Sure, you want investors. But sometimes the outsiders most capable of helping your business are those who invest time, not money. And I don’t mean because they lend a credible name to an investor pitch: way too many entrepreneurs look at names on Advisory Board as just a way to expedite a raise. If that’s all you really expect of the Board, you’re cheating yourself as well as the investors before whom you dangled the names.
Proper use of Advisory Boards begins with proper construction. You want to find people who really are willing to provide a few hours a month. You want different strengths: industry relationships; deal-making skills; related product knowledge; financial expertise; operational know-how; public profile. And you want to compensate them with meaningful if not extravagant equity, because you want them to make genuine money if the venture is a success: otherwise, they’re just doing favors, and you’ll drop from the radar screen the moment they get busy.
But the real key to good results is that you have to keep the Board members engaged and educated. Regular email updates, say once every two weeks, are absolutely vital; as are periodic meetings or calls when the Advisors can all chat together. This is where most entrepreneurs totally fail: they assemble a board, completely ignore it for months, and then one day call up with an out-of-context emergency request. Of course, the Board member has a hard time being effective … he can barely recall what the company does.
Even more fundamentally, though: you can’t possibly think of all the right questions to ask your Board, or know when they might be helpful. The only way to discover the real synergies they can deliver is by having the Advisors identify those opportunities themselves. And of course, the only way they can do that is if they have their fingers on the company’s pulse all the time.
By the way, I’m often asked, if someone “believes” in my company, shouldn’t he show it with an investment, too? Not really. There are a zillion reasons why a Board member many not also invest: he may not want to “double down” and risk both time and money; or he may be constrained by “real job” commitments. But the best reason is that such dual roles can result in conflicts regarding advice the entrepreneur seeks. And, anyway, let’s face it. You’re much more likely to get that meeting with the person you want to recruit if you indicate up front that you won’t accept an investment, so your intentions for the meeting are crystal clear.
Please do establish an Advisory Board. But please do not ignore it.
All opinions expressed are those of the author, and do not necessarily represent those of Gust.