Forming and managing boards and advisory boards in start-ups
When is the time to establish an advisory board – and when a board? How do I identify the critical competence gaps my company has and how do I find the right profiles for my board? How, in practice, do I get the most from it and how do I compensate my board members?
Those are some of the questions Food & Bio Cluster Denmark has received from innovative entrepreneurs on how to take their ideas to the next level. We got in touch because they are already collaborating with externals like Chr. Hansen and Nordzucker in innovation projects funded by Biosolutions Zealand.
Common to them is that they want develop their companies with the help of a board or an advisory board, but don’t know how to get started. Therefore, we invited experienced board members and entrepreneurs to a panel session discussing this during the event “Innovation in Biosolutions” at DTU, and here’s a summary of their answers.
Photo: Christian Jacobsen, Thomas Grotkjær and Lone Hass discussing the role of boards and advisory boards at the “Innovation in Biosolutions” event at DTU on 13 April 2023
Difference between board and advisory board
Thomas Grotkjær, Partner at Bio-industrials, Novo Holdings and board member first outlined: “Let’s put it out very clearly; a board has a legal responsibility towards the company (financially and strategically) while advisory boards can give you advice on specific topics or input to your strategy”.
Yet Christian Jacobsen, CEO, Eupry ApS, who has been through the drill himself, suggested an in-between solution, as Eupry ApS is using the board members as advisors between board meetings. Besides, the company uses individual advisors for specific issues, and they are not organized in an advisory board.
How to select board members
Lone Hass, Board Member, Bestyrelseskvinder, gave valuable advice on how to select board members: “You need to explore what their REAL motivation for being an advisory/board member is. Is it to gain the title, get warrants in a complicated system adding more work on you? Or is it to add value to the company?”
Also, the three panelists agreed that a “nice CV”- e.g. being a highly profiled corporate person , cannot always be translated into a valuable advisory board member. When it comes to off-loading some of the burden, Lone Hass suggested that startups ask someone to screen potential board members and set up meetings if there are good candiates.
Onboarding and compensating when you don’t hold a penny?
“Let’s cut to the chase, how much does a board member cost - From 40,000 DKK upwards per year is acceptable”, Lone Hass suggested, which was confirmed by the other panelists. But “If a potential advisory board member wants you to set up a reward system for their benefit, that might be difficult and costly for a startup (like warranties), then they aren’t doing you a favor. Keep it simple”, she continued.
Thomas Grotkjær added to this: “Make sure that if your board members get shares for their work, their shares should be in a vesting scheme as well – so that they need to keep working hard for you”. Which brings us to the next question.
Can you fire board members?
With regards to making sure the advisors you have are fit for your company’s needs, all three agree; “If a board member is only making your to-do list longer, they aren’t a good board member, they need to help you focus and take things off your desk”, as Thomas Grotkjær puts it.
This refers back to the good onboarding: If you have an honest and open discussion before onboarding an advisory board member on what you need, maybe even specify a timeline or a temporary agreement, it is easier to get back once the board needs to be adjusted.
Bestyrelseskvinder.dk offers two hours free advice on how to establish or move forward with board / advisory board, and Food & Bio Cluster Denmark has a database of interested advisors that want to help entrepreneurs.
Please contact Eva Nautrup or Claus Mortensen, if you want to hear about this opportunity.
More articles from panel discussions at “Innovation in Biosolutions” event at DTU on 13 April 2023:
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