In-House Counsel

4 Steps To Growing An Advisory Board

Growing a successful business is a team sport.

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In February 2020, Jessica Sobhraj, the CEO of Cosynd, celebrated along with 125 of her friends, customers, and advisors. She had become the first CEO to secure an investment from We Ventures, New York City’s $30 million venture fund for diverse entrepreneurs in partnership with NYCEDC and women.nyc. She created Cosynd to be the fastest and most affordable way for content creators to protect themselves and their copyrights.

By March 2020, due to COVID-19, Sobhraj’s funding, along with the plans of so many small businesses, was put on pause. For guidance, she turned to her advisory board. “The role of an advisory board,” Sobhraj explained, “is to be willing to help in the toughest of times. They’re the brains and hands ready in the forefront.” Together, the Cosynd team and its board decided to expedite a new product launch, which has kept the company on track and ensured that all employees maintained their jobs.

This isn’t the first time Sobhraj credits her board for adding value. In fact, before Cosynd’s business model was solidified, and even before her team wrote a single line of code, she spent a year and a half assembling her advisory board to help Cosynd scale, fill knowledge gaps, and serve as “sanity checkers” ensuring the team keeps true to its core mission. Sobhraj made sure that Cosynd’s advisory board contained three categories of professionals: 1) those with expertise in intellectual property (her industry); 2) those with experience building and creating content-focused companies (her customer); and 3) those with deep knowledge of raising capital. To pitch the roles, she outlined the proposed time commitment and offered compensation in the form of equity in the company.

The Cosynd founding team, which is 80% female, 60% minority, and 20% veteran, values diversity. Of Cosynd’s 15 advisors, five are lawyers, four have technology backgrounds, 11 are women, three are minorities, and eight are over 40 (three are over 50).

Sobhraj sees her diverse advisory board foundation as integral to success. When asked for her most important piece of advice for women building a company, she recommends that they surround themselves with an incredible board of advisers from the onset. Growing a successful business is a team sport. Early-stage founders benefit from utilizing a collection of aligned experts who are committed to a company’s long-term prosperity and who can assist in navigating complexities and mitigating potential pitfalls.

Advisory Boards Vs. Boards Of Directors

An advisory board, which is sometimes known as a council, is a collection of experts responsible for guiding a founder, CEO, or company representatives. Building out an early advisory board may ensure the presence of independent advisors, which can provide strategic advantage and insulation from overreaching investors down the road. Not to be confused with an employee or a vendor, who may work on a specific project, provide deliverables, or complete day-to-day tasks, each advisory board member brings specialized knowledge focused on company strategy and success. Members attend an agreed upon cadence of advisory calls and meetings. Although an advisory board member does not traditionally have a fiduciary duty, compensation, often in the form of equity in the company, is likely for the role.

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A company may begin with an advisory board before creating a board of directors, the governing body of a company. An advisory board role may evolve with the company into a position on the company’s board of directors. The directors generally advise across disciplines and aim for the company’s long-term returns. Board of directors members attend meetings, are provided with regular updates, and, as opposed to advisory board members, have fiduciary duties, abide by laws and regulations, and are more likely to be compensated in cash as well as in equity for their efforts.

In the past few years, the importance of having a diverse board of directors has received widespread media coverage. For example, a California 2018 law mandates the number of women on a board of public companies with an executive base in California. In January 2020, Goldman Sachs announced an initiative that they will not take a company public unless it has at least one “diverse” board member.

We now concretely know that diversity is not philanthropy; it’s good for business. A March 2018 study by the financial planning firm MSCI found that having a more diverse workforce and board of directors leads to greater diversity of ideas. MSCI also found that companies with three or more women on a board of directors saw a median productivity 1.2 percentage points above those in their respective industries and performed better financially. This would stand to reason for advisory boards as well.

Choosing An Advisory Board

For a startup, family business, midsize, or small company looking to scale, here are four tips to starting and growing an advisory board:

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1) Commit To Building And Maintaining An Advisory Board

Your company deserves a qualified team that is dedicated to you, your vision, and your company’s long-term prosperity. The earlier you build it, the earlier you can benefit from expert guidance. Quiet the voices of doubt that may demand perfection before approaching people or suggest that you are an imposter and not worthy of a board. Commit to searching for and choosing the right advisors, providing them with regular company updates, and growing your company together.

2) Brainstorm Specific Needs

Generally, each advisory board member will bring a mix of excellent communication skills, strategic planning aptitude, industry and business expertise, a strong network, and credibility. A member must also be aligned with the company’s vision, values, and goals, while also being willing to challenge assumptions. Ideally, each person will bring a unique background and offer specific and tangible expertise evidenced by their work history. A board should not be a homogenous collection of VCs or ex-CEOs.

To prioritize your company’s immediate needs, use growth plans to identify any senior leadership knowledge gaps to specify the ideal advisor’s skill set. Determine the time commitment for the role and if feasible and appropriate, compensation. Those attributes may guide an advisory role description:

  • The relevant industry (and adjacent industry), subject matter, or skill set;
  • Similar roles or projects that demonstrate skills;
  • Appropriate relationships and networks; and
  • Game-changing introductions to a person or company.

3) Pitch And Be Pitched

Once a target is identified, it’s possible to point an arrow. To find one, reach out to a current network of colleagues and describe your advisory board needs. If you approach people who are unfamiliar with your company, drive interest and excitement via your company’s elevator pitch or product narrative. Convince them of your passion for your mission, value proposition, projected growth, and other relevant business metrics.

Before committing, you may want to test the relationship through discussions or a limited project. The goal is to ensure that an advisory board member is culturally aligned with your team and goals. You are building what will hopefully be a genuine, mutually beneficial, and long-term relationship for both parties.

4) Re-evaluate As Necessary

Like companies and relationships, advisory board member duties may evolve over time. Open communication will ensure that expectations are aligned. The goal is to thrive, not to simply survive.

Just as many small businesses are struggling post-COVID, many talented professionals and seasoned executives are finding themselves furloughed or with extra time on their hands. According to Sobhraj, now may be an opportune time to invest in cultivating advisory relationships as “there are so many people with deep expertise sitting at home, wanting to add value via virtual meetings. Once we enter a new normal, there will be a mass movement for investors to re-energize their business and support founders, like me, to help us get back on our feet.” As the proverb states, “If you want to go fast, go alone. If you want to go far, go together.”

Sarah was the General Counsel / first Lawyer at Etsy and Vroom.  She’s a co-founder of The Fourth Floor, a creator and producer of Legal Madness, an NYU Law School Engelberg Center fellow, a board member, an investor, and a speaker. You can also find Sarah hammering silver, eating candy, and chasing her child. sarahfeingold.com.

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