Want VC investments?
Build an advisory board first.
Few people talk about it, but building a solid board of advisors is a great first step before fundraising. Getting funding from investors will be so much easier when you have advisors backing you up.
Don’t need convincing? Download advisory agreement template here and start building your advisory board right now.
Why get an advisory board?
Introductions and access to capital
You’re not asking advisors to invest, but once you get them excited about your product, they’ll start talking about you in investor circles. And that’s exactly what you want: somebody else selling your startup for you.
It’s easy to get caught up in daily operations and lose sight of competitors (or make an early-founder mistake of thinking you don’t have competitors). Advisors can help you gain a better view of the marketplace and see competitors you might be overlooking.
Credibility (social proof)
It’s hard to stand out to investors because they hear thousands of pitches every year. One of the easiest ways to get noticed is to have people they trust vouching for you (by being your advisors).
It’s a classic example of “borrowing trust” — investors might not know you, but if they know your advisors (or at least know about their achievements), you can use the trust investors have for them for your advantage.
How to approach potential advisors
Some of your mentors and contacts may already be acting as advisors, just without the title. They’re the easiest to ask: tell them how much you appreciate their advice, then say you’d be honored if they considered joining your advisory board.
It’s a bit harder to approach strangers, but it’s doable. Use LinkedIn to see if you have any mutual connections (improve your LinkedIn profile and reach using hacks from our guide). If you do have a mutual connection, ask that person to introduce you. If you don’t, send a cold email to the potential advisor.
Here’s a template you can use:
My name is [Jane], and I’m the founder/CEO of [Startup], a company that [5-10 word explanation].
I’m reaching out because you have 20+ years of experience working with healthcare startups/successfully scaled your company from two employees to 2,000/are an expert in financial tech, etc.
I’d love to buy you coffee or lunch (at your convenience, of course) and get your feedback on [Startup] product/roadmap/growth strategy/other. I think you’d be interested to learn the inside of what we’re building.
A couple of notes:
- Meeting in-person is ideal, but if you can’t meet with them (or they can’t), suggest a call instead.
- Do not ask them to sign an NDA—you’ll come across as presumptuous and ignorant.
- Don’t say you’re reaching out because you want them to be your advisor. A) You don’t know if you want them yet, and B) That’s like asking someone to be in a relationship with you before your first date.
How to work with advisors
Here’s a general outline for how to work with advisors: only ask them for favors that won’t take more than 5 minutes of their time.
An experienced advisor can take 5 minutes to solve a problem that would take you 6 months, so it’s a good trade-off.
Questions you can ask an advisor include:
- Asking for a relevant intro;
- A “don’t do it” advice;
- Inquiry about hidden opportunities or costs of something you’re about to do.
Disclaimer: you don’t have to follow the advice you get from your advisors, but on practice, it’s the most valuable advice you can get.
You should ping your advisors no more than 2-3 times a month, and make sure it’s something they can resolve quickly.
How to compensate advisors
You don’t ask advisors to invest their money, but you do ask to invest their good name, so you still need to be good to get that investment.
Advisors are not employees. They don’t bear responsibility for your company, but they can introduce you to very important people at a cocktail party.
The standard protocol is to give advisors a nominal share of your company as compensation, plus reimburse their expenses for helping you out (so it’s good practice to pay for their dinner with you, etc).
It’s standard to allocate 0.25-1% company share vested over 2-3 years to advisors.
Ideally, your advisors are such a big deal that they don’t need cash compensation. If they request monetary compensation right away, they are probably not right for your advisory board.
What agreement to use with advisors?
Want to act on what you just learned? Download an advisory agreement template that you can use here.
Let us know if you have any unanswered questions or other thoughts on this material in the comments — we’d love to hear from you!