Thinking of Setting Up an Advisory Panel?

During my research about how to set up an advisory board, I came across some useful information. Hope this comes in handy for new entrepreneurs and startups looking for advisors who am sure have questions galore about how to go about this arduous task. I remember attending a Webinar last year conducted by TiE Mumbai where Madan Padaki spoke about how he set up his advisory board. Summarizing some of the key points from Madan's session as well as from Mark Suster, Jordan Cooper, and others' blogs:

Why look for advisors?
The reasons why companies look for advisors may vary. Some look for advisors for pure "gyan" and mentoring support during their maiden entrepreneurship venture. For others, a good advisory board can help create the right kind of impression and impact when looking for business. Most people seek prominent industry experts, luminaries, highly networked individuals, or people in highly influential positions etc as part of their advisory board. The agenda for most are either or all of these:
a) Provide valuable gyan or mentoring support
b) Be the company's brand ambassador/mouthpiece
c) Help get business contacts

Whatever be the objective, it is ideal to have an advisory panel of 3 or more advisors. This will help get the right combination of advisors to make a difference.

Where/How to look for advisors?
Your first choice should be to find an expert from your own domain or from your own industry. This will ensure that you get enough wisdom from someone who knows your industry well and has had similar experiences facing the challenges that you encounter to be able to provide you advice on the same. You could begin with known people in your circle, acquaintances, senior ex-colleagues etc.

The next choice could be to look for someone who can be your brand ambassador. Someone who has the right reach to help you reach out to the world. The person could be an existing client, somebody from the media, academia or a public figure well-respected in the industry circles. It is always interesting to have an advisor from academia for various reasons. a. They would typically have more time to spend with you compared to advisors who have a hectic corporate or public life. b. Academic advisors can bring in a lot of credibility while looking for business. c. Advising is almost an occupational hazard for them, so you can always depend upon their gyan and advice.

Some tips from Madan about how to approach potential advisors:
- Clearly define what you need and who you need
- Seek and shortlist
- Don't ask (send a request)
- Sell your dream - they should sense your passion
- Be upfront about what you can give - though advisors typically are not looking for your money
- Tone down your expectations on their contributions (after all they are doing this to help you)

What to expect from advisors?
This is a particularly interesting question. While we all may have our own reasons for setting up an advisory board, how can we ensure that advisory boards really add value to us as well as to our business? I came across an interesting post by Mark Suster "Should Your Startup Have an Advisory Board?". He specifies some advisory board problems in great detail. Here's a quick recap:
- Not enough time
- Not enough wisdom
- Too much effort
- Expensive

How to make the most of your advisory board?
Apart from the useful tips by Mark Suster, Madan also specifies some points that can help you make the most of your advisory board.
- Send them updates (made a calendar of events) informed them, posted updates, involved them in all significant achievements of the company, involve them
- If your advisory panel is a very diverse group, avoid getting them together. If the common topics between them are very different, it will be difficult to bind them into a common theme. On the contrary, group interactions can also be good for your advisors when they get to meet other influencers and benefit from the association.
- Be transparent about crisis etc with them - it is critical to build a relationship of trust with them.
- Get about 1 or 2 hrs of their time over a 2-3 months period, with every meeting, try to increase their mind share about your company. Over time, their involvement will increase.

What should you offer them?
Here, I came across a lot of information about what to offer the advisors. The point that came out very clearly is that mentors/advisors are not interested in 'your' money. They are typically successful people who have been there, done that and seen it all. They are passionate about growing a small start up to a successful company. The reasons why they've said a yes could be many. They may have found your idea exciting, liked your dream, or liked you :) !

While advisors typically are not looking for monetary gains or a remuneration, an acceptable return for services rendered could be a stake of about 0.1% (not exceeding 2%) depending on the state of the startup. Jordan Cooper sheds some light on paying advisors with equity in his post 'Founder Beware: True "Advisors" Don't Ask for Free Equity.' You can also read through some discussions about how much equity to hand out to advisor or mentor. On the other hand, Madan had mentioned that you could offer them a remuneration - a monthly honorarium for the services rendered - once your business starts flowing smoothly.

Some informative reads, please add to the list if you come across more:
1) http://jordancooper.wordpress.com/2010/01/25/founders-beware-true-advisors-dont-ask-for-free-equity/
2) http://www.avc.com/a_vc/2010/01/role-models.html
3) http://www.startupnation.com/How-much-equity-for-advisormentor/topic/
4) http://startups.com/questions/3760/equity-to-advisor
5) http://www.bothsidesofthetable.com/2009/10/12/should-your-startup-have-an-advisory-board/