5 Ways Joining a Startup's Advisory Board Can Pay Off Big Time

Investing in and gaining equity from a startup comes in more forms than writing a check. In fact, being a part of a company’s advisory board is a win-win for advisors and startup founders and can yield some of the biggest career advantages for both parties. To uncover the advantages, we tapped a network of all-star female mentors to share the top 5 reasons to join a board.

How is joining an advisory board a wealth management strategy for investors?

According to The Fourth Floor , a market network to diversify boardrooms and cap tables, even very early, idea stage founders have an extremely valuable commodity that costs very little to the startup but can bring outsized returns: an Advisory Board. There are many reasons why serving as an advisor to a startup is interesting or valuable, including:?

1. Compensation - In an early-stage startup it typically comes in the form of a small bit of equity such as the FAST framework (Founder / Advisor Standard Template) which resembles a lottery ticket where you have your hands on the levers and might be able to influence a win.?

2. Prestige - Serving as an advisory board member to a for-profit company, even if it is a small startup, has value to the advisor beyond the compensation received such as:

• It is a doorway into for-profit board service, a doorway that can otherwise be elusive or locked tight! This is especially true for anyone who isn’t besties with Venture Capitalists or Private Equity bros.?
• It boosts your opportunity to self-advocate for a promotion or a higher salary at work because you can point to your strategic advisor role and make a solid case to be seen as strategic, not tactical. This can be incredibly helpful to anyone who finds themselves overcoming implicit bias to make the case they are true leadership material.??

3. Networking - Like an athlete who goes head-to-head with superior players, you sharpen your leadership skills when you rub shoulders with the best. Individuals who serve on boards are more than subject matter experts; their contributions range from cultural understanding to business savvy which can provide you with a broad range of partnership opportunities.?

“As an early-stage investor and startup advisor, I focus on being a servant leader, meaning I lead with empathy, trust and a dedication to the greater good, which are skills I’ve learned from other board advisors I’ve served with,” says Dr. Silvia Mah , a San Diego-based managing partner of Stella Impact Capital and the creator of Women’s Venture Summit . “Now I bring these skills to boards I sit on, which are usually startups I’m investing in.”

4. Boosting Opportunities for Women - Financial knowledge is power and it takes a community to provide that for women, says Judy Herbst, executive director of Savvy, a New York City non-profit empowering women to achieve financial security, in a YouTube presentation about building your own female advisory board. “That community can be female to female, helping each other out and building that,” she says. “That ultimately is how we change society and move forward with all the conversations everyone is having from the income gap to diversity and helping women grow financially.”?

Investor, economist and entrepreneur Barbara Clarke concurs. As the founder of and board chair at The Impact Seat Foundation , a philanthropic organization that melds impact investing, grantmaking and advocacy for women leaders, Clarke believes boards can help close the opportunity gap.?

"I join advisory boards so I can use my investment background, industry knowledge, and network to help entrepreneurs. As an advisory board member, my goal is to help remove roadblocks for the founders I advise and help them view their growth and business strategy from a fresh perspective,” says Clarke. “As an investor for over a decade, I've seen thousands of companies come and go – some successful, and some not so successful. As a result, I'm passionate about demystifying the founder's journey so the entrepreneurs I believe in can take their businesses to the next level."?

Clarke details the value of advisory boards in her book Build Your Board, Build Your Business: The Path to Million Dollar Success Explained, which is also the name of a discussion she’ll be leading at Women’s Venture Summit on Sept. 16-17, 2022, in San Diego. The Summit is one resource for entrepreneurs and investors who want to grow professionally and financially.

5. Impact - If you envision a better world, serving on an advisory board is your chance to move the needle in that direction, whether it’s sustainability or cultural awareness. While you won’t be making business decisions for the startup, your insights can influence the outcome.?

“When trust exists between founders and expert advisors, and you know there is a mutual ‘why’ rooted in the personal values and goals of the parties, you can make decisions quickly and in turn progress the company at a fast rate,” says Sarah Glofcheskie , the founder and CEO of BeMe.ai .?

Looking for advisors who have walked in your shoes is wise, notes Glofcheskie, which is what she has done while growing BeMe.ai, her health and wellbeing tracker and insight-generating app incorporating medical, behavioral and environmental data in support of Autistic children.

?“Board members are there because they believe in a founder’s potential, are excited to help grow a company, and/or to protect their investments in the company,” says Wendee Wolfson , a lead investor with Next Wave Impact , an early-stage investment fund focused on diversity and impact. “(They) often have broad networks, experience with other startups, and experience of their own that can be useful to founders struggling with connecting to relevant users/buyers, team building/hiring, and leadership issues as they confront the roller coaster of enterprise creation.”?????

How do founders best build their network through board opportunities in their company?

Because serving on an advisory board is so valuable a commodity to the individuals who seek it, a founder has leverage to secure an influential, well-connected, credible slate of advisors. Founders can have as many advisors as makes sense for the company, given the cap table and the founding team’s ability to make good use of those advisors. Advisors will typically vest a small amount of equity over a 2- to 4-year period, and it is during this time that the advisors are highly motivated to bring value to the startup so they continue to vest their equity.?

“Founders often ask me how to evolve conversations between themselves and mentors into formal founder-advisor relationships with negotiated equity. Sometimes this can be uncomfortable, but vesting over time is a very typical process,” says Mah. “Founder-friendly advisors are usually perfectly aligned with vesting because it helps the founder derisk the decision of awarding equity; the more advising they receive, the more equity the advisor receives, and they can co-create the startup together.”?

Founders can be strategic and add advisors to their board with extensive rolodexes and industry connections, which can significantly expand and improve the founders’ network, at a time when that network is critical to ensure the startup is capable of scaling down the road.?

“When building an advisory board, founders are looking for individuals who can contribute in multiple ways,” adds Glofcheskie. “An ideal advisor will fill a need for expertise specific to your business, can open doors, and be a sounding board. If you are lucky, your advisors will also be closely connected to your cause at a personal level.? When motivations are aligned on multiple fronts, that’s when magic can happen!”?

Investors should encourage early stage founders to build out and leverage their advisory boards early and often as it brings outstripped value to the growth of the startup.?

“The range of business needs, personal requests for guidance, and the trials and tribulations (along with the successes) run wide,” Glofcheskie says. “Dr. Mah has been instrumental in the critical pre-seed>seed period of the company. Examples of typical text messages that land in her inbox from me are, “Do you know this person?”, “What do you think of this?”, “Can we get on a call to do a dry run?”, “Can you review this key document?”, “Do these projections look good to you?”, and “Help, I need a _____ expert!” Along with invaluable strategic business support, I receive back messages such as “How is your daughter?”, “How are you doing?”, “Remember to take some breaks and take time to reflect!”, and my favorite, “Here is some encouragement; something inspirational…”?

Wolfson believes founders often underutilize their board members.?

“Founders must learn how to ask for very specific requests and ask board members directly for specific contributions,” she says.“General requests are often unanswered because no one feels a specific responsibility to help on that particular request. Founders must make it easy for board members to help and rarely do people contribute without being asked, so ask.”

To learn more about building and joining a board, attend Women’s Venture Summit on Sept. 16-17, 2022, in San Diego, grab a copy of Clarke’s book or join The Fourth Floor ’s Market Network.