Startup 101 - Composing your board of advisors
We have just talked about how to compose your board of directors, last post, but what about composing your board advisors? Broadly speaking, board of advisors serve to counsel you on matters based on their experience, whilst not being financially invested the same way your board of directors are.
An advisory board is a body that provides non-binding strategic advice to the management of a corporation, organization, or foundation. The informal nature of an advisory board gives greater flexibility in structure and management compared to the Board of Directors. (source: Wikipedia)
You lean on to your advisors for solid advice, and receive equity in the form of common stock (rather than preferred, which your investors would get), and something around 0.25-0.5%. But they shouldn't act like directors, as they don't have any binding power to vote. So, when composing your board of advisors you should have the following in mind:
Expand your board of advisors liberally
Unlike the board of directors which function better when smaller, you should let your board of advsors expand largely, but composed of those in the industry that are smart and capable, with insight and even networking/connections, like you would do with your board of directors.
Having 7-9 advisors on your board is a good number.
Join Advisory Board Programs
According to Entrepreneur, if you don't have many candidates that are willing or capable of serving usefully on your board of advisors, you can look at joining an advisors membership program. Companies like Vistage and CEO Clubs of America can help assign advisors, or even staff your board completely.
In addition to size and quality, you need diversity in your counsel. Those that have worked as founders in other startups (hopefully successful ones, but even failed ones) can teach you the ropes based on their experiences and knowledge-learned. Your peers, founders who have been there and done that, serve best to advise you on quarterly or monthly advisory meetings.
I would even think of having consumer advocates sit on the board, and have a direct bond with the grassroots of your company. For instance, a college representative if you are building a social media app for colleges (or they represent a high market segment of your product) so they can be your person on the ground and provide advice based on their daily interactions with their other peers.
Let their equity vest over time
ReadWrite suggest giving your advisers equity that vest over time, so you can utilize them over a longer period of time, rather than having them cash and run. This also provides mutual interest ans assurity over a longer period of time, that the project will succeed.