Dan, my partner, and Dave often see startups struggling to manage an assortment of advisers, mentors, and directors, even for a very small company. Some founders want to load up the bus with a bunch of luminaries for their pitch deck, even though the luminaries have little to do with how the company succeeds. So how's a founder to decide what's best for governing their startup and helping it grow.
Let's look at the three potential 'helpers':
- Mentors--before any other helpers, a founder needs the right mentors to assist them in thinking through how best to set up and run their startup. Mentors do not have to be gurus in the startup's space, but having basic knowledge of the startup world as well as an understanding of the space being tackled by the founder is important. The mentor often stays with the founder throughout the process of setting up and growing the company. The mentor gets to know the founder's strengths and weaknesses and is able to advise based on that knowledge, The founder comes to trust the mentor's judgment on key issues and will approach them any time something comes up that the founder may need help thinking through. Founders often have more than one mentor as a cross-check on decisions. Mentors realize that and generally do not take it personally if advice is not followed.
- Advisers--mentors can be advisers as well, although we like to separate the roles. Advisers are generally people with deep knowledge of the space the founder is entering and can help define go-to-market and business models. They are also valuable for their networks, introducing founders to influential people in the space and potential clients. Advisers are often not as close to the founders as mentors are, not because they could not serve as mentors (and often do), but tend to be very busy and successful people in their field with not a lot of time for the mentor role. Advisers generally serve on an Advisory Board, which meets for a day or so a few time a year to review progress and offer advice on growth strategies, etc. Founders can (and often do) call advisers between these meetings to garner insights on specific competitor products or potential customers. Our experience with advisory boards is decidedly mixed--some of our companies are very adept at tapping the adviser's networks, others not so much.
- Board Members-- first and foremost, board members have a legal and fiduciary responsibility to shareholders of a company. Being a board member can be looked on as an honor, but often involves a lot more work than an adviser or mentor. Between often monthly Board meetings, numerous committee calls (financial, compensation,etc.) take place between the board meetings. To be clear, all startups boards are not as complex in terms of governance, but monthly board meetings are generally required. Board members have the duty to maximize shareholder value, which definitely includes the founders who may still own a majority of the equity. We prefer small, perhaps only three-person boards in young startups--a founder, the company lawyer and a person with deep industry experience (been there, done that is the best). Often, early angel investors will clamor for a board seat. Try and avoid that as they often do not have the expertise to help the company grow.
So what's the best strategy for founders in deciding on what they need in terms of helpers? We prefer a simple solution--a mentor or two, a few advisers, but not an advisory board and a small three-person board should fill the needs for most founders. Having too many cooks can spoil the broth...
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