How to build an advisory board? 

Sam Cronin

2022-04-24

3 min read

Sam Cronin is the digital health investment manager at Arkin Holdings

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We notice that what entrepreneurs often need, especially at the earlier stages, is access – access to information, access to advisors, access to customers. One way to do this is to go out and do the leg work yourself – highly inefficient (usually!). You risk wandering the desert for 40 years and throwing away the most valuable resource you have as an entrepreneur (and a human being): time.

 

Another way is to hire a ‘rockstar BD’, except a) rockstars are expensive and especially in the early days of a startup you often don’t have the capital (nor do you necessarily know exactly what persona you need for your BD!); and b) even rock stars have a limit to their repertoire – for example, in healthcare, most BDs skilled at selling to pharma won’t know how to sell to providers or payers (and the more granular we go, the more niche the required skill set becomes), etc. I’d imagine this translates to other domains too.

 

Yet another way is to tap into the hive mind.

 

We’re huge fans of querying the collective experiences of the hive mind. It exponentially shortens the learning curve and the time to progress. It’s the equivalent of navigating using a map hand-drawn from a single person’s memories, versus using Waze.

 

Your advisory board is essentially a highly curated, business-focused navigation system for the CEO, assembled so that amongst them all they either have the answer, can probably help find the answer, or can make a warm intro to whoever might have the answer.

 

So what does that mean and why build one?

 

When built well, your Advisory Board can act as an extension of your core business-facing team (i.e. CEO, VP BD, etc.) and deliver outsized value. These are senior, respected and connected figures in your sector, able to offer you as much internal value (i.e. strategic thinking) as external (i.e. networking and promoting). In an ideal world they’ll have domain expertise, global business expertise, and a list of contacts and customers that would make any competitor envious.

 

The result of this? Imagine if you could take everything you think you’ll know in another 25 years of professional activities and put it into your brain today. Then multiply that across ~4 different, incredibly rich and diverse lives and successful careers, with broad networks that reach to your strategic customers. Then put that knowledge and those networks at your disposal, there to help accelerate anything you’re trying to achieve, make warm intros, etc. – whilst simultaneously challenging you from their vantage point.

 

That’s why you want an advisory board.

 

What is it not?

 

Just to note, an advisory board does not equal advisors. Let me repeat that: an advisory board does not equal advisors. Almost every pre/seed deck (especially if the science is more complex) lists “advisors” – these are almost always not like an advisory board. These are often figures that are there by happenstance (e.g. the PhD advisor of a founder, the friend who had an exit in a totally different space, a marketing expert, etc.) and placed there to seemingly add credibility to the venture. Most of the time they don’t add the credibility you think they do and, because you’re a poor startup, you’ve often given away valuable options.

 

Persona and profile

 

Finding people at the right level is challenging, especially for an early-stage company. It’s hard to say that there’s a right way to build this but here are some points that might help in determining the right personas and targeting the right people:

 

  1. Desire: they need to want to go on a journey with you, to be excited by the company vision and all the possibilities. Choosing senior figures who don’t ‘need’ this work is best. That doesn’t mean that they need to be fantastically wealthy, but they should ideally be a delicate balance of successful enough and hungry enough – and they should definitely be excited by the potential of how much that ESOP will be worth one day (we’ll come onto compensation later but in short, a combination of cash for the short-term and options for the long-term).
  2. Deep industry knowledge about your sector: they have to live and breathe this space, to understand all the pieces on the board and how they move, to be able to add strategic angles that it would take you months or years to reach on your own. It will help significantly with both strategy and credibility if they are the persona of your target user or customer.
  3. Respected nexus: they need to carry respect within the target industry because knowing people isn’t enough if they don’t trust the recommendation (i.e. warm intros to meet you), and they need to be able to earn trust of the new people they meet. A nexus exponentially cuts the time it takes you – or them – to reach the right people and decision makers in your target customer orgs. If you’re only getting advice from them and not practical aid, there’s probably someone better you can find who could do both.

 

If you’re in a space that’s science-heavy (e.g. healthcare, quantum computing), don’t settle – find the scientists who have done business or at least commercialized their research, or the physicians who have built something, etc. It’s not a rule but more often than not, the right people will not be Israeli – since we’re always building for foreign markets, find people who have lived their careers in those markets.

 

Compensation

 

This is a challenging one – there’s a reason many startups give options to their advisors rather than cash: they don’t have the money. But it’s a little hard to motivate someone to perform at their best when you’re offering them Monopoly money. The usual balance is a combination of cash and options. As mentioned earlier, cash shows them you value their time in the short-term while they still get to know the company and prove themselves, whilst the equity is what keeps them motivated for the longer-term.

 

One strategy is to start off paying them as an advisor and setting various KPIs to determine what happens after e.g. 6 months. If you split the payment between cash and options (of course, with a vesting period) it gives you some time to work out whether you’re getting value from them that’s worth cash, or whether you’re getting value that’s worth 0.1-1% of the soonicorn you’re working on. 

 

How do you build one?

 

Short answer? Slowly and carefully.

  1. Always be hustlin’ – maybe from an article you read, or a conference you attended, or a thread on LinkedIn or Twitter… Remember: “opportunities multiply as they are seized”. On the whole, people like it when someone asks for their advice. You need to demonstrate your expertise and the excitement of this journey and dream to pique their interest and gain their trust.
  2. Understand what’s of interest to them – this will vary significantly but it shouldn’t just be take, take, take, and you need to nourish their brain and soul with more than just money. The more connections you build between you and them, the tighter the relationship and the more value you’ll each get.
  3. Ask them who else would add value, then ask them for warm intros, and/or once you have one or two on board, you can use them or their names to convince others. If they’re known names in the industry, others will respect that they’re on board and see that it adds genuine credibility.
  4. Lastly, do you best to build a diverse board – genetics and natural selection have shown us that variety is better.

 

Final words – putting our money where our mouth is

 

We recently announced our own Advisory Board. We’ve been quietly working with them for a while, and it is an outstanding experience. It took some time to build and not a small amount of work – they’re titans (and we don’t use that term lightly) of US healthcare. They’ve all had incredibly successful careers, curry deep respect across the industry, and have probably forgotten more than I’ve learned.

 

There’s no substitute for knowledge, experience, and relationships, and done right it can be like turbocharging an engine.

 

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