Success rates for first-time entrepreneurs are thought to be as low as 18%, according to Business Insider. Self-aware, first-time entrepreneurs often identify lack of experience as a dominant cause of failure, and often aspire to create a team of advisors to share their unique perspectives, industry knowledge and wealth of experience.
With growth as the prime directive a solid advisory board can be a startup owner’s best secret weapon. But how do they get it right? Our Talent Acquisition Technology Startup Incubator, Talent Tech Labs, in Manhattan strives to select advisory members who not only have complementary personality characteristics (in more ways than one), but also have the right set of diverse experiences to serve the startups’ needs. Finding a balance between positively aligning the advisory board with the startup, but leaving room for a little push and shove, is necessary to avoid groupthink and stagnation
Here are a few best practices to follow when selecting advisory board members:
Focus on Metrics, Not Time
Simply put, it’s best to select members who can add value to the startup. By delegating advisors to functional categories and areas of expertise, such as Marketing, Product, Finance, PR, and Sales) you can then specify which metrics determine success. Delineate three metrics on which to measure your prospective board:
- Each member selected has a specific purpose to the group’s mission
- A diverse range of needs are met, if too many members can only be judged on the same metrics, and you need to fill other functions, you can easily deselect them out of the process
- Options are then tied to their metrics of success rather than the amount of time vested
“Much like board members have term limits, advisory board roles should also have term limits-such as 12 months or 24 months. It is awkward and may even be potentially damaging to your business’s reputation to kick out an advisor if he or she is not performing. Setting term limits makes the transition happen naturally.” – Asheesh Advani, CEO at JA WorldWide
We’ve seen it time and time again—the initial excitement is off the charts, but it dissipates as time goes on. This lends itself to the fact that advisors must be placed on the team with metrics in mind to ensure time isn’t overvalued.
It can be smart to launch without providing any stock options, or even compensation, to ensure those who are most passionate about your success (and not entirely motivated by money) are involved. But beware, some advisors are in demand and may expect compensation of some sort in exchange for their valuable time.
“In TechStars, mentors are not compensated monetarily, nor are they given equity for their services. Later on down the line if a mentor invests in or serves in an official advisory role for a TechStars company, that’s a different story. But during the program, there isn’t anything like compensation. That said, the TS program is a great way for mentors, who are potential investors, to work closely with the companies to get to know them well, so I guess the risk mitigation is a compensation in some regard.” – Andy Cheung, TechStars
Finding the right fit personality-wise and experience wise can be quite the task. A few questions we like to ask ourselves regarding potential advisors include:
- How is this person personally or professionally vested into our mission?
- Does this person genuinely care about this industry and the problem we’re trying to solve?
- What can we gain from this person?
- What ulterior motives may this person have?
- Does this person have a body of work that aligns with our values?
Mentors have walked the road you’re walking, advisors have seen your struggles time after time and fellow entrepreneurs are standing right beside you experiencing tough months. Finding others who you can rely on for collaboration isn’t just building a group of thinkers bent on talking about “the business” all the time. It starts as collaboration and a shared interest and turns into a support system of people who have advice on everything from scaling your product to sharing ways to overcome daily stress.
Many startup founders can benefit from applying to and participating within a startup incubator or accelerator as it can help get your business off the ground with support, coaching and even capital. Want to learn more about building your startup advisory board? Link up with Talent Tech Labs.