startup advisory boards
TRANSCRIPT
Startup
Advisory
Boards#startupadvisors
Gadiel MorantesPartnerEGFS
Adam QuintonFounder/CEOLucas Point Ventures
About Us
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Agenda
• The what, why, how and when of Advisory Boards
• Using (and abusing) your Advisory Board
• Compensating your Advisory Board
*www.lucaspointventures.com
What Is an Advisory Board?
• NOT a “fiduciary Board” – as required by law
• RATHER – an ad hoc group of individuals you turn to for advice and support
– They have no legal obligations
– They may or may not (your/their choice) have a contract
– They may or may not have specific responsibilities and goals
– They may or may not be compensated
– They may or may not serve in a fixed term (vs open ended) basis
*www.lucaspointventures.com
Why Have an Advisory Board?
• Value-add from knowledgeable/experienced partners
• Social validation – customers/investors/your team
• Discipline – builds accountability
*www.lucaspointventures.com
How Do I Structure My Advisory Board?
There are no hard and fast rules but …
• Look for committed, available partners
• Better to have 3-6 strong engaged players than 7+ not very engaged people
• People with diverse skills and experience
• Ability to support company’s progress in clearly defined areas, e.g. finance, customer acquisition, marketing, technology, etc.
*www.lucaspointventures.com
How Do I Find My Board Members?
• Don’t start with “easy wins” of people you know
• Define what attributes you want on your advisory team
• Draw up aspirational list of people that fits those attributes
• Hunt these people down!
• What about investors? Yes … but be careful with “non-investor” investor advisors
*www.lucaspointventures.com
When Is It Time for an Advisory Board?
• Any time!
• F&F/Seed stage – boards are usually pretty informal
• Seed/A stage and beyond – they become more formal
• Written Advisory Board contracts = formal
• Contracts should have:
– specified time commitments (at a minimum)
– include legal language on confidentiality
– can include written details of what each Advisory Board member is expected to contribute
*www.lucaspointventures.com
How Should I Use My Advisory Board?
• Your members will have obvious value to add – if you selected well!
• But don’t be afraid to use for their full network – so other connections and skills that may come to light
• Don’t over step your pre-agreed time expectations without their consent
• Keep them up to date – but they don’t need to know everything, keep it higher level
*www.lucaspointventures.com
How Often Do Advisory Boards Meet?
• Rarely … as a collective entity
• Mostly one-on-one relationships with CEO
• Ad hoc communications are the norm
• The most effective Advisory Boards get together a couple of times a year in person
*www.lucaspointventures.com
How Might I Abuse My Advisory Board?
• Don’t take them for granted and ask for too much time or impose on their connections excessively
• Value added merits a reward eventually: If you can afford to pay, do so (never cash)
• NEVER have a “Vanity” Advisory Board
*www.lucaspointventures.com
How Do I Pay My Advisory Board?
• Very early stage – no compensation
• At the Advisory Board contract stage ... compensation starts to make sense and honor their contribution
• Compensation should ideally be tied to specific deliverables
• Compensation is a matter of agreement and depends on time contribution and expected benefit to company
• Typically no cash component but with options being granted on appointment vesting over the term of the agreement:– Advisory Board member will have less time commitment and no
fiduciary responsibility. So 0.10%/year and up seems fair
– Early stage full Board members (who are not founders/VCs) typically get 1% of equity through options vesting over 3-4 years
*www.lucaspointventures.com
Should I Report Financials to My Advisory Board?
• To repeat: your Advisory Board has no fiduciary responsibility
• So share as much or as little as you feel appropriate
• Provides opportunity to experiment with dashboards, financial model, etc.
• Provides “training wheels” prior to a fiduciary Board where reporting is a key obligations/requirement
*www.lucaspointventures.com
Finally….
• Balance input from your Advisory Board with your own expertise and judgment
• Don’t be too reliant on your Advisory Board
• Ultimately fully “own” all your decisions – no one, even close Advisors, knows your business, your team, your goals as well as YOU do
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Take Advice; Don’t Follow Advice
www.lucaspointventures.com
Q&A and Contact Us!
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Gadiel Morantes
415.234.3437
@EarlyGrowthFS
Adam Quinton
@adamquinton