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What’s a Board of Advisors? Why Have One?
Riddle: What do you call a powerless board of directors?
Riddle: What sounds official and legal but probably isn’t; sounds expensive and probably isn’t; sounds like a good idea and might be, or not; depending on who you are and how you implement it?
You guessed right: The board of advisors.
My experience with advisors
Here’s a real case: At Palo Alto Software, we had a board of advisors in the late 1990s. Over three years, our sales doubled.
We had three advisors. They were paid $1,000 for a day, plus travel expenses, for two or three half-day meetings per year. One was a former CEO of a successful software company. One was a smart entrepreneur with a finance background, and a mix of successes and failures in his past. Another was the former dean of the business school.
The meetings were fun, interesting, and useful. We’d discuss strategy, finance, and whether we needed a VP of marketing.
We eventually let the board of advisors go. As we grew, we developed expertise internally and the function was taken in house.
And here’s another case:
Not long ago, I was asked to be an advisor for a website I like, developed by a person I like. However, the financial institution that invested in the website wanted me to sign a formal document giving them rights to use my name forever, without any compensation. I declined and did not sign, but I remain in contact with the developer.
And a third case:
I’ve also been asked to be an advisor by another person I like, whose website I like. In this case, there is no formality. He occasionally asks me questions by email or phone, and I give him honest answers. I may request low-level options in the future, but it’s not a pressing matter. My name is not associated with his site.
Notes on establishing a board of advisors
The trick here is that what we did doesn’t necessarily apply to you or anybody else. The board of advisors is what you make of it. It’s optional and the compensation, if any, varies. Here are some more insights:
- It’s not a board of directors. The board of directors is a formal legal board established in a corporation’s charter. Directors hire the management team, approve loans and compensation, etc. Every corporation has a board of directors with members who have ownership and liability insurance.
- There are no set guidelines for how or how much a company pays board of advisors members. Some are paid, others receive stock options in high-end startups. Advisors may also have actual ownership shares.
- There are no standard guidelines for what advisors do. They may provide advice, attend meetings, or enhance the website and collaterals.
- Advisors are commonly used in business plans for high-end venture capital investment. They add credibility to the management team. Formal ties like ownership or regular meetings solidify the relationship.
So, the questions in my title are trick questions. A board of advisors is what you make of it. You only need one if there’s a reason to have one.
Hello!
I’m Andrew Brooks, a seasoned finance consultant from the USA and the mind behind phonenumber247.com.
My career is built on a foundation of helping individuals and businesses thrive financially in an ever-changing economic landscape. At phonenumber247.com, my aim is to demystify the complex world of finance, providing clear, actionable advice that can help you navigate your financial journey with confidence. Whether it’s personal finance management, investment strategies, or understanding the nuances of market dynamics, I’m here to share insights and tools that can propel you towards your financial goals.
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