My last post on “How to Build Your (Advisory) Board” generated a bunch of follow up questions — mostly focussed on two areas: How to compensate advisors and how to best interact with them.
The compensation question is fairly easy to answer: First of all, unless you run a publicly traded company (or a company of equal heft), you generally don’t compensate advisors monetarily (i.e. you don’t pay them money). The exception to this rule might be covering travel expenses if you want the advisor to attend out of town meetings, etc.
To align incentives and put some skin into the game, it’s fairly common to give advisors some stock (usually somewhere in the 0.1 to 0.25% range). Put that stock (like all stock grants you issue) on a vesting schedule and be clear about what you expect from your advisor in terms of support, meeting frequency, time invest, etc.
I often recommend arrangements where you “try out” an advisor for one to three months. This gives you and the advisor the chance to see if you like each other, if you enjoy working together and if the relationship is effective.
Which brings us to the question of how to structure your relationship. This is a bit more complicated as it depends a lot on the parties involved, their geographic proximity, their working style, etc. As a general rule of thumb though: The onus is on you to structure the relationship, schedule meetings, keep everyone organized. Your advisors are part of your team, thus treat them accordingly: You define what they should help you with, you assign tasks to them and you should expect them to do what they say they do. Especially if they are not only doing it out of the good of their hearts but are compensated through equity.
And one last thing: The best advisor relationships I’ve seen are based on genuine curiosity on both sides and a mentee who is pushing for the hard truth (and then implemented what she learned).
I hope this helps.
Now find those awesome advisors, get them work and build the future together!