Philip Bahoshy, founder and CEO of MAGNiTT, an online pitching platform that connects entrepreneurs with investors, explains that an advisory board can help start-up founders navigate pitfalls and mitigate risk.
While exciting, entrepreneurship can be lonely at the best of times. Across the MENA region, entrepreneurs utilise incubators and co-working spaces to canvass ideas and share thoughts on the ecosystem. However, one of the largest struggles they continue to face is building a business in isolation without the continuous support of a team.
When I talk to entrepreneurs from the region, the same three challenges arise – how to raise funding, how to get help and support, and how to build traction for the product.
In fact, 56 percent of the founders of more than 1,500 start-ups listed on MAGNiTT list mentorship as their biggest need and requirement, while 26 percent specifically highlight the need for a board member.
Although start-up founders across the region often focus on the challenges of fundraising, in my opinion a greater challenge is how to provide them the right tools and support to become successful.
I believe that an advisory board is an extremely effective tool which is currently being underutilised! If used correctly, it can help overcome some of the challenges, especially at an early stage.
My advisory board has been instrumental in guiding me through all sorts of hurdles in the last six months. With regards to the platform, they have provided feedback on the prioritisation of features and usability of the site. In terms of business development, they have challenged the value proposition for the users’ benefits. Lastly, with regards to funding, they have helped define my pitch deck and introduced me to investors.
What is an advisory board?
Think of an advisory board as a formal group of mentors. Advisors provide individual expertise, give you advice, introduce you to valuable contacts, and tell you when you are potentially making a mistake.
They are not to be confused with a board of directors, which consists of people who act as shareholder representatives and have certain legal and business responsibilities and powers, including firing the CEO.
An advisory board does not have any official authority, but they can serve as a sounding board at the most crucial time of your start-up’s development.
How can an advisory board be useful to you?
Founders should be continually seeking feedback on their idea and its development, for which formalising an advisory board provides numerous benefits, including:
Expertise: The key is to seek mentors that can support you in the areas of your business that you are least familiar with. In my case, I was able to bring on five advisors, each of whom had an experience as an entrepreneur, an investor, a community builder, a corporate innovator, and a tech specialist.
Accountability: If used effectively, an advisory board can hold you to account. In setting targets for the founders, challenging the norms, and providing an incentive to overperform, the board allows the founders to see alternative perspectives to their own.
Credibility: Much focus in the region is given to funding, and rightly so because it can be a struggle. However, a well-rounded advisory board can be a powerful tool in the fundraising process. Not only can they provide credibility to the offering, including adding their logos on your team page, but they will also become strongest advocates who can introduce you to the other ecosystem stakeholders.
Loneliness: Although this should not be the main reason, advisors alleviate some of the struggles of doing a start-up alone. They can provide moral as well as strategic support in helping you grow your expertise.
How to find and select advisory board members?
I often get asked how I both picked my advisors and approached them to join me. Unfortunately, there is no magic wand and it takes time and a lot of networking. However, rather than answering how I did it, I prefer to highlight who and what traits you should look for when reaching out to people:
Passion: When you speak to a potential advisor gauge their passion for your project. Is this someone who believes in your vision? Do you see hunger in them to become a part of your journey? If not, then they probably will not provide the commitment you are looking for.
Knowledge gaps: As mentioned previously, you should focus on meeting people that will complement your weakest links. These can be industry experts, specific service providers, current or previous entrepreneurs, or a consultant that can help you with your pitch deck and how to define your product.
Opinionated: Seek people who care about you and will provide you with candid and direct input. Their role is not to pander you and tell you everything is going “okay’. The more blunt and honest they are, the more you stand to gain.
Industry practice is to have around four to five advisors, each with a different area of expertise. You want to have enough to canvass useful feedback but not too many that you will have multiple opinions and difficulty in scheduling meetings.
How to motivate your advisors?
They are highly skilled and in-demand people with plenty on their own plate already, so what is in it for them?
This is important because any advisor has to have skin in the game! They are committing to providing you support, guidance and their time. It helps if they are passionate and interested in your project, but ultimately they need to be rewarded for their efforts.
Providing equity in your company, especially in the early days of its development, is an appropriate way to incentivise them. Having equity in your start-up will solidify their support. It will also test their commitment as to whether they ultimately believe in your vision. Having equity in your start-up will solidify their support.
However, giving up equity is always emotional. There has been a lot of research on the Internet as to what is appropriate. Ultimately, it is a tradeoff between the amount of time they are willing to commit and your willingness to compensate them for that. It can differ based on the stage that you are at and the seniority of the individual. It is also important to remember aspects such as vesting period of the stock, expected time commitment monthly, duration of the relationship, and any other additional KPIs that they commit to.
How should you use them?
From my experience, there is power in both the collective as well as individual side chats. Being able to structure your advisory board and keep them updated is essential to getting the best of them!
Here are a few tips to help you:
Structure: Ideally, they can commit to a monthly meeting. Use doodle to canvass suitable times and keep the meeting on time and to the time agreed. I recommend between 60 to 90 minutes.
Dashboard: Create a dashboard that tracks specific KPIs that can gauge the success of your start-up. Update it monthly and highlight trends month-on-month. This snapshot will prove essential in highlighting areas of improvements as well as in praising success.
Agenda: Create an agenda and keep it to no more than four to five specific points. Send out the board deck and dashboard in advance of any call or meeting. Ensure that you have your problem statements clearly articulated so that they can come prepared. Most importantly, send it to them in advance of the meeting or call so that they can think about it first.
Listen: Remember that the point of having an advisory board is to listen to their opinions. Your responsibility is also to take action based on their advice. Don’t get defensive and aggressive. Listen, comprehend, take their collective views on board, and then digest the feedback to take the best course of action forward.
group calls: Allow your advisors room to debate. Many will have differing views, which is extremely healthy. However, allowing them to debate with each other will further enrich the conversation and provide you the insights you might have not attained if you spoke to them individually.