The Benefits of a Target Market Advisory Board
This post is written with B2B startups in mind, but should be generally applicable.
For startup founders, it’s never too early to start thinking about putting together a target market advisory board. I tend to think of this group as distinct from the business advisors with whom you may discuss operational strategy, but all the better if there is an overlap in capabilities.
The target market advisory board should consist of 2–4 industry veterans who have connections to C-level execs and VPs in your target market. Perhaps they have previous leadership experience at these companies or are still there today. In other cases, they may come from your channel partners or elsewhere. Whoever they are, they must fully appreciate the value you bring to those companies and be able to speak the right language to the right people.
This is useful for a number of reasons, the most obvious of which is to help you navigate the right channels in your vertical and open doors to potential customers. A strong advisor can walk you in the door to the same number of companies as 2–3 new sales hires. Never discount the power of a warm intro. The strength of their network is something you’ll want to confirm ahead of signing them on.
Having a target market advisory board is also helpful come fundraising time. Especially in early rounds — pre-seed and seed— when there are limited sales metrics and only early signs of product-market fit, these advisors help complete “the package” so to speak, providing a useful industry reference to investors and filling in the gaps in domain expertise that are common in disruptive tech-first founding teams. The more disruptive an idea, the harder it is to evaluate at an early stage. And founding teams with limited operational backgrounds in their vertical or domain will create doubt. (An investor thinks: what don’t they know about the market that will hurt them later?) Target market advisors can help add to your credibility. They may also be helpful with introductions to investors in your category.
Finding the right advisors and convincing them to join isn’t trivial. I’m often asked where to find these people and how to approach them. There isn’t a simple trick to get it done. I think of this as an early test of the founding team’s sales ability. As founders, your job includes selling product to customers, stock to investors, and opportunity to employees. All of these are challenging sales tasks, and advisors are no different. Hopefully in doing enough market research to convince yourself that this is a worthwhile opportunity to pursue, you’ll know who to seek out and have enough evidence to convince them to join.
As for compensation, stock options in the range of 0.1% to 1.0% in company equity is normal at this stage, with the higher end of the range reserved for leaders of industry who bring more to the table than connections. This amount should vest over some period of time — 2 years is typical — and should be subject to the completion of concrete goals and commitments. Even better if the advisors are able to invest money in the company, even a small amount ($10K), so they feel like there is more at stake. You might consider starting with an offer to invest at a low valuation before discussing sweat equity.
It is up to you as the founder to keep your advisors accountable. The mistake many founders make is to bring on marquee names and compensating them without holding them to specific actions (e.g. certain number of customer intros, quotes for PR) and meetings on a pre-specified, regular basis. I think the negative experiences on advisors are almost always tied to either choosing poorly, not having expectations contracted, or lack of accountability.
