What does an Advisory Board do?

October 19, 2006 2:10 PM

What is an Advisory Board and what does it do?

In the context of a small tech startup, when is an Advisory Board appropriate? Are members normally compensated? Do Advisory Boards actually operate as a team? Or is it more an ad hoc list of people who help the founders with advice, connections, etc?

Any advice/links/pointers would be appreciated.

posted by o2b to Work & Money (1 answer total)

Information on forming and operating with an advisory board is readily available on the Web. Essentially, an advisory board offers the small business owner the experience of a well composed corporate board, without the legal responsibilities to shareholders the corporate board has, and without the fiduciary responsibilities for management oversight.

In the tech world, advisory boards also became something of a necessity for startup incubators in Silicon Valley. The benefits to the startup of spawning in an incubator were that, at best, you were in contact with management and money types very early on, before you even really needed the money in some cases. And incubators really did provide the roofs and infrastructure at favorable rates, that made startups a little nicer to do than grinding away on a carpet out in the garage, as many did in the early days. Generally, the Silicon Valley version of the Advisory Board was your lawyer, 1 or 2 potentially interested angel investors, and a biz dev guy/gal, to whom you showed your prototypes under NDA, and who gave you some feedback while helping you raise external buzz rapidly, when the time came to raise money for commercialization.

The management/money folks often served on several advisory boards at a time, to keep their deal pipelines full. It became the ultimate networking game, to see if your involvement as an advisory board member could really push an idea into becoming a money maker, while keeping the inventors/founders/tech types pushing out new ideas on a reasonable schedule.

Outside the Silicon Valley, the utility of advisory boards as conduits to money/management/marketing never reached the incestuous heights it did there, but even in such parochial settings as Atlanta and Dallas, the tech advisory board became a regionally useful networking excercise. The variations in various business regions had more to do with how startups typically grow in those environments. In the southeast, more of the startups I knew of personally were software or Web projects, and due to the relatively lower costs of personnel and operation, the angel cycle was more important, and generally longer than it was out West. So, the advisory board influence was different in the Southeast, because advisors generally had a longer relationship with their projects, in my experience.
posted by paulsc at 3:47 PM on October 19, 2006