When Yext, a B2B tech company that powers location data in search results, wanted to grow its customer reach in the US, its team was intentional about the verticals it wanted to dominate. It set out to recruit a 12-person advisory board within those verticals, with equity grants. The result? Several key sales conversations and successes at large US corporates. One advisory member alone opened doors to three major food accounts for Yext, garnering its needed beachhead in that market.
An advisory board is not the same as a Board of Directors – it has no fiduciary duty or authority over the company. Its purpose is to fill knowledge and network gaps within your company or your own background.
Most companies don’t engage their advisory board in meetings as a group; instead they reach out to specific advisors as needed and set different frequency for those interactions.
An advisory board can be a bounty when you find the people who are experts at solving a set of problems you have, engage them with clear expectations and rewards, and turn to them whenever you have issues related to that problem. To find the right people, you have to be clear on what problems you want them to help you solve.
When it comes to engaging advisors, think of it as the same recruiting challenge you have for roles in your company: you want expertise and you want results, and therefore finding the right advisors is key. Once you’ve identified the clear objective for your advisor, it is easier to have targeted conversations, since you can be specific in your wish list. For example, if your goal is to grow a base of customers in a particular vertical—as was the case with Yext—one possible strategy would be to:
• Ask your customers or prospect customers who they respect
• Ask your Board of Directors and industry connections for referrals
• Have a point-of-view related to the industry, and build a profile and relationships based on your expertise
Many companies use advisory boards to help with product development or sales strategy, or to introduce them to valuable clients, suppliers and investors.
Since advisory boards are not engaged with governance, you can focus the work and input of those advisors much more narrowly to their expertise.
There is more flexibility on the time and level of engagement the advisor can offer and you can reach out to specific advisors individually as needed. Remuneration should reflect the advisor’s level of engagement.
Compensate advisory members appropriately
It is a good idea to compensate your advisors, either with cash stipends or stock awards. In addition to aligning incentives and recognizing that expert time is valuable, compensation will make you more disciplined about the caliber of advice and support you are seeking and getting.
Equity grants are a very cash-effective way for ventures to gain credibility within the market by enlisting decision-makers to support their efforts. In the United States, grants usually range from 0.10% to 1% depending on company stage and the level of involvement of the advisors. For example, the Founder Institute suggests in their advisor template that compensation be set at:
“As well as the quality of ‘content’ of their advice, there is a reputational benefit to Advisory Boards. Ours has very credible people, and their credibility reflects back onto us.” Rupert Baines, UltraSoc
If you choose to compensate advisors with stock, consult professional advice to create vesting schedules. For example, one common approach is straight-line with 3-month cliff, 2-year vesting with single-trigger full acceleration upon a liquidity event. Plan for a proper stock transfer and have an exit plan should your advisors want to sell their shares. Seek professional advice on potential conflicts-of-interest that might arise if your advisors work for other companies.
Have it in writing
Speak to your lawyer before establishing and engaging an advisory board; by and large, it is wise to have members sign non-disclosure agreements, draft a charter outlining advisory board responsibilities and compensation, and provide advisory board members with written indemnification. Also consider incorporating an annual review process into the agreement, such that there are ongoing occasions to review and discuss whether the relationship is productive and should continue.