If Done Right, Advisory Boards Can Be Good for Startups

Lora Bentley

Corporate boards are important. Those who sit on them can make or break a company, depending upon how they do their jobs. But does every company need a board? What about startups?

 

Both Sides of the Table blogger Mark Suster posed the question this week: And Suster, a former entrepreneur who is now a venture capitalist, is in a unique position to offer insight on the subject. Most of the time, those who hire advisory boards want to present their company to investors "in a positive light," he says. Sure, the idea of guidance from seasoned business people sounds good, but generally, the entrepreneurs want to be able to drop names more than they want the guidance.

 

However, an advisory board can be helpful if it is set up properly and expectations are realistic about what its members will do, Suster says. He offers three tips for setting up an advisory board that can work:

 

  • First, ask your advisers to invest. If the company is interesting and you provide a fair valuation, it shouldn't be hard to get a small check. If they have "some skin in the game," they will be more likely to stay involved.
  • Next, Suster suggests hosting two dinners a year for your advisers. "Don't try to solve the world's problems," he says. In other words, don't schedule monthly meetings. Use the dinners to build relationships and share your strategy as it develops. If the advisers have solid relationships with you and with each other, you'll be more likely to get help when you need it.
  • Finally, Suster says not to "oversell" the advisory board when you're presenting to venture capital firms. He says, "It's OK to have the adviser slide where you glance quickly over the names. Just don't lay it on thick."


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