A 30-something biotech entrepreneur, speaking to a family friend, asked whether the friend, a semi-retired owner of a retail brand, would be available to join his start-up company’s Board of Advisors. “Why me?” asked the retailer. “I know nothing about biotech and I’m not clear as to what my role would be.” The biotech hopeful said “You don’t have to know anything about biotech but I do need some grey hair around the table.”
Speak to any successful entrepreneur and you will invariably discover that apart from the formal Board of Directors (who are charged with compliance, reporting and prudential responsibilities) they will have constructed a Board of Advisors around the company.
There is a major distinction between the director and advisor roles: a Board of Advisors is an informal version of your Board of Directors. They generally have no voting privileges, but provide value in the form of advice, know-how and contacts.
In some industries such as publishing and medical science, Advisory Boards are almost mandatory as they give credibility as well as networking potential to the company. But for most start-up ventures the role is often as simple as 'grey hair’ around the table. These will be people who have had experience in business, often in your industry but more often than not you will naturally gravitate to electing advisors who complement your skills sets that are in place.
The advisors are often experienced in having taken a venture through to a trade sale or IPO and hence have great wisdom to offer in terms of their direct experience. This is where the role of the CFO is crucial especially in companies who are on a fast track and are growing their revenues. The CEO may well be the driver of the initial vision of the business but it is almost certain that once a CFO is appointed that he too becomes part of the core team of decision makers driving the enterprise forward. The capabilities of a well-rounded CFO are ideal in the context of a Board of Advisors – indeed in the selection of the members of that Board.
In a technology company an advisory board focuses on ideas around emerging technologies, and an entrepreneurship advisory board is one which would focus on ideas around entrepreneurship skills/knowledge that appear to be weak or missing in the organisation.
The reality is that company directors are expensive and engaging high quality people who may be wary of a legal relationship may be difficult. For the entrepreneur and his key executives, they get an impartial sounding board that can help with advice, ideas and networks (120+ years of business experience on tap for the cost of an airfare, a good meal!). It’s a great way too of getting to know people (and they you) before inviting them to get further involved with the company.
A CFO can act as a useful catalyst for example in ensuring there is an agenda and simple specific goals, because it’s irritating to the members if the advisory board seems ineffective or pointless.