Firstly, these are two very different things. A BOA is usually a domain expert while a BOD member may bring skills like finance, sales, operation, scaling, marketing or other expertise. Too many boards are dominated by investors who only know finance.
The right time to start is yesterday. Usually as soon as you are clear on the mission of the company, which allows you to build out the skills you need on your team. It takes time and patience to develop a BOA member. Few want any formal connection until some value has been built, as the risk is so high, like 90% that the company will go nowhere for a long time. You can work with them informally and work your way up to something more formal when needed.
An informal Board of Advisers (BOA) can be started very casually and develop over time. Start with lunch and discussions to get their input of the business plan. Tell them everything, hold back nothing. Be vulnerable to show you are coachable and will listen to people with other perspectives and expertise. The Founder cannot be expert in all 30 skills needed to build a company. These are filled by a team. Maybe meet every other month for three to six months before even asking about a formal arrangement. Starting a company is a marathon, not a sprint. People think it is easy, it is never, though. Let them know you respect their input in XXX area(s) due to their experience.
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The best BOA and Board of Directors (BOD) members are CEOs and ex-CEOs who did exactly what you are trying to do in the past already. Can be in different industries and 80% of skills at this high level are transferable. They have all the experience and war wounds that they can help you avoid. Ideally, they should have more experience and success where you as Founder are weakest. So if you are a technical founder, seek an expert in marketing and/or sales.
Lots of companies get their boards dominated by investors, but a BOA is for mainly domain expertise. Industry landscape, technical knowledge, sales and distribution experience, whatever will help you get to product-market fit quickest.
Like on your full-time and/or virtual team, you are building a team with complementary skill sets. The 5 key areas in business are Marketing, Sales, Product/Domain expertise, Finance and Operations. As Peter Drucker, The Father of Management, says, though: A Company has two main functions: Innovation and Marketing. He says this because the others are relatively easy to do and to hire for also. They require little or no creativity and are “standard” skills you can hire from almost any other industry.
Creativity to drive innovation is the most valuable and the rarest skill. Maybe 5% of people maximum are truly “Creative”, being able to build something from nothing. Starting from a blank sheet of paper. It is relatively easy to do incremental improvements to anything.
This is how Elon Musk became the world’s richest person. Jeff Bezos did it through leadership and management skills, and by building great teams. Bill Gates did it with technical expertise and business savvy. He also had perfect timing. Musk has vast knowledge of many areas of expertise and combines them to create very innovative products. Few have such vast expertise. Also, few CEOs do this, they depend on domain and product experts to do 98%. Elon is all about a superior product. He spends little on market because he had zero competition. Totally differentiate offerings. A disruptive leapfrog. Great marketing is a close second for the need for creativity. Because it also requires a creative and experienced person. And lots of trial and error, usually, too. Of course, raw intellect and critical thinking goes without saying too.
No BOA member should have less than 10 years' full-time experience. No exceptions. No college friends that are “Smart”, you are looking for deep experience. Fifteen to twenty years is better. Gray hair and lots of connections.
Once a BOA becomes formal, you can meet every other month and give them some compensation via stock options. Equity is usually 0.1% to 0.25% per year of service, depending on what they bring and the time commitment. At this point, collaboration and brainstorming together becomes valuable. Also, I believe five to seven members are ideal. Never more. After seven people it becomes more political, and people do not get another time, and many will not fight for their ideas against six others.
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Bob Norton is a long-time Serial Entrepreneur and CEO with four exits that returned over $1 billion to investors. He has trained, coached and advised over 1,000 CEOs since 2002. And is Founder of The CEO Boot Camp™ and Entrepreneurship University™. Mr. Norton works with companies to triple their chances of success in launching new companies and products. And helps established companies scale faster using the six AirTight Management™ systems. And helps companies successfully raise capital.
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