As a founder, you know your product intimately, but navigating the broader startup landscape requires different expertise. Unless you’re a serial entrepreneur, assembling a startup advisory board can provide valuable guidance during your venture’s critical growth phases.
Learn how advisory boards for startups can help businesses access strategic expertise and accelerate their growth.
What’s a startup advisory board?
A startup advisory board is a carefully selected group of industry experts—typically three to seven members—who provide strategic guidance to a startup’s founders and management, helping the startup grow faster and improve leaders’ decision-making.
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How advisory boards can help startups
“Advisory board members typically provide you with strategic advice, offer industry insights and create valuable networking opportunities,” said Erin Lashbrook, a vice president for J.P. Morgan Startup Banking. “They can also strengthen your team’s problem-solving capabilities, provide feedback on your business plans and ultimately help you achieve your strategic goals.”
Startups may consider forming advisory boards early in their development, particularly before major milestones such entering new markets or navigating the regulatory landscape.
Expanding to international markets
Take, for example, a U.S. software provider planning its European market expansion. Its advisory board might provide guidance on:
- The optimal market-entry strategy for Europe, including which countries to prioritize based on factors such as the regulatory environment, barriers to entry and local market dynamics.
- Navigating EU business regulations, including specific compliance requirements for software products, data privacy mandates and regional certification standards.
- Adapting U.S.-oriented marketing strategies and product features to better resonate with European customer expectations and local market preferences.
- Building strategic European networks by accessing advisory board members’ relationships with potential distributors, customers and regional partners.
Understanding the regulatory environment
In highly regulated industries such as life sciences, advisory boards provide crucial expertise that could mean the difference between successful market entry and costly regulatory setbacks. A medical-device startup, for example, can leverage advisory board expertise to:
- Map out steps for compliance and approval, including clinical trials process and documentation requirements.
- Develop a strategic launch plan, aligning business objectives with regulatory requirements, ensuring efficient resource allocation and managing stakeholder expectations.
- Anticipate regulatory hurdles before they emerge and develop contingency plans for common approval delays, reducing business disruption and preserving investor confidence.
5 differences between advisory boards and boards of directors
While advisory boards and boards of directors may sound similar, they are different in several ways:
- Role and purpose: A board of directors is a formal governing body with fiduciary responsibilities to the company’s shareholders. Unlike a board of directors, an advisory board’s main purpose is to provide guidance, mentorship and industry insights to help a startup achieve its goals.
- Legal obligations: Members of a board of directors have legal and fiduciary duties to act in the best interests of the company and its shareholders. Advisory board members typically don’t have these responsibilities.
- Decision-making authority: Advisory boards provide recommendations and guidance, but they don’t have formal decision-making authority like a board of directors.
- Compensation: Advisory board member compensation can vary and may include honorariums, equity grants or expense reimbursement. When offering equity compensation, founders should carefully consider the potential impacts of equity dilution on their ownership structure. Boards of directors are typically compensated with a blend of cash and equity, often requiring shareholder approval.
- Structure and composition: A board of directors follows a formal structure outlined in company bylaws, typically including both internal and external directors approved by shareholders. Advisory boards offer more flexible structures, potentially including industry experts, entrepreneurs, end users and specialists in areas like finance, legal, supply chain, marketing and sales.
Best practices for forming an advisory board
“When forming your advisory board, you should first define its specific purpose and expected benefits, then carefully select members whose expertise aligns with those goals, and then establish clear expectations for engagement from the outset,” Lashbrook said.
Effective advisory boards typically share several key characteristics: members with directly relevant expertise, clearly documented roles and commitments, open communication channels and strong alignment with the startup's vision and goals.
The most successful advisory boards evolve alongside the company. Regularly assess your board’s composition and impact, making strategic adjustments as your business needs change to ensure continued value from these relationships.
Build your future with J.P. Morgan
Our Innovation Economy team connects founders with industry experts and provides strategic guidance for building effective advisory boards tailored to your growth stage. Connect with J.P. Morgan Startup Banking today to continue the conversation.
JPMorgan Chase Bank, N.A. Member FDIC. Visit jpmorgan.com/commercial-banking/legal-disclaimer for disclosures and disclaimers related to this content.
