Raising Money? Start with an Advisory Board Instead.
After seven years running a service business which helps large, organizations with multiple locations manage their social media and online reputation, we decided to make a leap into the mobile app world.
I took the largest problem that didn’t have a solution (one we run into on a daily basis) and sketched out what a mobile app might look like to solve the solution. Distributing the sketches to our internal team helped me further refine the idea and overall direction of the app. With that refinement in place, I built a few Photoshop mock-ups, a sales presentation and started test marketing it to our current clients.
The initial results were in. The existing clients loved the app’s concept. We took the development one step further and started building a beta version. One that would allow us to demo the app first-hand to anyone that was interested.
This is where things got a little crazy. With our initial beta version of the app, we set up a no-frills 10' x 10' booth at an automotive trade show. The automotive industry is the biggest no-brainer target industry for the app. During the tw0-day show, we ended up being one of the most trafficked booths and had a total of 400 dealerships interested in using our app.
At the same time, our test marketing was spreading and, in total, we identified three industries that our app would work perfect for, easily generating a high demand in all of them.
The problem? We didn’t have an app ready for that demand.
At first we thought: Let’s raise some capital! We can increase our development team size and get this app built pronto! But, as we reached out to potential investors, a few things became clear:
- We need money, yes. But at what cost?
- We need more insight and connections into the industries that our app will work perfectly in.
- We don’t need dumb money, we need a strategic investor that can provide the insights and connections.
Enter the Advisory Board
By building an Advisory Board, we’re accomplishing a few things right away:
- We are making connections in the major industries we want to have a strong market share in.
- We are incentivizing our advisors to help us grow the business.
- We are leveraging advisors that have connections to smart capital and can be introduced through them as a third-party instead of seeking capital directly.
We also realized that while we may know the solution to the problem and can build an app to solve that solution, there is still a lot of knowledge we do not possess. Initial discussions with potential advisors have already refined our revenue model and shaped the way we’re thinking about the rollout.
This type of knowledge is extremely valuable and helps us stay leaps ahead of any competition.
Steps to Building an Advisory Board
- Define the objective you want your Advisory Board to fulfill.
- Set the expectations for board members. Meeting frequency, full honesty, bring solutions with problems, etc…
- Establish the compensation (options, stipend, travel, meals, etc…)
- Create an Advisory Board Contract that keeps everyone on the same page.
- Build your Dream List of people you’d like on your Advisory Board.
- Work to contact every person on your list and get them on your board.