Post the dotcom bust, the buzz word in VC circles is ‘team.’ Most VCs will tell you that they make investment decisions based on the strength and credibility of teams and not just ideas alone. In fact, there are many who go so far as to say that a good team can build a great business even around a mediocre idea and conversely, even a brilliant idea may be killed by a mediocre team. What do we mean when we say ‘team?’ To my mind, there are four distinctive elements of a team. They are:
Founders: These are the guys who came up with the idea; got together and pooled emotional, intellectual, capital resources; created a legal entity and declared ownership; and finally took the idea to market.
Hired team: These are the people that are hired for the various functions—product development, marketing, accounts, customer discovery and acquisition, treasury, and the like.
Outsourced partners: These are typically third party service providers, your web developer, digital media agency, statutory auditor, contracts lawyer, branding and advertising agency, channel partners, and the like. You have to enter into clear agreements with them that outline scope, tenancy and terms.
Advisory Board: Let’s start with two basic questions—What is an advisory board and, what do the members bring to the table? An advisory board consists of people from different walks of life. They bring credibility, network and knowledge to the table. When I say credible, it does not mean that they should be Page 3 people or that their names should ring a bell. What I mean is that their resume should be robust in terms of their longitude of service, diversity of portfolios and steepness of their learning curve.
Network is, as the name suggests, their primary, secondary and tertiary connections. Primary connections typically are those where the people they know have worked with them as bosses, peers or subordinates. Secondary connections are that—even though they have not worked together—they are all part of the same milieu, both professional and social. So, it could be someone who is a fellow CII member or a golfing partner at the gymkhana.
Tertiary connections are those where one may not know someone directly, but knows someone who has him as his primary or secondary connection. A network is the most critical gift an advisory board member can give to a company irrespective of the stage of maturity it is in—for the ability to open doors with a phone call or a mail is the most prized gift.
The premium on knowledge of the advisory board member is an obvious one. It is not just domain knowledge but perspective and bandwidth that I’m talking about here. By virtue of his past experience, the member can connect seemingly unconnected dots and avert a crisis for the company or even spot an opportunity.
It is always good to have people from diverse backgrounds on the advisory board. An e-commerce company will benefit from having a technology guru, an organization-building expert, a marketing whiz kid, a retail pioneer, a corporate governance specialist, and finance professional. A good size for an advisory board is six-10. It is not necessary to be a big branded company to attract a good board. A startup which has been in the market for 12-18 months, can use its own network to bring on board some members. A mentor, an alumnus, or someone you met at a TiE event can all be leveraged.
Members who are attracted to the company come on board not because they expect remuneration but because they want to be part of the exciting story that they believe the entrepreneur will script. In many of my mentee companies and mine included, the advisory board has neither expected nor been remunerated for their role. It is up to the entrepreneur to decide on the compensation model, fee, equity or plain excitement.
Nandini Vaidyanathan teaches entrepreneurship, mentors entrepreneurs (www.carmaconnect.in) and has authored the bestseller Entrepedia
