Setting Up an Advisory Board

Alec P. Karys
Genesis: Consulting for Startups & Emerging Companies
aleckarys@rcn.com
508-333-6619
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Goals for Advisory Boards
 Establish credibility by association
 Networking & connections from Board
members
 Review & input on company’s strategy
 Feedback on company’s products or services
 Feedback on technology product/roadmap
 Sounding board for management

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Types of Advisory Boards
 Customer
– Help with product development, marketing &
sales
 Strategic
– Help with strategy, company development &
strategic alliances
 Technology
– Help with technology/product road map

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Member Obligations
 Public relations
– Allow association to be publicized (Web site, pr campaign)
– Willing to talk to press
 Attend meetings & participate
 Respond to phone calls & emails
 Respect company’s confidentiality & non-compete
issues
 Help recruit other members
 Provide strategic & networking help
 Provide feedback on product or service

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Benefits to Members
 Ringside seat at entrepreneurial, high growth
firm
 Ringside seat at “bleeding” edge
 Networking & interaction with other members
 Ability to influence company & industry
 Chance to be associated with success
 Potential financial benefit from shares

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Company’s Obligations
 Protect member’s time
 Protect member’s confidentiality (contact
info) & reputation
 Make meetings & interactions interesting,
stimulating & rewarding
 Provide inside look at company’s strategy
& products

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Benefits to Company
 Provides unbiased outside perspective
 Increased credibility with investors, vendors, customers
 Strategic planning assistance and input
 Enhanced CEO and management effectiveness
 Sounding board for new ideas
 Advice around common start up “pitfalls”
 Adds “ cache” to company
 Introductions to potential investors
 Partnering, joint ventures
 Advice on IP, Trademarks, Copyrights

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Board Composition
 Membership – 2 to 8
– More than 8 hard to manage
– Plan on at least 3 not attending meetings - need
about 8 to get attendance of 5
– Get mix of expertise/experience/industry
 Chairman
– Helps with agenda & scheduling meetings
– Gets additional shares as compensation

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Member Qualifications
 Industry experience
 Startup experience
 Advisor experience
 Research/Academia experience
 Subject matter expertise (engineering, marketing, finance, etc.)
 Time available
 Willingness to work for company
 No conflicts
 Chemistry with founders/principals
 Name value

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Recruiting Members
 Founder’s contacts
 Investor’s contacts
 Cold calls
 Consider prospect’s geographic location (impact
travel costs)
 Look for successful entrepreneurs who may have
time available
 Look for diverse disciplines
 Avoid friends, family members, professional
advisors
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Term
 One-year renewable
 Co-terminus with other members

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Compensation
 No cash compensation
 Pick up expenses involved in attending
meetings (travel)
 Stock options
– Vest in one year
– Additional options for service beyond one year
– Total for board = .5% - 1.0% of shares
outstanding

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Letter of Agreement
 Outlines mutual expectations &
responsibilities
 Lists terms & conditions
 Accompanied by non-disclosure/non-
compete agreement

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Advisory Board Management
 Founders/CEO must be involved
 VP of Marketing can manage day-to-day
functions – especially for customer boards
 Consider once a year joint meeting of
Board of Directors & Board of Advisors
 Be wary of spending too much time

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Meetings
 In person
– Expensive, time-consuming, requires pre & post
meeting work
– Most valuable to members & to company
– 1 to 3 times per year; 2x per year optimal
 Virtual
– Use Web technology
– Saves on T & E
– Easier to schedule
– Save transcripts

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In Person Meetings
 Place
– Off site – away from distractions – hotel meeting room
 Time
– ½ day +; less not worthwhile for travel time & cost; more
may be hard to schedule
 Schedule a years meetings in advance
 Pre-meeting dinner –night before for social agenda
 Agenda
– Develop with Chairman, member input
– Get input from management team
– Clear objectives & deliverables

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In Person meetings (cont)
 Member preparation
– Review agenda
– Homework assignment
 Make interactive – minimize presentations,
maximize feedback, discussion, interaction
 Use company scribe to take notes

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Virtual meetings
 Time should be shorter than in-person (2+
hours)
 Make sure technology works beforehand!
 Dry run with staff to debug process

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Post meeting follow-up
 Thank you notes/emails/call
 Reimburse T & E expenses
 Send out meeting notes & action items
 Confirm schedule for next meetings
 Touch base with those who did not attend

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Public Relations
 Post board bios on Web site
 Include their email & links to their Web sites if
they wish
 Be careful to not imply that their employer is
endorsing the company
 PR should focus on the Board in toto, not on
individuals
 Prepare board members for press & investor
questions

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 BOD vs BOA;Major
Differences
 BOD
– Provide fiscal accountability
– Govern the organization
– Legally accountable
– Fiduciary responsibilities
 BOA
– No formal power, or binding legal authority
– Serve at the pleasure of the business or the CEO
– Provides support, advice and assistance

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Q&A

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