On Business Advisory Boards
This is the original discussion thread that gave birth to the Acceleration Co-op concept:
Many new ventures lack deep market expertise in their target market. The founders are often technical. And even if they are lucky enough to have a team member who is expert in the nuts and bolts of how the target industry works, there is usually just one of them in the company.
Many companies have scientific advisory boards. But far fewer have a business advisory board. But if well designed, this can go a long way to plugging the industry- and market-related gaps in the team's skill sets.
I have noticed that CEOs and founders are often in favour of the idea of such an advisory board, but seem to find it very hard to put in place a good one. Often, if such an advisor group even exists, it contains the wrong type of people. It's like a breath of fresh air when I find a company with an advisory Board stuffed with industry luminaries with real business experience, of the right sort and in the right field.
I have been thinking for quite a while about a way to make it easier for new ventures to put together a group of market-focused advisors that can provide high level industry guidance in a cost effective way. At the highest level, my idea is about assembling a "network of experts" in several industry verticals, and enabling new ventures to access that expertise in a way that makes business sense for all. This network would be global. The focus would be on expertise not location. The network would be available to startups from any geography. It would use existing social media tools, and be layered on top of one of the networks, to which most of you probably already belong (eg LinkedIn or Facebook).
Yes, I know there are numerous other attempts out there to do this. But I think they all fail in one of two key areas: the business model and the "quality filter". I think that to be effective we need to solve those two challenges.
Challenge #1: Quality filter
One of the big problems I have seen with other attempts to have a "network of experts" is that often the "experts" are not all that expert. I think there needs to be a quality filter so that the group has been vetted and that the experts really are expert.
Challenge #2: Business model
Another big problem I see with existing attempts to have a network of experts is that the business model does not make it worthwhile for real experts (whose time is usually valuable) to take part. If the business model involves modest economic incentive, then the "experts" tend to be limited to those who see this as a philanthropic activity. Or to those whose time is not very valuable. This limits the pool and makes the group potentially much less valuable. I would like a business model that makes this attractive to high powered experts. And of course to new ventures who need help.
What do you think?
--Richard Caro.
[Editor note: comments below were originally submitted by email. Each comment is by a different individual, but all were entered by me into this thread under the name "anon" for simplicity. Disregard the timestamps. These comments were received in response to an email sent to Richard Caro's colleagues in 2009.]
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With the Acceleration Co-op
With the Acceleration Co-op we have attempted to tackle both the challenges mentioned in the original post.
I prefer LinkedIn over
I prefer LinkedIn over Facebook - it provides access to a larger group of professionals. This is an excellent networking tool and suitable for online discussions.
This is a great idea and I
This is a great idea and I agree it is much needed.
I completely agree with your
I completely agree with your analysis; the situation here in Europe and especially in Germany is even worse than in the US, where you have at least some “industry veterans” which find it rewarding to serve on a start-up panel. The scientific boards I know are indeed more a marketing effort and to please the egos of academic company founders, the thing that would really help are friendly critical business advisors. I do see however one basic hurdle in matching a company to such an expert. On the one hand you like the expert to be just that which means he/she should have relevant expertise in the market sector of the start-up. Many technological areas are however quite narrow which would mean that a conflict of interest or a competing situation could occur quite easily. This is in my opinion besides other factors one of the reasons why you normally rather find retirees in such boards (besides just having time…).
This is an interesting and
This is an interesting and important problem. A "network of experts" could work, but you have to remember that an advisor could not simultaneously advise a competitor to an existing client. So your network might really act as an "advisors bureau" where people interested in providing the service are listed, and entrepreneurs go there to recruit them.
I think you're spot on with
I think you're spot on with this initiative and I'd be interested in contributing in whatever way I can.
I work in the bio-automation
I work in the bio-automation area and frequently come into contact with companies with great scientific ideas but a lack of market fundamentals. We try to help them transition from the lab to marketplace and often find they need a lot of help shaping their investment efforts.
I couldn't agree more with
I couldn't agree more with your supposition that a business advisory board would be a huge help to almost every startup; mine included. In the past, I have tried to form them for previous startups I've been in, but I have never been able to form one that I have been satisfied with. I also agree the forming a scientific advisory board is much easier. Although I've never tried to form one, I'll been on a few.
If an industry/vertical board
If an industry/vertical board with sufficient current depth and breadth could be formed, whose members were willing to actually advise a company and/or make executive level introductions, I believe that many entrepreneurs would gladly set aside a percentage of the shares in their companies to compensate them. I know I would. And by advising several companies, the board members reduce the risk of advising a company whose shares are never of any value.
