their network and help fill leadership roles from people they’ve met in the industry or previous startups they’ve worked with, as your scale and build your team out.
Signalling to investors
It’s not the most important reason to build a board, but no doubt having the right people on your board, who are credible, industry experts and know the startup world very well, increases the confidence level that this team could be worth betting on. Especially in the early days of startups, sometimes the team is more important that the idea. Investors know that you’ll make lots of mistakes, learn and pivot along the way to finding product market fit. So, it’s really important that the team, which includes the people advising and guiding you, have the right soft and hard skills needed to navigate startup challenges and build something people want.
Whether it’s tough decisions about how to extend your runway, pivoting the product or being realistic if you’re your start-up is growing in the way that it should, these are difficult conversations and having an outside view is crucial for founders. Your employees, friends, family or even strangers for that matter, will shower you with words you want to hear. However, a good advisor will give honest and critical feedback on big decisions and the real progress you’re making with your company.
One of two great advisors can make all the difference in the early stages of a startup. There are may other points that need to considered when adding advisors e.g. how to compensate them, how to really utilise advisors and picking people who have the right profile for your stage of business. I’ll be writing follow up posts to these questions.