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Setting Up an Advisory Board

Stephen M. Bayle

Consulting for Startups & Emerging Companies

steve.bayle@gmail.com978-505-1243

This work is licensed under the Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 Unported

License. To view a copy of this license, visit http://creativecommons.org/licenses/by-nc-nd/3.0/ or send a letter to

Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA.

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Types of Advisory Boards

Customer 

 ± Help with product development, marketing &

salesStrategic

 ± Help with strategy, company development &

strategic alliances

Technology

 ± Help with technology/product road map

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Member Obligations

Public relations

 ± Allow association to be publicized (Web site, pr campaign)

 ± Willing to talk to press Attend meetings & participate

Respond to phone calls & emails

Respect company¶s confidentiality & non-

compete issues Help recruit other members

Provide strategic& networking help

Provide feedback on product or service

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Benefits to Members

Ringside seat at entrepreneurial, high

growth firm

Ringside seat at ³bleeding´ edge Networking & interaction with other 

members

Ability to influence company & industryChance to be associated with success

Potential financial benefit from shares

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Company¶s Obligations

Protect member¶s time

Protect member¶s confidentiality (contact

info) & reputationMake meetings & interactions interesting,

stimulating & rewarding

Provide inside look at company¶s strategy& products

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Benefits to Company

Provides unbiased outside perspective

Increased credibility with investors,

vendors, customersStrategic planning assistance and input

Enhanced CEO and management

effectivenessSounding board for new ideas

Advice around common start up ³pitfalls´

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Board Composition

Membership ± 7 to 10

 ± More than 10 hard to manage

 ± Plan on at least 2 not attending meetings - needabout 7 to get attendance of 5

 ± Get mix of expertise/experience/industry

Chairman

 ± Helps with agenda & scheduling meetings ± Gets additional shares as compensation

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Member Qualifications

Industry experience

Startup experience

Advisor experience

Research/Academia experience

Subject matter expertise (engineering, marketing,finance, etc.)

Time availableWillingness to work for company

 No conflicts

Chemistry with founders/principals

 Name value

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Recruiting Members

Founder¶s contacts

Investor¶s contacts

Cold callsConsider prospect¶s geographic location

(impact travel costs)

Look for successful entrepreneurs who mayhave time available

Avoid friends, family members,

 professional advisors

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Term

One-year renewable

Co-terminus with other members

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Compensation

 No cash comp

Pick up expenses involved in attending

meetings (travel)Stock options

 ± Vest in one year 

 ± Additional options for service beyond one year 

 ± Total for board = .5% - 1.0% of sharesoutstanding

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Letter of Agreement

Outlines mutual expectations &

responsibilities

Lists terms & conditionsAccompanied by non-disclosure/non-

compete agreement

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Advisory Board Management

Founders/CEO must be involved

VP of Marketing can manage day-to-day

functions ± especially for customer boardsConsider once a year joint meeting of 

Board of Directors & Board of Advisors

Be wary of spending too much time

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Meetings

In person

 ± Expensive, time-consuming, requires pre & postmeeting work 

 ± Most valuable to members & to company ± 1 to 3 times per year; 2x per year optimal

Virtual

 ± Use Web technology

 ± Saves on T & E ± Easier to schedule

 ± Save transcripts

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In Person Meetings

Place

 ± Off site ± away from distractions ± hotel meeting room

Time

 ± ½ day +; less not worthwhile for travel time & cost;more may be hard to schedule

Schedule a years meetings in advance

Pre-meeting dinner ±night before for social

agenda Agenda

 ± Develop with Chairman, member input

 ± Get input from management team

 ± Clear objectives & deliverables

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In Person meetings (cont)

Member preparation

 ± Review agenda

 ± Homework assignmentMake interactive ± minimize presentations,

maximize feedback, discussion, interaction

Use company scribe to take notes

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Virtual meetings

Time should be shorter than in-person (2+

hours)

Make sure technology works beforehand!Dry run with staff to debug process

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Post meeting follow-up

Thank you notes/emails/call

Reimburse T & E expenses

Send out meeting notes & action itemsConfirm schedule for next meetings

Touch base with those who did not attend

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Public Relations

Post board bios on Web site

Include their email & links to their Web sites if they wish

Be careful to not imply that their employer isendorsing the company

PR should focus on the Board in toto, not onindividuals

Prepare board members for press & investor questions

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BOD vs BOA;Major 

Differences

BOD

 ± Provide fiscal accountability

 ± Govern the organization

 ± Legally accountable ± Fiduciary responsibilities

BOA

 ± No formal power, or binding legal authority

 ± Serve at the pleasure of the business or the CEO ± Provides support, advice and assistance

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Q&A