I think such boards would
I think such boards would also work for other types of advice as well; tax, law, international trade, finance, science, technology, etc.
I agree that there is a
I agree that there is a crtical absence of vertical market expertise working in an advisory capacity for start-ups but there are reasons which are both obvious and inherent in doing this for start-ups.
1. This can be a time sink hole for the expert volunteer
2. If there's no pain there's no gain to the start-up, they have to pay in some fashion, and paper aka equity/warrants is not going to get it done in a recession.
3. There are so many steps in growing a start-up into a profitable entity or at least one in position to be acquired and create an exit strategy it almost speaks to plotting a template roadmap which invariably will end up as cradenza ware in a CEO's office.
I believe this proposition is best focused on capitalized companies, one's with seed capital from Angels or strategic partners etc. and the founders. Further I like the Small & Mmedium sized companies who have capital and really appreciate outside expertise and know they need other imputs to grow and prosper.
Steve R.
An interesting point has been
An interesting point has been made by Steve. While I think that the importance of the original idea to provide assistance to the startups, the complimentary idea that once the network is built that it can also be used to meet the needs of the slightly more established companies may also be worthwhile. They have a capacity to pay to fix their problems, but they may not actually know where to get the expertise. There is a possible synergy.
The point that Steve made is
The point that Steve made is especially valid in Europe, where there is a different approach in starting businesses. In my opinion the following questions should be asked and answered before a professional will spend time on a start-up company.
1. Do they see the necessity of professional support?
2. Do they have the ambition (if they have the potential) in letting their business grow beyond their span of control?
3. Do they have the necessary funds to pay the professionals?
A possible solution can be that if the first two questions are answered to make a joint offer with a party that can deliver the seed-capital that is needed for the first stage. This can work to both sides, for the start up to pay for the services from professionals and for the provider of the seed capital to reduce the risk of his investment. In the next stage there will be need for an adequate management team, may be our service of interim managers to set up the company for the next fase?
Bert N.
To follow on some ideas Bert
To follow on some ideas Bert mentioned (but probably from a different angle), to sustain the interest and viability of an business expert network, there should be proper compensation, especially at the early phase when the network is still building up. The services of this group can be pitched to the ones supplying the seed capital (angels, VCs, corporate venture funds, etc.). They can use the network in their due diligence efforts or refer the network to potential start ups they are seriously considering on funding. Once the network gets their foot in the door, there can be a number of arrangements in terms of compensation and (on-going) services to be provided. (I know this network is meant to be global but if there is critical mass in a particular geographical area, it may be worth road testing this idea with potential clients in the area. Face to face discussions always help.)
Interim management (as Bert suggested) as well as board directorship could be considered services that the network provides or options for the network member/client depending on the particular situation.
I like the points made with
I like the points made with respect to a business advisory board (BAB). It does require a level of maturity/experience on the part of both the CEO and key members of the BoD in order for the start-up to engage and fund a BAB. The specific issues identified by the other members of this group resonate with me.
I'd like to address the possibility of interim CEO-ships arising out of these advisory activities. I had a successful career as an interim CEO in the 1992-2001 decade, but I think that market conditions changed severely in 2000-1 in such a way that future interim CEO opportunities will be much more limited. 10 years ago, the typical situation was a 2-4 year old vc-backed start-up with 1-3 technologists as founders. The original CEO would have had no prior CEO experience and would have been replaced on an acting basis by a Board member who was also a general partner in his vc firm. After 3-6 months, the acting CEO would have become frustrated because the search for a permanent CEO seemed to be going nowhere, he and his fellow general partners wanted him to get back to the vc firm's business, the founders were frustrated by the lack of experienced leadership and paranoid that their baby was being slowly strangled, and the other Directors of the start-up resented their exclusion from operating decisions. This combination of factors was ideal for the hiring of an interim CEO to release the acting CEO back to his vc firm, to relieve the founders of their fears, and to land the permanent CEO. Landing the permanent CEO would trigger the accelerated vesting of the interim CEO's stock options so he was incentivized to replace himself asap.
What changed with the dot.bomb of 2000-1 was that ever since then there are plenty of experienced CEOs who are either unemployed or underemployed and therefore immediately available as full-time CEOs. While this is a negative factor for interim CEOs, it might be a positive for BABs because the quickly-hired CEO is more likely to need market-specific advice.
