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Should your startup have an advisory board? (bothsidesofthetable.com)
25 points by onewland on Oct 12, 2009 | hide | past | favorite | 7 comments

I have worked extensively with startups in Silicon Valley since 1984 and have seen every shade of advisory board, ranging from those set up for pure window dressing to those used extensively by founders for insightful continuing advice.

The latter usually arise from pre-existing relationships between one or more of the founders and the advisors. Normally, the advisor is someone who wants to assist the founders and whom the founders accordingly want to reward by small equity grants via the advisory director role. These types of advisory boards, in my experience, tend to be of significant value to early-stage startups and are well worth the small equity grants involved (which, by the way, tend on average to be more like .1%/yr of service rather than the higher number suggested by the author of this piece). The informal nature of the relationship also avoids many of the hassles associated with trying to have such an advisory board meet from time to time in some formal manner. In essence, what you have with such boards is a healthy working relationship from which all parties benefit.

The "window dressing" variety of advisory board is often as phony as an undersized glass eye that spins randomly with every blink. This often involves the so-called industry luminaries used to make the startup look much more impressive than it really is. In essence, such advisors hire out their names (and, yes, they will insist upon larger equity grants and often for some form of cash compensation as well, as for example for every meeting attended). While one can never say categorically that such advisors do not add value to a startup, their primary function is to add name-value and hence the value of their contributions apart from name value tends to be limited. There are exceptions but, in my experience, not many. In general, these types of advisors are a clear mis-match for most early-stage startups, though they often help later-stage ones needing "company profile" dressing for IPO, etc.

By the way, founders still occasionally confuse the role of advisory director with that of a board director. There is no connection whatever between the two roles. The former is basically an outside consultant only and has no management-level authority; the latter, of course, has tremendous management authority (and corresponding liability risks as well, which the advisory director does not).

Appoint them very carefully.

Understand that it feels good to have an 'advisory board' but at the end of the day, the only person who's going to get your biz off the ground is you.

[EDIT: My own experience: most people are more than happy to give advice without being formal advisers]

A fundamental question to ask is do you want the advisory board for show off or to get actual advice? I think there are some specific cases where you need an A-star list. But more often than not, what you really need is advice for which you don't need to put together an official board until later in the venture.

I like the idea of getting help from people. When/if your startup is going somewhere, pay back for their help/advice in form of equity--as opposed to getting an A-star list put together on day 1 which often just ends up looking shiny but rarely useful.

There's a difference between "Advisory Board" (capitalized) and "advisory board". The former is more for show than function. The latter is more for function than show and will make your business appear more attractive because it actually is more attractive. Skip the first and keep the second.

When all is said and done, you will have to perform and deliver. Embrace whatever you can to help that. If something is cosmetic and doesn't help you, people will eventually see it for what it is.

If the value of the name is greater than the value of the advice, skip it.

I feel like everyone thinks 'man you need an advisory board to be considered real.' Most meetings with anyone investing in you they ask 'who is on your board.' Even with all that being said, I just don't see the value. Most people will help you along your way because they care about what you are doing. The ones that want something from you in return, I would stay away from anyway. Either way, like hwijaya said, its all up to you.

Assemble an advisory board to decide.

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