Do I Need an Advisory Board in Place to Raise Money?
Photo by Amy Hirschi on Unsplash
If you’re raising money from family and friends who are betting on your success more than your company’s success, having an advisory team in place is less important than if you’re seeking to raise venture or private equity capital.
That said, as a general rule of thumb I believe the stronger your team, the better.
In terms of pre-revenue companies, or even those who are below $100,000 a month in sales, your team is likely to consist of people who are outside your organization, e.g. freelancers, partners, consultants and so on. We’ve invested in co-founders who complemented each other well, and when they put together advisory boards we find it can add great value to the company.
I tend to interview the advisory boards to understand how invested they are in the business and how much time they’re actually giving to it. It’s very easy to spot an advisor whose heart isn’t in the business: they either won’t talk to you or, if they do talk to you, they don’t understand the business nearly as well as they should. I want to see boards that know the company’s strategy cold, including the company’s mission, core values, consumer profile, marketplace, and priorities. So make sure yours does!
In addition, include your outsourced resources — e.g., sales broker, marketing firm, product development house, or co-man — in your decks you send to prospective investors. As an investor, I’m likely to know some of those people, and you can add credibility if you can show me in your P&L that you are actually paying those people to help you. This, too, enhances your credibility. So, pick your outside resources and service firms carefully; they can be just as important to the credibility equation as your “stellar” list of advisors.
My rule of thumb for founders in the earliest stages of creating their change-the-world companies is straightforward: go for quality over quantity in the people you want to have investors associate with your baby. If that’s one or two people, fine. If it’s more than that, also fine.
It takes different kinds of people to make a venture successful. So build your team wisely, whatever its size at the earliest stage, around a set of core values that will keep everybody in your organization, even those that are not direct employees, heading in the right direction.
Investors will see that you get it and they will be more likely to do business with you. Let me know who you are associating with to bring your change-the-world brand to life.
Sincerely,
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All credit to my ghostwriting partner, Dave Moore, who is instrumental in getting my thoughts out in a coherent manner & into these blogs. Thanks Dave!