Advisory board for startups: how founders build one
An advisory board for startups is a small group of outside experts who give a founder advice. They do not vote and they do not run the company. They help you see what you cannot see from the inside.
How an advisory board differs from a board of directors
A board of directors is a legal body. Directors hold formal authority, approve major decisions and carry legal duties to the company. In Singapore, those duties come from the Companies Act and from general company law.
An advisory board has none of that. Its members give non-binding advice, usually in an informal setting. They cannot vote on company matters, and they do not carry a director's legal duties. That makes it easy to set up, but it also means you stay fully responsible for every decision.
Never let an adviser sign contracts or speak for the company unless you give that permission in writing. Keep the line between advice and authority clear from day one.
Sources: Wikipedia, "Advisory board," en.wikipedia.org. The point about Singapore directors' duties is general company law background and is not drawn from a quoted page.
Decide what you need help with first
Do not collect names. Start with a gap. Maybe you need a sales leader who has sold to large firms. Maybe you need someone who knows how to hire engineers, or who has dealt with regulators in your market.
Write the gap as one sentence. For example: "We need help winning our first five enterprise customers in Southeast Asia." Every person you invite should fit a sentence like that.
Who to invite
Pick people who have done what you want to do. A few simple types work well for an early company:
- An industry expert who knows your customers and your rivals.
- An operator who has scaled a team from ten people to a hundred.
- A founder a few steps ahead of you who will be honest.
- A finance or legal specialist for fundraising and contracts.
Keep the group small. Three to five people is enough at the start. Larger groups are hard to schedule, and each member gets less time to help. Choose people who will say no to you. A board full of fans is not useful.
Sources: Wikipedia, "Advisory board," en.wikipedia.org, which suggests keeping the group to about eight members at most. The list of adviser types is the editors' practical suggestion.
What to offer in return
Many advisers expect something for their time. Some join for the chance to learn about a new field, and some want to help a founder they like. Others ask for a small amount of equity, or a modest fee.
If you offer equity, put it in a written agreement. State the amount, how it vests over time and what happens if the person stops helping. Vesting means the shares are earned step by step, so someone who disappears does not keep everything. Ask a lawyer to check the paper before you sign. Rules on shares and tax differ by country.
Write down what you expect in plain words. A common ask is one hour a month, plus a few quick introductions a year. Also add a confidentiality clause so that private plans stay private.
Sources: Wikipedia, "Advisory board," en.wikipedia.org, which notes that advisory members are generally paid less than directors. The points on equity and written agreements are general practice, not legal advice.
How to run the meetings
Meet every quarter, or twice a year if the group is busy. Send a short note a few days before. Say where the company stands, what you have tried and the two or three questions you want help with.
In the meeting, spend little time on updates. Spend most of it on the hard questions. Take notes, and send a short summary of the action items afterward. At the next meeting, say what you did with the advice. Advisers stay interested when they see their time lead to results.
You can also use one-on-one calls. Many founders find that a thirty minute call with one adviser beats a long group meeting.
Review the board once a year
Needs change as the company grows. Once a year, ask whether each adviser still fits your biggest gap. If not, thank them and let them step down. A fixed term, such as twelve months, makes this easy and polite.
When your company takes outside investors, you will likely form a real board of directors. Your advisers can still help. Many stay on as trusted friends of the company.
Sources: the editors' practical suggestions. Meeting rhythm follows the quarterly or twice-yearly pattern described in Wikipedia, "Advisory board," en.wikipedia.org.
Sources
Wikipedia, "Advisory board," https://en.wikipedia.org/wiki/Advisory_board