Creating a strong advisory board is one practical way of filling in the competencies gap that a startup may have.
Most startups are resource-starved and hence not in a position to employ people for the various skill sets required for building the business. This often means that the entrepreneurs end up doing the thinking on the most critical aspects about the business EVEN IF THEY ARE NOT THE EXPERTS ON THAT PARTICULAR SUBJECT OR AREA OF ACTIVITY. E.g. a team of two founders with experience in technology and marketing respectively would also ATTEMPT to think on their own, perhaps with some amount of research and talking to experts, about areas like production, procurement, logistics, supply-chain, customer support, etc. Each of these is a specialized area and would require someone with years of experience to provide a perspective on the opportunities and challenges.
This is obviously not going to work in most cases. Think of it this way… If you were starting a cardiac care hospital, and because you are a startup and cannot afford a good surgeon, would you go ahead and operate on a patient if you were not a cardiac surgeon? Well, you won’t because that would be a dangerous thing to do!!! Exactly for the same reason, like cardiac surgery requires a surgeon with specialized expertise, different aspects of a business like supply chain, marketing, sales, technology, etc. should be ideally thought through by some folks with some experience in those areas.
Creating an advisory board allows the founders to get the brain-power, guidance and insights from senior function/domain experts, without having to actually hire senior resources to handle those functions. E.g. a startup may require some serious help on the supply-chain or sourcing side, which the founding team may lack. In such a scenario, getting someone with 15 – 20 years experience in the domain and skill-set as an advisory board member would work well for the startup.
This is a tool that is not used effectively in India, though you would observe many startups in places like Silicon Valley and Israel – the hotbeds of entrepreneurial activity – having strong advisory boards which help them think through their businesses.
Why would someone accept to be on the advisory board of a startup? Well, this is where the ability of the founders to sell the vision of the company comes in handy. Of course, you should have a large, aspirational vision to begin with. No one is going to be excited with someone trying to build a company which does not even aspire to be a market leader.
If you have a large vision and if you aspire for your company to have a large impact on that industry, and if you communicate that with passion, the right people would often consider being on the advisory board. If you come across as THE team which can do it well, many of the people you approach for an advisory board position would not want to take the risk of turning you down as they may regret later in case you become super successful. Because if you become super successful, they would like to have the bragging rights to say that they were an advisor to your company.
Of course, it is good to compensate the advisory board members with some equity as you are not likely to have the resources to remunerate them monetarily.