Truth 32. Board of advisors
A board of advisors is a panel of experts asked by a firm’s managers to provide counsel and advice on an ongoing basis. Unlike a board of directors, a board of advisors possesses no legal responsibility for the firm and gives nonbinding advice.[1] A board of advisors can be established for general purposes or can be set up to address a specific issue or need. For example, some start-ups set up customer advisory boards shortly after they are founded to help them fine-tune their initial offerings.
A board of advisors can be established for general purposes or can be set up to address a specific issue or need.
Similar to a board of directors, the main purposes of a board of advisors is to provide guidance and lend legitimacy to a firm. Both of these attributes are seen in the advisory board set up by Laura Udall, the entrepreneur who started ZUCA, a company that makes backpacks on rollers for school age kids. When asked about the types of advice and support she gets from people outside her immediate management team, Udall said,
“The company has a board of directors, but I also have created a wonderful board of volunteer advisors that has been very helpful with tactical and strategic decisions. The advisory board has evolved over the years as a result of my network. I asked each of the members to join as a result of their specific expertise. It now includes a CFO/COO of a prominent corporation, an executive in the luggage industry, a mom inventor who has founded several successful companies, a product designer, and a manufacturing expert.”[2]
Imagine the type of advice and support Udall gleans from this group of advisors.
Most boards of advisors have between 5 and 15 members and interact with each other and with a firm’s managers in several ways. Some advisory boards meet three or four times a year at the company’s offices or in another location. Other advisory boards meet in an online environment. In some cases, a firm’s board of advisors are scattered across the country, making it more cost-effective for a business’s owners to interact with the members of the board on the telephone or via e-mail rather than bring them together physically. In these situations, board members don’t interact with each other on a face-to-face basis, yet they still provide high levels of counsel and advice. The fact that a start-up has a board of directors does not preclude it from establishing one or more advisory boards. For example, Coolibar, a maker of sun protective clothing, has a board of directors and a medical advisory board. According to Coolibar, its medical advisory board “provides advice to the company regarding UV radiation, sunburn, and the science of detecting, preventing, and treating skin cancer and other UV-related medical disorders, such as lupus.”[3] The board currently consists of six medical doctors, all with impressive credentials. Similarly, Intouch Technologies, a medical robotics companies, has a board of directors along with a business and strategy advisory board, an application and clinical advisory board, and a scientific and technical advisory board.[4]
The fact that a start-up has a board of directors does not preclude it from establishing one or more advisory boards.
Although having a board of advisors is widely recommended in start-up circles, most start-ups do not have one. As a result, one way you can make your start-up stand out is to have one or more boards of advisors.