One of the best things a startup can do is select an advisory board.
Before we dive into the nitty-gritty of how to choose an advisory board, we need to make one thing clear. An advisory board is not the same as a board of directors.
There are a few key differences between an advisory board and a board of directors. An advisory board is different because they have no legal or fiduciary responsibilities. However, a board of directors is held liable for advice given and has voting power to make changes within the organization. As a result, the compensation for members of a board of directors is typically much higher.
Watch Felena Hanson share about the selection process for Hera Hub’s advisory board.
Key questions to ask yourself BEFORE you choose an advisory board:
What experience do you need?
Advisory boards are made up of hand-selected members. For instance, the member may have a personal relationship with the business owner. Advisory members are typically selected for a particular skill set or expertise that would be valuable for the startup company.
- ask close friends, family or colleagues that are knowledgeable in the areas where support is needed
- choose people who are committed to supporting you and your business
- select individuals with expertise in areas you lack strength (legal, operations taxes and accounting)
What will your advisory board members do?
Clearly outline what will be expected of each individual on your advisory board. Will conduct quarterly meetings? Do you want in-person strategy sessions? What frequency will they be expected to provide strategic advice? What level of involvement will they have on projects or major business decisions, if any?
Decide how they will be compensated?
Compensating your advisors is a great way to ensure their participation. According to FundingSage, “Stock options between 0.1% and 1.0% of company equity are typical for startups in the Concept and Seed stages of development.”
Above all, choosing an advisory board is a great idea for growing a business and should be done with intention.
Work with an attorney to put together a contract that articulates what your advisors are being asked to contribute and what they will get in return. Consider incorporating a vestige clause so if someone disappears and doesn’t fulfill their duties under the agreement, they can’t circle back to try and cash in their shares.
Here are a few extra resources that may help.
The post How to Choose an Advisory Board appeared first on Hera Herald Resource Center.
