Question: Does a Board of Advisors provide much value to a startup company? Would having a Board of Advisors have any impact, negative or positive, on angel or venture capital funding?
It’s a lame answer, but “it depends.” We’ve seen the effectiveness of these boards skew all over the map. We’ve seen some that are quite helpful with strategic direction, sales, marketing and business development and we’ve seen others that are simply faces on a website. If you go through the trouble of creating one, make sure they are really champions for your company and will be there to answer your calls. Sometimes the more of a luminary the advisor is, the less likely that they’ll have time to really impact your business.
As for an advisory board’s affect on attracting investment, it’s not really a factor. Clearly it’s not a negative if you have a board of relevant advisors, especially ones that have prior successes in a similar sector. That being said, most venture capitalists will choose a company based on the management team and the company itself, not on who has decided to take an advisory role.
My personal opinion is that if you have some high quality people who are willing to put in the time and who knocking on your door, you might want to consider creating an advisory board. I wouldn’t go out and spend much time looking to form one, however.
Posted in: Advisors | Posted by: Jason MendelsonCOMMENTS (5)
A distinction has to be drawn between "advisors" and an "advisory board". Advisors individually can be hugely helpful -- big names with no time, and no names with plenty of time, and equally useful for different reasons.
The question is whether you should formalize your advisors into a "board". This is where you may lose efficiencies by trying to organize group gatherings.
I agree these are often fluff - big names with no specific industry relevance and probably no time to invest. However, in the very early stages, an active group of advisors can help make up for an incomplete management team, which might be enough to gain seed funding and make those key hires. Engagement is the key, as you point out.
I find it can be quite useful to have an advisory board for all those industry luminaries you want on your side, but who wouldn't contribute well as board directors. The board should have non-execs with experience of growing businesses, so that they can discuss the issues the CEO faces every day. Senior industry people are often useless at this, and so they are better placed on an advisory board which can open doors, promote the company, etc.
It's pretty simple. If your advisors can 1) introduce you to investors, 2) help you find the best talent, and 3) help you make good decisions, then they're worthwhile.
Notice that nowhere did I mention A) look good on a "About Us" page, or B) sound impressive in meetings. Advisors that don't actually advise aren't worth anything.
Oxlo has had an advisory board for some time now. We're not very formal about it, which means it hasn't drained unnecessary time. In our case, and this may apply to others, advisors with specific industry expertise and relationships have proven valuable. We're focused on automotive, and two of the guys we work with in Detroit and southern California, have been very helpful. To the point made in this post, value has come in the BD/Sales/Marketing arena.