Optimizing the Startup Board of Advisors: A Comprehensive Guide

Startup journeys are often characterized by the ebb and flow of relationships, partnerships, and support systems. Among these, the organization and composition of a startup's Board of Advisors (BoA) play pivotal roles in shaping the company's success. In this article, we explore the typical number of Board of Advisors, the distinction between boards and advisors, key considerations, and tips for optimal board composition and management. We will also address the importance of commitment, responsiveness, and the best practices for securing valuable advisory input.

The Distinction Between Boards and Advisors

It is crucial to understand that the roles of boards and advisors are fundamentally different, and failure to grasp this distinction can lead to misunderstandings and inefficiencies. According to industry experts, boards are essential for governance, strategic oversight, and investor relations, whereas advisors often fill gaps in an entrepreneur's expertise and provide strategic guidance.

Given the diverse responsibilities and distinct purposes of boards and advisors, it is advisable to reach out to as many excellent advisors as possible. If these advisors are willing to provide their services for free, consider it a huge advantage. However, when engaging advisors, it's crucial to ensure their time is used efficiently and that their contributions significantly impact the startup. For a more structured agreement, be sure to refer to the FAST agreement provided by the Founder Institute if you find it necessary to grant some shares in exchange for their expertise.

The Ideal Number of Board Members

When it comes to the number of board members for a startup, it's important to strike a balance. In the initial stages (pre-Series B), a typical BoA composition often includes 3 to 5 members, which allows for a balance between oversight and flexibility. Below, we delve into the reasoning behind this range and provide insights into the roles each member should play.

Common BoA Composition

Typically, a BoA consists of the following roles:

2-3 Co-founders (if all are not at the helm, one who is CEO is usually preferred) 2-3 Investors or investor-led members 1-2 independent advisors chosen by the founders to support specific areas of expertise

This structure allows for effective governance, strategic oversight, and industry expertise, without overcomplicating the decision-making process.

Why Not Let Investors Choose the Board?

A key consideration is the independence and control of the BoA. It is essential to avoid a situation where investors can appoint members of the board. While initial financing round investors may have a seat, founders should ensure that key decisions are made democratically. The presence of an independent advisor (or two) ensures that the founding team retains control and can make strategic decisions based on the best interests of the startup. This independence is crucial for maintaining the startup's vision and direction.

Avoiding Board Observers

Although board observers may not have formal voting rights, their influence on discussions and decision-making processes cannot be overlooked. To maintain clarity and control, it's advisable to avoid appointing board observers. This practice ensures that the BoA remains a clear accountability mechanism and decision-making body for the startup.

Case Studies

To illustrate the effectiveness of a well-structured BoA, we can look at a few case studies. For instance, a startup that had a BoA of eight members found that four of them were well-connected individuals who started one of the most renowned companies in the industry. The remaining four were respected individuals in the segments the startup was targeting. This diverse and motivated team provided significant strategic insights and support, contributing to the startup's success.

The Ideal Number of Advisors

While the number of board members is essential, the quality and responsiveness of advisors are equally important. A general consensus suggests that a BoA of 4 to 7 members is ideal, enabling the startup to cover a wide range of areas including strategy, human resources, sales, technology, and growth. The key is not just the number of advisors but their commitment and responsiveness to opportunities.

Commitment and Responsiveness

The success of a startup is greatly influenced by the responsiveness and commitment of its advisors. Founders should prioritize working with advisors who are dedicated to the startup's success and who can provide regular guidance and insights. Cultivating a relationship of trust and mutual benefit can significantly enhance the startup's trajectory.

Conclusion

In summary, the typical number of Board of Advisors in a startup ranges from 3 to 5 members, with a focus on controlling decision-making and maintaining independence. While the number of advisors can vary, the quality and responsiveness of these advisors are crucial for the startup's growth and success. By carefully selecting and managing both the board and advisors, founders can create a robust support system that propels their startup towards achieving its goals.