How to select your advisory board?

One of the most critical tasks as founder of a startup is picking those who will sit on your board of advisors. To discuss this subject, SVASE organized a meeting on the 11th of September in San Francisco and invited two expert panelists:

* Sam Allen, CEO, ScanCafe - Sam has over 15 years of experience in managing intricate engineering projects for companies like Cisco Systems and Northern Telecom. Sam also has extensive operational experience in both Europe and Asia and managed a $10 billion acquisition portfolio while at Cisco.

* Bruce Taragin, General Partner, Blumberg Capital - Bruce has 17 years experience as a technology venture capital investor, entrepreneur, technology investment banker and corporate attorney.

An advisory board is a group of expert individuals appointed to make recommendations to the managers and the board of directors. Advisors do not have authority to vote on corporate matters. An adequate advisory board team will help a company to solve problems without involving the board of directors in the resolution. They advise about diverse areas such as technology, management, strategy, marketing and others.

The number of members involved in the board is not the most important. Usually three are enough. The most important is to choose the right ones. In order to maximize the benefits Sam and Bruce gave three key pieces of advice:

1.- Identify the right person: the entrepreneur should think about his/her lacking skills and try to fill in this expertise. Remember that it is about “individuals” and not about “organizations”. “We want Steve Richards, PhD from Stanford; not a Stanford PhD”

2.- Second the communication has to be excellent. That means that the entrepreneur, after analyzing his/her own weaknesses, has to clearly say what he/she wants and what are his/her expectations in terms of time.

3.- Third the entrepreneur has to be involved in the resolution of the problems. That means that he/she has to talk to the members of the advisory board frequently and spend real time with them. To achieve this goal, it is very important to create an advisory board consisting of professionals with whom he/she can collaborate.

It is also important to prepare the meetings very well by sending the material to the members in advance and by personally talking with them about the subjects to be discussed. Additionally, a final evaluation of the meeting should be done in order to analyze the results of the discussions and trying to emphasize the benefits of the meetings.

The most frequent and useful compensation is the one which creates a win&win linkage between the entrepreneur and the advisors (around 1.5%). Under equity compensation the players give and bring value to each other. Monthly compensation is not the most frequent but it is sometimes used ($500-$2,500 per meeting).