Following up on some of the
Following up on some of the thoughtful inputs to this thread, it occurred to me that it would be important that the management team of the venture feels like these "experts" have interests that are aligned with the management team and not feel they are potential "threats". For example, if the existing management team felt the advisors were doing this as a way to find new interesting interim CEO roles, or even permanent positions, that would likely be counterproductive.
Any ideas about how to make sure all parties have aligned interests?
And would this advisory network focus on making the management team happy, or on making the investors happy (ie who is the customer?)
On the question of where the
On the question of where the advisor's loyalty belongs, I think it's determined by the reporting relationship. If the advisor is reporting to the CEO, then the advisor's objective must be to make the CEO as successful as possible. If the advisor in this situation aspires to be interim CEO, then the advisory engagement is doomed and ultimately the advisor will be hurting his professional reputation. As an advisor I have been approached on rare occasions by one of the company's lead investors about my interest in taking the CEO's place. For multiple reasons I rebuffed these approaches.
Richard's comments make
Richard's comments make sense. I would suggest that a group or groups of vetted and qualified team members put together a charter of values and a misson statement. The groups could, via web advertising and face to face meetings with contacts from both investor groups and entrepreneurs, market themselves as a solution to some of the issues raised in this forum. The question would remain as to whether or not this could be a mentoring situation or a for profit situation. Criteria could be made to determine which is most valid for a given situation. The only real issue I would forsee is someone acting on their self interest rather than the interest of the client. I would structure the group to include past and present ceo's, cto's, scientists and engineers and perhaps ONE MBA.
I feel strongly about having
I feel strongly about having an Advisory Board tasked with the responsibility to make sure the client company is in allignment with the market and their business strategy is clear and actionable. Our allignment with CEO or shareholders is always a delicate balancing act. We have all probably know CEO's who don't have a clue about the "business" aspects of their venture because they are the chief technologist. Often VC's will install a CEO to replace the founder and watch them drive the company into the ground. Therefore I think our main mission is to assess if the comapny is really a viable business and assit in creating an exit strategy whereby both the investors and the employees have a positive outcome.
The composition of the AB can and should be diversified in experience but MUST have domaign expertise otherwise they will add to the confusion. Multiple experts from the same disciplines can compliment eachother rather than be in conflict. In the end it comes down to perceived needs versus wants which will determine the effectiveness of any advisory services which ultimately have to be monotized by ALL parties.
Richard, This is a great
Richard, This is a great idea. Making it work will depend on who is participating, their ability to provide measurable value and the acceptance of management at the subscribing companies. I have over 40 years of experience in starting companies, including 28 years as the founding/managing partner of a successful intellectual property law firm. I am currently doing project management consulting for media, marketing and energy companies. I would be interested in exploring this idea further.
Yes, startups have difficulty
Yes, startups have difficulty finding good, committed business advisors. The problem for advisors is time and risk. The time it takes to help technically oriented CEOs and teams is huge and the risks of failure are great. I am sure I do not know that there is a solution but am willing to discuss (as long as my time is limited and risk is low ;)
There definitely is a need
There definitely is a need for a network. There seem to be many individuals out there who could add value to Start Ups but do not have the network to make meaningful contact with the Start Up’s and as you point out the reverse is also a problem.
Couldn't agree more. To
Couldn't agree more. To refine the problem area further, advisory boards (particularly in Australia,) tend to be filled with people the founding group knows, not people they have actively gone after to become involved. Two issues here: the value the founder(s) places on securing the right members, and their ability to attract the right sorts of candidates.
Rich, again I have to agree
Rich, again I have to agree with your thoughts. I had a similar idea in the past, but failed to follow through... Glad to help if I can find the time...;-)
I think this is a terriffic
I think this is a terriffic idea
I don't think these issues
I don't think these issues apply only to start-ups, and yes I am most eager to participate.
As this group will be very
As this group will be very "value added" how do you forsee us monitizing our value to the companies we will be addressing? We all know that if there's no pain there's no gain.
I am working at a University
I am working at a University and we are constantly facing the challenge of getting good quality, targeted business and marketing advice for our start-ups and pre-start up. We are working to get access to a network with similar aims as you are suggesting. Except our network is more local and we would benefit greatly if it could be global instead.
I think any start up needs
I think any start up needs help forming a relationships that have access to supply and the market like venture partners that have been successful in that area or are looking for new avenues to diversify and develop new profit streams.
This may be similar to your Idea, which seems a better solution.
