Startup Boards, 2nd Edition

Chapter 15Is an Advisory Board Useful?

Advisory boards can be a great source of help for entrepreneurs. They can also be valuable for people who want to understand and become involved in startups. But they are very different from a board of directors.

Some startups attract industry luminaries as advisors and then showcase them as an advisory board. Beyond the recognition of a well-known person on your website, an advisory board can help you navigate the tricky waters of an early-stage startup, attract your first customer, develop your product, execute a financing, recruit critical people, or resolve issues with your co-founders.

While advisory boards have potential, they can be incredibly frustrating for all involved. It's essential to understand the difference so that you don't recruit the wrong people for, or get the wrong things from, the wrong board.

The guidance from an advisory board member may be similar to a board member, but there are some differences between them. While advisory board members provide coaching, industry insights, access to people who can be helpful to the business, and credibility, they don't have a responsibility or duty to act in the interest of all shareholders. Unlike the board of directors, the advisory board doesn't meet formally, have any control rights, or have typical director legal responsibilities such as “duty of care” and “duty of loyalty” (see Table 15.1). Advisory boards infrequently meet, and many advisory board member relationships ...