By SUSAN LAHEY
Reporter with Silicon Hills News
The boards had too narrow a focus, frequently just trying to “buy” customers, for example. Or everyone on the board came from the same industry. Often they failed to bring in a facilitator from the outside who could speak plainly and tell the bigwig board members to wait their turns. Knicely gave a RISE session Monday noon at Tech Ranch on how to build an advisory board.
An advisory board, Knicely said, can help a business see the unseen…find out what it does not know. As a venture capitalist, he said, experience taught him to judge in three minutes whether a business was going to make it or not. That’s the kind of knowledge it helps to have on an advisory board. A well placed board member can give you insight to your competition, bring funds your way and help you analyze your market position in addition to bringing your company to the attention of other influential people.
“The number one weakness of startups, the missing link in the chain, is how do we understand the needs of the market and how do we value comparatively those needs?” he said. An advisory board can help with that.
Startups, he said, begin with mentors in the ideation stages and move to advisory boards. By the time they contract someone to be on an advisory board, they have to have their act together, know what they want from the advisor and respect the advisor’s time. He knows people who have effectively used LinkedIn to find advisors who could help with the early stages of the business. But they have to focus on what that advisor’s passion is and make connections based on that. That kind of relationship and mutual interest is going to produce the best board.
Startups should choose advisors with the same care professional teams use to choose their players.
“I love Austin,” Knicely said. “I’ll be buried here…but a lot of startups treat building their business like a pick-up football game. ‘Hey, man, you’re available.”
Not that all advisory members have to be high-performance athletes. Having too many personalities in the room can make it difficult to build consensus and move forward. An advisory board also needs some “quiet doers.”
They shouldn’t be from the same industry. Knicely showed a picture of an apple, loosely pieced together from slices of four different kinds of apples. From a design standpoint it looked cool, but when he asked the audience to evaluate it as a product, they pointed out that some customers might not like the disparate flavors, it might not last very long since sliced apples have a short shelf life, it might be difficult to package and ship—considerations that might have fallen through the cracks in a room full of designers.
He had several other considerations:
- The relationship should be between the CEO and the advisory board, but communications about meetings etc. should be outsourced. It’s too time consuming. “When you’re starting a business, you don’t even have time to talk to your wife,” Knicely quipped.
- Meetings should be regular and facilitated by someone from the outside who has the professionalism and emotional maturity to handle conflict deftly but who doesn’t have to worry about offending anyone. He remembered an incident with one board member jabbing a pen into the $300 Egyptian cotton shirt—and the arm– of another. Somebody needs to be there to handle that.
- Meetings shouldn’t try to cover everything. The CEO has to set priorities and the agenda and outcomes must be clear.
- Meetings should include fun. With huge corporations, board meetings involve retreats to resorts or at least golf. In Austin, a startup on a budget can find plenty of fun for its advisory board members after the meeting.
- Startups should require no more than an hour a month—or a 3-hour quarterly board meeting—from advisors. It’s crucial to know, upfront, what kind of time and help the advisor is willing and able to offer and respect that boundary.
- Advisory board members should be rewarded. Contracts customarily run for two years with a three-month “cliff” meaning no board member receives equity until after three months of solid performance. After that three months, he has generally seen half of a percent to one percent equity per board member.
To get really good advisors, Knicely said, the most important thing is relationship and treating advisors with respect.
“People will ask ‘How did you get this guy on your advisory board?’” Knicely said. “But it’s all about how you treat people.”