I came across a great article on establishing a board of advisors for your startup, to work alongside your board of directors. Credit to readwrite for this piece.
Vest Their Equity Over Time
It is extremely difficult to find the right advisers for your business. You need to make sure they have a strong work ethic, sufficient spare time to commit to the company and that they can provide solid advice and resources to your business.
Instead of giving advisers all of their shares at once, consider having their equity vest over time so you have a fair solution if these factors do not line up, which is often the case.
Bring Them In By The Boatload
I would get a large board of advisers at low equity cuts (between a quarter and a tenth of a percent) so that you can really create a huge list of people that can help you with your initial launch. The more advisers you get the easier it will be to get more, and the more you have for your launch the bigger your splash will be. I've seen quite a few few companies pull this off (about.me being a fantastic example).
Most people will informally advise you. Have as many of those kinds of advisors as you like. For your actual board of advisors you should be a lot more selective.
They get small portions of equity, so they should really know what they're talking about and really help you with the business. They should have experience in startups or your field. They should be somewhat noteworthy, have an exit, experience or strong personal brand. Plan on three to five people. The spots should be coveted.
Seek Counsel, Not Advice
It’s important to seek people who can provide counsel instead of people who just give advice. Anyone can give you advice, but counsel is a very specific type of advice that comes from people who have vast knowledge or experience in the area of your business.
You should always try to surround yourself with people who have more experience or are more knowledgeable than you are. You do not have to be an expert in every area of your business, but you should put together a council of people who are the most knowledgeable about every critical area of your venture. It’s your job to know what those areas are.
—Arian Radmand, CoachUp
Build A Fortune 500 Board
I would advise an entrepreneur preparing to put his/her board of advisers or board of directors together for the first time that there is potentially no more important task than this in the early phase of starting a company. An advisory board lends credibility, industry expertise and a wide range of introductions and advice that can be crucial to one’s early days as an entrepreneur.
A dear friend of mine, venture capitalist Emily Melton, advised me early on that “if you want to build a Fortune 500 company, start with a Fortune 500 board.” I took that advice to heart and always went after dream advisers in the wine/ beverage/technology/media industries.
Listen And Reward Them
Your advisers should be people that you’re truly excited to listen to. Don’t put people on your list who you wouldn't be excited to chat with for 20 minutes.
That said, advisory boards are not as practical as you would think. While you will certainly benefit from your advisers' feedback, a board is also an important way to build and maintain your network. Think about who has helped you in the past, who will be there in the future and who you want to bet on.
—Bhavin Shah, Refresh
Take Your Time
I know many companies that have given away cash or stock options to advisers too quickly, often before getting to know them well or understanding their commitment to the company. Don’t rush into it. Most advisers worth their weight will happily spend time with you and prove their value long before they ask for an official role or any kind of compensation.
Bring Different Perspectives Into the Mix
Don't fill the room with a bunch of people who will think the same way. It will generate a crippling form of groupthink. Bring different perspectives to the table, because they'll offer a more comprehensive and effective solution. Get a good money guy, operations guy, marketing guy, etc. You'll be able to gain better insights that consider all areas of your business.
Look for Passion and Availability
Don’t chase a title or a company. Instead, look for board members that are excited about your business and vet them based on their skills, experience and availability. This will help you build a passionate board that is committed to your success.
Have Skin In The Game
Don’t rush it, and don’t feel like you have to put a board together right away. By making sure your board members want to be engaged and involved, you can avoid wasting resources like time and money.
Furthermore, make sure your board members have some skin in the game and have made an investment in the company. This will prove to you that they believe in the company and the leadership, and that they will be willing to work hard to associate themselves with a winning business.
When building our advisory team, we drew our dream team of advisers on the whiteboard. We included specific, sometimes famous and out-of-our-reach people.
Once we had a team we were happy with, we identified the important factors that drove us to include each person on the dream team. Were they a subject matter expert in our space? Did they know influential investors?
Once we completed this exercise, we were left with specific features, experiences and connections we were looking for in each seat. The rest was easy. We networked to meet people with those specific sets of features. Once you know specifically who you're after, people will help you find them.
—Brennan White, Watchtower
Anyone worthy of being on your board of advisors will be an extremely busy business professional. Be respectful of their time and do your homework in preparing and structuring every interaction.