Two years ago, I founded a biotech startup company that became profitable within its first year. Like any unaccompanied founder, I have had to make all the decisions about the business. The very best decision I ever made, though, was to bring on a team of Advisors. I created a "Board of Advisors" and invited 5 individuals to join.
Here are the top 10 reasons why having this set of Advisors has been so valuable:
They know a lot more than I do: My company's 5 advisors range in age from early 30s to mid 60s. Some are technical experts in my company's technology areas, some are expert project and product managers for similar types of biotechnology, and one is an experienced CEO of a biotech company. The bottom line is that no matter how smart or experienced I may be, arranging 5 other smart and experienced people gives me access to a pool of wisdom that I cannot possibly have myself.
They see the forest for the trees: My advisors do not get bogged down in the specific problems of individual projects, nor are they affected by the cyclical ups and down that my startup (or indeed any company) experiences. When they give advice, it is always with the long-term best interests of the company firmly in view. In short, they are far less emotional than anyone working directly for the company. It never fails that in any situation requiring their input, at least one advisor will suggest of a possible alternative that I didn't think of. While I don't always choose to take their advice, having a clear set of intelligent options is essential.
They have no ulterior motives: Specifically, their only function is to help the company be successful. I pay my advisors a fraction of the company's profits that is entirely at my discretion, but they do not have equity and have not invested their own money in the company. With shareholders, or venture capitalists in particular, financial goals of the investors can sometimes override the interests of the company. For example, sometimes VCs are more interested in earning a "solid double" on their money, rather than helping to build long-term strength and growth. By setting up my Board of Advisors as I did, the advisors self-selected themselves as people who were genuinely interested in helping the company without any promise of financial return. Thus, they have no ulterior motives. They just want to help.
They can add a line to their resumes: Even though the Board of Advisors is just a fabricated entity, they can still add it to their resumes. It's clearly not the same thing as sitting on an official Board of Directors (I am the only member of my company's BoD), but nevertheless if my company continues to show rapidly increasing revenues, my advisor's roles will be a significant achievement. If they so choose, I will allow them to speak freely about their role with my company, and will even arm them with some financial data to demonstrate their value. In addition to simply being helpful to a small business, the ability to show how and how much they helped is a major incentive for my advisors.
They help maintain and expand your network: Like any founder, I am really busy running the company. I don't have as much time as I once did to network by attending conferences, seminars, and the like. My advisors, however, do have the flexibility to network and they don't run in the same circles as me. Without me even asking, they help advertise my company, and have brought both potential partners and potential customers right to my doorstep. I don't think a Board of Advisors can be relied solely upon for networking, but they definitely help make up the slack created by founding/CEO responsibilities.
They have access to resources: Like any startup, my company has new needs crop up all the time. When we need new services (for example legal, accounting, manufacturing, labor, etc), there's a good chance that I don't have a lot of experience in the area and don't know where to turn. But it's almost always the case that one or more of my advisors can point me either to a good resource for the services I need, or at least can send me down a path to figure it out for myself. Their advice goes well beyond "just look in the yellow pages!"
They have easily manageable expectations: As I alluded to above, my comapny's advisors receive a percentage of my company's profits. When I set up this arrangement, I was clear that the percentage was entirely at my own discretion, could go up or down each year regardless of the fortunes of the company, and could be zero if the company had no profit or if the profit was needed to pay me or make investments for the company. As a result, both I and my advisors knew going in that there should be no monetary expectations and that any cash they see should be viewed as a bonus. This takes a lot of pressure off me; I am happy to share the company's wealth so that when I do well, my advisors make a little money too, but I don't worry about my advisors expecting, or even worse needing, to get paid. By clearly defining the role at the beginning, I don't need to worry about letting them down. Just being respectful, professional, and communicative is enough.
They provide business opportunities: Because all of my advisors are involved in biotech, business opportunities arise from time to time. I don't mean just what I mentioned above--providing potential partners or customers--but rather that my advisors themselves are potential business partners. For example, a few times an advisor's company has developed a product concept for its own customers that is something my company could manufacture and provide as an OEM product. The pre-existing trust and familiarity between the advisor and me makes such opportunities among the easiest to execute.
They don't get equity: I have implied this above, but let me state it directly. Since the advisors don't get equity, I retain full control of the company, and full benefit should it have a successful liquidity event such as getting acquired. Mind you, my advisors will do well if I sell the company. But there is a world of difference between trusting my own judgment and generosity to treat my advisors well and being legally obligated to involve them in high-level decisions or pay them a certain percentage of revenue or profits.
They ultimately have no vote: This is subtly different from the other points. It boils down to the fact that if all goes well, the advisors are providing suggestions, both broad and specific, but no matter how strongly any of them feels about their position, ultimately I have full authority on all decisions. There is no question about this, and as a result the communication with the advisors is never contentious. In larger companies, supervisors often tell their direct reports to present options and alternatives in a clear and open manner, with no ulterior motives. In practice, this is very difficult to achieve in a larger company due to office politics, individual career paths, and a wide array of personalities. In my startup's case, however, this kind of transparent alternative suggestion is exactly what I get. The advisors' roles are clear, and I have the only voice of authority. There are no hard feelings about decisions, no politics, no wrangling.
Like any startup, my company was cash strapped at the beginning, and even now couldn't afford to hire a full-time staff that brings what my advisors bring. But through the way we constructed the Board of Advisors, I found a way to get much of the same value with low cost and low risk. No decision could be better.
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