Building The Board
"No" can be a valuable asset
Happy Thursday, 👋
Who tells you “no”?
It’s a question we often ask founders during investment due diligence or when advising teams. The question is often followed with a quick description of an advisory board or a long pause. As a leader, having guardrails can be one of the most powerful tools for building a successful business.
Two Types of Boards
The nature of a board often depends on the stage and size of a company. Advisory Boards tend to be more involved at the early stage of a company while a Board of Directors is often found at larger or more established companies.
🏡 Advisory Board – typically found in early-stage companies, this board assists in making strategic decisions and provides expert insights. Their primary focus is on the daily operations with members usually chosen by the founder to fill gaps in areas such as finance, marketing, or operations.
🏢 Board of Directors – this board oversees more mature companies. Members represent shareholders or investors and are usually elected through shareholder votes. The integration with an executive team is less frequent as the focus is more on oversight and safeguarding investor interests.
Constructing the Board
Advisory board members often fall into two categories.
🏭 Internal Focused – these advisors bolster the team by offering expertise in areas such as marketing, finance, or operations. They are often specialists which a startup might not be able to afford full-time but can provide invaluable guidance.
✈ External Focused – these members have vast industry or customer networks helpful in growing sales, raising capital, or helping develop strategic partnerships.
While it might be tempting for founders to invite close friends or family to join an advisory board, it’s advisable to tread cautiously. Personal relationships often hinder objective decision-making and may limit tough questions in favor of protecting a friendship.
Laying the Groundwork
After selecting an advisory board, it’s time to set the operational framework. While every company’s approach will differ, here are a few guidelines:
🤝 Meeting Cadence – given that advisory boards are closely involved with the company, monthly meetings are a good starting point. A valuable first agenda item may be reviewing the monthly investor update.
⏱ Term Limits – most advisors serve 2-3 years, but it can vary. Defining term limits allows the board to periodically review its composition to ensure a continued evolution matching the company’s needs.
Being an Effective Advisor
Advisory board members occupy a unique position, balancing between trusted counsel and observer. A few helpful recurring themes we have noticed include:
❔ Ask Questions – if something seems amiss, ask “why”. It often sparks meaningful discussions, exposes unforeseen challenges, or helps develop alternative solutions.
🗺 Maintain a High-Level View - small companies can easily deviate from their strategy, especially with highly focused teams. Advisors should be the ones watching the map while the team is driving the car.
🚩 Stay Objective - be supportive but do not become emotionally invested in a company or the team. Excusing or justifying behaviors or failures should raise red flags.
Additional Thoughts
Founders should also be alert to discrepancies between their team’s feedback and the advisory board recommendations. Such disparities can hint at conflicting incentives or perspectives, so use diverging feedback as a signal to investigate further. Sometimes the road ahead might look clear from the driver’s seat, but the map indicates you may be heading for a cliff.
When we ask a founder or CEO who tells them “no”, it’s a way to understand the dynamics of the advisory structure. A company grounded in mutual trust between its team and advisory board is an ideal way to build a successful company.
Wishing everyone an enjoyable weekend,
-The Caymont Ventures Team.