Advisory Boards

I can't tell you how many companies come in and present and inevitably, somewhere in the deck, is a list of advisors.  Of course, as I dig in to understand what these advisors actually do for the company, 9 times out of 10 they are just high profile names that are thrown on a list to give a company a stamp of approval.  Trust me, I am all for advisory boards.  In fact, many of my portfolio companies have them.  Many entrepreneurs or management team put together advisory boards to get real expertise on product direction, the market, and to expand their network to reach new customers and partners.  Advisory boards can be especially great because the typical relationship is usually noncash and compensation is based on options which vest over a period of time.  So the cash-hungry startup can add talent and help without breaking the bank. However, like any business relationship, it is important to figure out what you want from each advisor, what their time commitment and interest level really is, and then structure the appropriate role and responsibilities. I, like most VCs, am more impressed with companies that have advisory boards that are structured and actually do real work for the company versus seeing just another list of names.

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This post was written by who has written 358 posts on BeyondVC.

4 Responses to “Advisory Boards”

  1. Dharmesh Shah Mar 14, 2006 at 12:29 pm #

    I agree totally. Too many advisory boards are no more than a “who’s who” list of names. This is similar in concept to those “strategic partnerships” that create minimal (if any) value for either side.

    One of the reasons for the current phenomenon as there is little downside for either party (and some hope of upside).

    The entrepreneur believes she has access to some top-notch expertise and talent without having to spend consulting fees.

    The advisor believes (or is led to believe) that they can be associated with a startup that could become big someday — with very little effort required.

  2. Darren Fast Mar 14, 2006 at 3:25 pm #

    I agree. Many of the big names seem to be on many advisory boards preventing them from being effective on any. Any advisors need to be able to take time to actually provide advice and perspective to the company between the official advisory board meetings. If the big names are too busy, then find someone who is actually prepared to roll up their sleeves and work with you.

  3. Hooman Radfar Mar 14, 2006 at 6:40 pm #

    Great post – advisors are definitely an important resource for cash-starved, early-stage, ventures. One thing that entrepreneurs should note is that advisory boards are one of the more dynamic components of an organization. In other words, the first bunch of folks you bring on board will probably not have the same value down the line. Just as the skill set for a CEO at a startup is vastly different than that of a CEO at a Fortune 500, so are the skills/value that advisory boards bring to the table in both cases. For instance, a clutch utility guy with time on his hands that understands operations, financing, and strategy may be of tremendous help initially, but as you grow you may want to add more focused advisors to the mix that understand specifics associated with your sector, even though their time commitment may not be as large.

  4. Charlie Crystle Mar 21, 2006 at 2:16 am #

    we have great advisors and rely on them for insight-all the time!

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