Richard - this is definitely
Richard - this is definitely a thorny problem. Whether this can be solved by a formalised network or simply the Management Teams becoming better at soliciting advice from experts is worthy of debate.
think your idea has value. I
think your idea has value. I have been (and still am) an advisor to, as well as a member of, several advisory boards in the medical and pharmaceutical industry. It was interesting to see how easy it was for many companies to squander their money by misunderstanding the intricacies of the market they were targeting. Getting the right advice early can make an enormous difference to outcomes.
I think your initiative is
I think your initiative is very intersting and useful. In the Mexican context it is even more relevant because the idea of start ups coming from research laboratories and universities is still new and the lack of experiences creates many problems in the success of the few new enterprises that have been set up, so I am interested to participate in the discussion group and one of the reasons is that your idea avoids the problem of location, but I want to understand how the group with lead with the problem of specific markets (national, regional, etc.).
Our company is a start-up
Our company is a start-up software company providing subsurface modeling and analysis tools to the oil industry. Because the oil and gas industry is huge and dominated by large companies, there is an enormous amount of inertia in what they are currently doing. Because of the size of the organizations, barriers between technical groups (geophysicists, geologists, and engineers) prevent efficient communication and collaboration in the decision-making processes. So while all complain about the cost and inefficiency of the workflows and software tools they are using, changing directions only slightly takes an enormous amount of time and effort. Making these changes by working with the "workers" who understand the technical issues is ineffective because they cannot change the workflows and tools they are using. Making these changes with managers is just as ineffective because they often don't see that there are problems. If they do recognize that there are problems they have difficulty understanding proposed solutions. Consequently they take no action and assume and hope that market forces will prevail and new tools will magically appear without intervention or support from them. So how can successful retired expert advisors help in this situation? While they have access to colleagues and management levels in the company and could help effect changes, do they see that there is a problem? Since they "managed" these companies, they are often defensive when suggestions are made that workflows and tools can significantly improve efficiency and reduce costs. While there are no doubt courageous, successful, and retired visionaries out there, they are few and far between and we haven't been very successful in finding them. They are the key to our successful development both in delivering technology to the end-users and in convincing investors that we can make a successful business out of this effort. So suggestions on how we "sell" our vision to the expert advisor community out there is a primary object for us and we are looking for ideas on how best to do it. Thanks Richard for starting this important discussion.
Yes, I would be very
Yes, I would be very interested to discuss with you how to set up an "expert network". This is clearly one of the elements necessary for an efficiently-working ecosystem that can support innovation and entrepreneurship, so I have given some thought to the issue. In the context of my work in China, I am particularly keen to add the cross-cultural/global dimension.
Setting up a network of
Setting up a network of experts that young (inexperienced, immature, fledgling, etc etc) companies can access is a great idea. I'd be interested in being involved from the outset.
this sounds like a good
this sounds like a good idea!
I would very much like to be involved in discussing the idea further and so would probably be also my other colleagues within the enablingMNT group.
So please keep me updated! I am using LinkedIn but try to avoid the “principally private social networks” such as Facebook.
Certainly interested in
Certainly interested in exploring how I can contribute to this. The issues you raise are magnified for startups in small regional markets like ours. We struggle to find quality management teams / advisors and board members for the companies that we invest in. The other issue I see quite often are companies with two many outsiders providing opinions and noone actually rolling up their sleeves to provide strategically valuable insight.
I know that many of my
I know that many of my technically-oriented colleagues are interested in starting companies, but don’t have the first idea about how to move forward. Even in the short period of one year, I now have a sense for what the “network” looks like and the types of people a scientist needs to be connected with to push their idea forward.
Thank you for the email. I
Thank you for the email. I very much like your idea and I think there are some things that should be included to help insure its success. Please excuse me if these seem too obvious.
1. Assurance to the startup founders that their ideas will be held in complete confidence.
2. Some method of evaluating the concept presented by a startup. This evaluation should be both technical (can it work) and can it be practical. I believe this presents a far greater challenge than it might be originally apparent. A panel of reviewers must be able to "think outside the box" but also not be appropriately critical of concepts that cannot work or simply are not practical.
3. A means of providing experts and investors with some feedback on the key concepts (can it work, is it practical etc re: #2).
4. A win-win arrangement between the advisors and the founders to reward both.
I know there is more. I hope this is of some help. I would be very happy to be included in this new expert network.
All start ups need and should
All start ups need and should seek advice, but it is not easy to identify who can give the best advice.
This system may be a way to ask for and receive advice that helps the start up who reports progress that is shared for the benefit of all and leads to a rewarding relationship for the parties that can work together successfully.