A carefully chosen advisor can serve as a strategic resource to help you guide your business especially when you’re just starting out as a tech company or an early-stage startup.

Difference between an advisory board or a formal board

As a company, you may choose to have an advisor in an advisory board or a director in a formal board. Unlike an advisory board, a formal board director will also be taking the usual director’s legal responsibilities and duties attached under the companies law.

While there are no prescribed rules on who should be on the board, it may be a good idea to have a diverse mix of people in terms of both experience and knowledge.

Also, if your company is in an early stage, our advice is to select a handful of people who can really add value, rather than spending so much time building a large advisory board (usually to entice investors).

Appointing an adviser in a startup

Any advisor appointment needs to be formalised in an advisory agreement like how you hire an employee or contractor. Their role, compensation, and legal relationship should be clearly spelt out. A good advisory agreement will have these commercial terms including how the compensation will be paid by the company.

Also Read: The startup advisor cheat sheet

This also includes the board procedures and rules and how and best way to deploy advisers, so that you can spend less time obsessing over the board structures and more time developing your business.

There seem to be an ongoing debate in Silicon Valley on whether having an adviser is really going to make a huge difference in terms of your fundraising or business prospects. We are on the fence here as we too feel that a good adviser can open doors, but you need to be really careful and selective when deciding to hire one.

Having a well-drafted appointment letter between your company and an adviser may help avoid common pitfalls and misunderstandings.

Speak to a legal counsel on how they can help you address high-level issues on what to look out for before onboarding an adviser in your tech company or startup.

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