Should I create an advisory board?
Takeaway: A well-curated advisory board can provide invaluable strategic guidance and industry credibility, but you must formalize the relationship with clear agreements and vested equity to ensure real, sustained engagement.
As an early-stage founder, you are constantly facing challenges that are outside your core area of expertise. Building a formal advisory board is a powerful and capital-efficient way to surround yourself with experienced industry veterans who can provide targeted advice, make critical introductions, and lend credibility to your young company.
However, an advisory board is not just a collection of impressive names on a slide deck. A purely ceremonial board provides no value. To be effective, the relationship must be structured with clear expectations, formal agreements, and aligned incentives.
The Role of an Advisor vs. a Board Director
It is critical to understand the distinction between a board advisor and a member of your Board of Directors.
Board of Directors: Directors have formal fiduciary duties to the company and its stockholders. They have voting power and are part of the legal, governing body of the corporation.
Advisory Board: Advisors are informal counselors. They have no fiduciary duties and no formal voting power. Their role is to provide their expert advice and to open up their professional network for the benefit of the company.
What to Look For in an Advisor
A great advisory board is a curated team of experts designed to fill specific gaps in your founding team's knowledge and network. You are not looking for generalists; you are looking for specific, targeted expertise. Key roles can include:
The Industry Veteran: A retired executive from a major company in your industry who can provide deep domain expertise and high-level customer introductions.
The Technical Expert: A renowned scientist or engineer who can provide guidance on your technology roadmap and help you solve difficult technical challenges. For a biotech company, this might be a Scientific Advisor who is a professor or PI at a major university.
The "Go-to-Market" Expert: A seasoned sales or marketing executive who can help you build your initial customer acquisition strategy.
Formalizing the Relationship
To ensure your advisors are engaged and aligned, you must formalize the relationship.
The Advisor Agreement: Every advisor should sign a formal agreement that outlines their specific responsibilities, their time commitment (e.g., "participate in quarterly calls and be available for ad-hoc advice"), and the terms of their compensation.
Equity Compensation: Advisors are almost always compensated with a small grant of stock options or restricted stock. A typical advisor grant is in the range of 0.1% to 0.5% of the company, vesting over a period of one to two years. This vested equity is the key to aligning their long-term interests with the success of your company.
Confidentiality and IP: The advisor agreement must include a strong confidentiality clause to protect any sensitive information you share with them.
A well-chosen and properly incentivized advisory board can be a massive strategic advantage for a startup. It is a powerful way to bring decades of experience and a world-class network into your company at a stage when you could never afford to hire those individuals as full-time executives.
Disclaimer: This post is for general informational purposes only and does not constitute legal, tax, or financial advice. Reading or relying on this content does not create an attorney–client relationship. Every startup’s situation is unique, and you should consult qualified legal or tax professionals before making decisions that may affect your business.