Building a Board/Advisory Board/Exec Team
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Transcript of Building a Board/Advisory Board/Exec Team
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It’s All About The People:Board, Advisors, Executive Team
Janis MachalaManaging PartnerPaladin Partners
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Role of the Board of Directors
Fiduciary responsibility to company
Liable: mistakes/fraud/etc.
Obligation to company first, CEO second
More formal than advisory board
Legalistic entity
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Board of Directors
Odd numbers
Smaller is better
Create a board earlier
Recruit an outside director(s)
Insiders minimized
Consider an executive chairman
Board members often require D&O
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What is an Advisory Board?
A group of individuals who are selected to advise regarding
business issues, includingmarketing, sales, financing, etc.
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Role of Advisors
Idea feedback
Reality check
CEO Confidante
Access to investors
Access to industry/customers
Lend credibility
Domain expertise
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How to Build an Advisory Board
Define member profiles
Determine expectations
Create pitch and comp package
Brainstorm targets
Seek out targeted advisors
Incorporate in company communications
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Finding Advisors
Friends, family, colleagues, vendors
Industry trade associations
Industry conferences
Industry analysts
Complementary firm boards/advisors
Recruiters
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Advisor Considerations
Meet regularly or 1:1?
Length and quantity of meetings?
How much to pay?
Length of vesting period?
Trophy, operating acumen, super connector?
Recruit for short term objectives
Don’t treat them as employees or consultants
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Benefits to Being an Advisor: What’s in it for Them?
Extending their circle of contacts
Developing new business opportunities
Getting new perspectives and ideas
Contributing to an industry
Personal satisfaction: “pay it forward”
Resume building
Fun!
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Advisor Pitch
Have comp structure determined
Craft a “killer” introduction
Articulate company values
Explain opportunity in 5 minutes
Compelling and focused
Set expectation
Appeal to their ego
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Compensation
Food and drink
Cover expenses
Cash (fee per meeting)
Stock options
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Terms of Advisor Agreement
Description of relationship
Disclaimer of employment
Payment for services
Confidentiality
Conflict and how to handle
Ability to perform services
Ownership of work product
Termination
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Sample Advisory Board Agenda
Why an advisory board?
Questions?
Introduction of members
Presentation of discussion topic
Discussion period
Proposals/resolutions./options
Summary/Action items
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How to Get the Most Value
Ask questions and listen and learn
Come to meetings or calls prepared
Write email advisors can send for intros
Think of them as investors
Communicate regularly
Leverage them for their expertise
Track action items and outcomes
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Resources
Sample advisory board letter:sbinfocanada.about.com/od/management/a/sampleinvite.htm
Sample advisory board agreement:founderinstitute.com/docs/FAST.doc
Great general advice on funding, advisors:www.thefunded.comwww.techcrunch.com
www.humbledMBA.comwww.innovationamerica.us
www.techstars.org www.ycombinator.com
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Executive Team:Strategists AND Doers
CEOPresident
COOCFOCMO
VP of SalesCTO
VP DevelopmentVP Technical OperationsVP Professional Services
VP of Business Development
Any VPs? Some VPs? No titles??
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Finding Executive Team Members
Start-up execs scarce
Beware bigCo execs
Networking
Executive search
Behavioral interviewing
Reference check
Bad executive hire will cost you $250K to out of business
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No Funding, How to Hire?
What if the perfect person comes along?
Severance pay, merger, exits, etc.
The executive invests/brings in investors
Key exec starts out as advisor
Accrued wages?
Work for equity only?
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Interviewing TipsDetailed position specification
Outcome in 6-12 months
Ask the same questions
Candidate must know the job
Interview for chemistry
Always hire for smarts
Demonstrates learning ability
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Reference Checks:“No Time to Do In-depth Calls!”
What does a hiring mistake cost?
Find out before your potential VC does
Ask for 10-12 in 3-4 categories:Board, investors, peers, employees, business partners, vendors
Listen for what is NOT being said
Ask references for other references
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Exec Mistakes
Hiring friends and family
Spouses as co-founders
Poor performer hangs on
Not vesting founder shares
No cliff vesting
Unsustainable comp plan
Deal is too complicated
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Some TipsHire slowly and fire quickly:
no hire is better than a bad hire
Have spouses meet
Envision a long road trip
Use StrengthsFinder, MyersBriggs
Discuss lines of authority, trust, style, dispute resolution, board/management interaction
If you agree on everything….
Hire people better than you!