I was sitting in a coffee shop next to a tremendously powerful business woman. Nervously, I asked her the one thing I should be doing to launch my business and get investors to take me serious. Five years later, her words still resonate. “When your business has no credibility, you build it through your advisory board.”
I convinced her to join as my first advisor a few months later. This was in 2013 – my business wouldn’t officially launch until nearly six months later. Her advice and the advice of other advisors that I subsequently recruited has proved invaluable in helping to shape the growth of my now multi-million dollar start-up over the past five years.
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These days, I often find myself seated on the other side of the table, helping early-stage entrepreneurs get their businesses off the ground. Too often I see entrepreneurs who are focused solely on funding, telling me things like, and “if I can just raise $250k I know we’ll take off.”
When I tell them to get feedback and try to validate their idea before fundraising, I often hear things like “Oh yeah, I’ve heard asking for advice can be a great way to get investment.” Even once I’ve convinced him or her that having advisors is valuable for its own sake, not as a means to an end, I still find that very few entrepreneurs understand how to find the right advisors, what to offer them and how to best utilize them.
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Often people think that you have to be well-connected in order to recruit good advisors. As someone who started a food business at age 23 with zero food industry experience, I’ve found it’s entirely possible to build a powerful network from scratch.
The first step is to research other companies who you’d like your startup to be when it grows up. For me, that meant figuring out what companies were introducing new superfoods to the market and doing it in a creative and impactful way. Once I found those companies, I read up on their founders and looked through LinkedIn to see if I might have any 2nd or 3rd-degree connections who could introduce me. I knew that once I could get my foot in the door with one food CEO, there was a strong chance that he or she could introduce me to other CEOs.
I treated that first potential advisor conversation like it was the most important job interview of my life. Immediatley, I studied her company, watched her TED talk and came up with a list of questions. I ended the conversation with two, all-important asks. “Can I reach out to you from time to time with questions?” and “Do you know anyone else in this space who I could speak with?”
I found that asking people for advice opened the door to formally ask them to be advisors months later. Then came the tricky part – how to compensate them.
Advisory Board Compensation
In our early days, all of my startup Kuli Kuli’s advisors were volunteers. We held an advisory meeting once a quarter where we provided dinner; updated them on our progress and engaged in rich discussions around our challenges.
As the business started to grow, we began to lean on some advisors more heavily than others. We formed a board of directors with our more active advisors and a few outside investors; all the advisors received small amounts of equity. Typical advisor shares are 0.25%, vested over the course of their four-year term.
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Not all of our advisors have stayed engaged. Newborn kids, ageing parents and other life events made many of our advisors pull back. I learned the hard way that it’s important to have the advisory hourly commitment documented upfront and to have the conversation immediately with advisors who aren’t meeting that commitment.
Recruiting, compensating and managing an advisory board can seem like a lot of work. Having talented, trusted advisors has helped me avoid many of the common first-time entrepreneur mistakes. It has helped to build the credibility of myself and my company in countless ways. Once a month I have someone tell me that they were impressed by the list of advisors on our website.
Startup business plans change on an almost daily basis and quickly become irrelevant. Good advice doesn’t. Having a great advisory board can help shape your business; while enabling you to grow as a leader and attract talented investors and team members.
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