Not too long ago, I joined the venture industry following an operating career in fintech and financial services. As I began to engage with founders, I would not have guessed what the most frequent topic of conversation would be.
You might have thought: cash runway or unit economics – or even the future of crypto, or the state of the economy – and you’d be close. Truth be told, the most frequent topic of conversation has been: Can advisory boards really add value?
My response: Advisory boards are more important than ever! Especially for companies with a B2B business model, but you’ve got to get some things right.
When market conditions are changing and business strategies need to respond, companies improve their prospects when they have a network of partners, allies and decision makers invested in their success. This is exactly where the role of the advisory board comes in.
Investing in the right group of advisors accelerates insight and access. Insight and access increase opportunities. And capitalizing on an expanded network of opportunities improves your probability of success. This virtuous cycle makes the role of an advisory board an invaluable resource!
So let’s start by answering three questions about Advisory Boards:
- What exactly is an advisory board?
- What should its goals be and who should serve?
- What are some best practices to ensure it works for you and your company?
What exactly is an advisory board?
Simply put: An advisory board is a group of experts who lend their experience, knowledge, and most importantly, their networks to help an organization learn, grow and accelerate the achievement of its goals. An advisory board is not a substitute for a board of directors and its mandatory governance role. Instead, an advisory board is an additional resource.
Engagement between a company and its advisory board primarily takes two forms: individual outreach where companies connect with advisors individually (i.e. one-on-one) and group outreach where companies get together with their advisors as a group on a periodic basis (e.g. quarterly or monthly). Most companies I spoke with utilize a mix of both.
What should its goals be? And who should serve on it?
Thinking carefully about an advisory board’s purpose will ensure that it will be structured to focus directly and solely on the purpose for which it was created. Startups setting up an advisory board need to be able to clearly answer the question: why are we establishing an advisory board and what do we want out of it? This clarity of purpose will also naturally help direct you to who you should be recruiting to serve on your advisory board.
Two areas where I have seen advisory boards add the most value are: (1) Finding product market fit and (2) Go-to-market sales execution.
If product market fit is your purpose, an advisory board to support this objective should be composed of prospective customers who can accelerate product development learning and provide early signal on the importance of product features and UX design. Direct engagement between the Heads of Product, Design and Engineering and the advisory board are helpful to ensure organizational learning. And recruiting advisors who are the actual decision makers in their organizations is critical to ensuring an advisory board is giving you the feedback you need.
Upwage, a Core portfolio company delivering faster, fairer hiring of hourly workers, powered by AI, created a Product Advisory Board of prospective clients “helping us co-create “badass” products” says Upwage Co-Founder, Diana Tsai. “By forming a Product Advisory Board with industry leaders, we’ve turned product development into a co-creative process,” explains Diana. “Instead of relying solely on countless sales calls to gauge product-market fit, our advisors directly share insights, objections, and what competitors are trying to sell them – accelerating our learning curve and enhancing our AI products before they even reach the market. Advisors often tell us they benefit by getting the latest on bleeding-edge AI and become AI thought leaders among their peers. It’s not just an initiative—it’s our most crucial strategy for growth and innovation.”
If go-to-market execution is your organization’s focus, an advisory board should be composed of business executives with experience selling into your market who can help you accelerate access to prospective customers and expand your network of opportunities to grow quickly. Direct engagement between the Heads of Sales, Revenue and/or Growth and the advisory board are helpful to ensure organizational learning.
Jeff Hendren, Chief Revenue Officer at Point Predictive, a platform streamlining loan approvals for lenders with machine learning to identify truthful applications, noted “Marketing is harder in B2B.It’s hard to get through and build trusted relationships. My advisory board gets me intros and conversations. I don’t need to go through 6 meetings and all that time and effort. I jump the chasm. Our advisors help us convert selling to order taking. It’s the fourth prong in our go-to-market strategy – marketing, sales, partnerships and our advisory board.”
Naftali Harris, Co-Founder and CEO at SentiLink a fintech offering identity verification and fraud prevention solutions shared, “our advisors helped us accelerate in ways we couldn’t have done by ourselves. Several major product ideas have come from the debates we’ve had with them and the back-and-forth on ‘you know what would be cool?’”
