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Startup Advisory Boards

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David Ehrenberg
David Ehrenberg

Do you need a startup advisory board? If you are a founder who has been asking yourself this question, check out this presentation from Adam Quinton, Founder/CEO of Lucas Point Ventures and Early Growth Financial Services (EGFS). Topics include: - How to build your startup advisory board - Finding the right key advisors - Board compensation best practices - Structuring an effective board - and more!

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Startup Advisory Boards #startupadvisors Gadiel Morantes Partner EGFS Adam Quinton Founder/CEO Lucas Point Ventures
About Us *
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 * Take Advice; Don’t Follow Advice www.lucaspointventures.com
Q&A and Contact Us! * Gadiel Morantes contact@earlygrowthfinancialservices.com 415.234.3437 @EarlyGrowthFS Adam Quinton adam@lucaspointventures.com @adamquinton

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Startup Advisory Boards

  • 3. Agenda • The what, why, how and when of Advisory Boards • Using (and abusing) your Advisory Board • Compensating your Advisory Board *www.lucaspointventures.com
  • 4. 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
  • 5. Why Have an Advisory Board? • Value-add from knowledgeable/experienced partners • Social validation – customers/investors/your team • Discipline – builds accountability *www.lucaspointventures.com
  • 6. 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
  • 7. 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
  • 8. 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
  • 9. 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
  • 10. 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
  • 11. 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
  • 12. 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
  • 13. 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
  • 14. 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 * Take Advice; Don’t Follow Advice www.lucaspointventures.com
  • 15. Q&A and Contact Us! * Gadiel Morantes contact@earlygrowthfinancialservices.com 415.234.3437 @EarlyGrowthFS Adam Quinton adam@lucaspointventures.com @adamquinton