I have seen so many startups founder in the deep end in the early stages of the business because the entrepreneur didn’t or couldn’t ask for advice, or worse still, had no one to ask.
It’s a challenge because the typical (if there is such an animal) founder/entrepreneur likes to run the show, often is the lone wolf who has all the answers and only realizes too late that lack of experience created a mess. Trying to go it alone is also problematic because it often takes much longer to build the company when you’re trying to do everything yourself.
Some strong willed founders may decide that a Board of Directors (BoD) is the answer to their problems. They think a strong Board may draw investors and make the business seem bigger and more corporate when in fact they are usually not ready for the pressure, drama and cost ramifications of a formal Board of Directors.
What could be the problem with having a formal Board of Directors? Lots! The BoD typically works on legal, finance and strategy. They also are in a position to control the CEO in more ways than his compensation. They can direct the actions of the company and can even fire an incompetent or disruptive founder.
Every corporation requires a Board of Directors but mostly the principals in the company take that role in the early days. Bringing in outside experts dilutes your responsibilities as a founder and diminishes your control.
It often comes down to why you need a Board, and what do you really want from them?
If you want someone to help you run the company and don’t mind giving up control and the money it takes to get a good Board, then you’ve found the right vehicle. There have been enough movies from Hollywood that paint a dim picture of Boards and while most are dramatized bad things can indeed happen to naive founders.
Consider a Board of Advisors Instead of Directors
Let’s take a look at the Board of Advisors (BoA) concept. I certainly espouse a founder using a mentor as a “go to” person, but imagine a Board of Advisors comprised of mentors? I love BoAs. The Advisory Board tends to be made of volunteers, ex-officio so their decisions are non-binding and their sole goal is to advise you.
A good Board of Advisors will guide you like a BoD can’t because they have no vested interest in your company except to help. Of course, if you sell your company for a billion you might throw a little money their way if they were instrumental to your success. Most people I know join a Board of Advisors as a way of paying it forward.
I love working with startups and young people so I’m a sucker for an invite to join a BoA. I’m on Richard Branson’s Centre for Entrepreneurship and love the juice his numerous entrepreneurs bring to their startups, and to me. Most of us don’t consider compensation except maybe a nice dinner once a year if that.
It’s a no brainer for a founder to bring on a BoA. Select the advisors carefully because you could be testing them for a Board of Directors position down the road. Select them for their skills to offset or complement yours and feel free to ask for their network contacts –it comes with the territory!
A good BoA will more likely advise you on marketing, product issues, or general business related issues so the advice is comfortable to take because it comes from experience and a place of support. It’s a safe harbour, a sounding board without binding decisions, and it brings a lot of prestige to a fledgling startup that has carefully selected the Advisory Board members.
There is some debate whether an investor is more likely to appreciate a ready-made Board of Advisors. From my experience investors appreciate that the founder has sought outside advice. The investor will most likely want one of ‘their people’ on a Board of Directors but the Advisory Board is innocuous enough that it remains a positive influence to an investor.
The truth of the matter is many BoAs bring investors to the table as part of their involvement. If your friends are looking for investments and you mention over a beer that you are advising a startup their ears will perk up. It’s human nature. Why invest blindly when you can have an insider’s perspective?
For me, it all comes down to timing. If you’re an early stage startup, you will certainly benefit from an Advisory Board with deep industry experience, strong reputations and wide professional networks gained from years of work.
So the choice is yours! If you can find several people to help you on a Board of Advisors, you may find it’s one of the best decisions you’ll ever make.
Gary is CEO of Bizzo Management Group Inc. in Vancouver. He has mentored over 1000 business leaders, investors and entrepreneurs. London-based Richtopia placed Bizzo on the Top 100 Global Influencers in the World for 2018