What are other best practices?
Start with Your Network. To find advisors, start with who you know. Sometimes mentors can morph into formal advisors if they have proven particularly valuable and you have formed a trusted relationship with them.
Conversations with potential investors are an opportunity to secure possible advisor referrals: Ask them if they know anyone who could help you accelerate your business. Investors, even if they don’t invest, may introduce you to people who can expand your network. This is key.
Pauline Roteta, Founder of Pasito (a Core portfolio company) shared this advice on recruiting advisors: “In my experience, anyone will give you free product advice. But finding people to open up their networks and take a risk on introducing you to someone is different. Unless they are willing to do that, it’s not going to be worth it having them as an advisor.”
Jeff noted, “you need advisors who know the decision makers, not just the companies you want to do business with. In Fintech, I learned it was the founders who were making the purchase decision for our product, so we recruited advisors who knew the founders at the companies we were targeting. That was key.”
Embrace Structure & Accountability. Most founders I’ve spoken with tend to have informal networks of experts they call on for advice and counsel from time to time. This can be an important resource for a founder – but an advisory board works best when it has a more formal structure.
Structure ensures all parties have clarity and understand their responsibilities, time commitments and how contribution will be measured. Spelling this out in the form of a simple charter, set of operating tenets or formal agreement helps ensure there is shared understanding and accountability. Creating that accountability helps an advisor keep their advisory role top of mind so they are committing the time, effort and energy to help you succeed and grow.
Says Jeff, “You need to clarify with your advisors early on: this is going to be 20% advice, 80% introductions. If you can get me into my top 10 clients, I can have you around. Otherwise, I need to cut the cord.”
In terms of the number of advisors, that is going to be a function of your and your company’s bandwidth to manage their engagement. Jeff noted: “Make sure you’re willing to put the time into it. You need to schedule meetings with your advisors every 6-8 weeks –1:1 or in a group. Or is there someone senior enough and strategic enough in your organization who can run it? Otherwise, it won’t work.”
“Advisors are like employees,” shared Pauline. “You need to manage them like they are your actual team members. You need to set the expectations upfront. You’re not asking a favor, this is what you need them to do. We once flew two of our advisors out to join us for a company offsite. They saw for themselves how fast and capable we are; how we are building the things they want to see. They got very committed. That was a huge boost.”
Reward & Recognize. Compensation for this kind of advisory work is most often provided in the form of stock options (usually 25bps for early stage companies valued below $20M). The vesting schedule for these grants should align with the term of expected service – typically a two-year term, and often with an initial 6-month trial period or cliff vest. That said, some companies I spoke with reward their advisors with non-equity in the form of product credits and discounts on monthly client/user fees.
Review & Refresh as Needed. There is a well-known tenet in organizational design that advises: structure should follow strategy. This tenet applies to advisory boards as well as to internal organization charts. Just as during periods of growth and change, companies should review their organization design to ensure it is still best serving their needs, so too, should they evaluate their advisory board to ensure it too is still fit for the company’s strategic priorities.
For example, if the company has confidence that it has found the product market fit it was searching for, then it may be time to evolve the role of the advisory board to help with go-to-market strategy and growth. Or if its go-to-market strategy and growth goals are being met, then evolving the advisory board to help with scaling and internal processes might be an appropriate evolution for the advisory board.
Naftali Harris shared, “our advisory board has evolved with the needs of our business. We’ve narrowed in on who we want around the table. And we’re adding advisors for spaces we need to learn more about, like the public sector.”
Conclusion/Wrap Up
Advisory boards are an important tool in the founder’s toolkit – helping accelerate sales efforts and focusing product roadmaps on features and UX of the highest value to your prospects and clients.
Investing in the right group of advisors accelerates insight and access. Insight and access increase opportunities. And capitalizing on an expanded network of opportunities improves your probability of success.
And why wouldn’t you want to have more smart, experienced, connected people invested in your success — and not your competitors’? It’s a no brainer!
If you’re looking for a thought partner to help you set up or refresh your approach to your Advisory Board, please reach out at susan@corevc.com. And if you have best practices to include, please share them.
I look forward to hearing from you!
