Build and Maintain Strong Advisor, Board Member, and Investor Relationships
We launched the final program in our Entrepreneurial Education Series, “How to Find Advisors, Board Members, and Investors,” on November 12th with our partner 1871 and sponsor The Wall Street Journal.
The event brought together powerhouse entrepreneurs and investors Bruce Barron (Co-Founder & Partner, Origin Ventures), Corey Ferengul (CEO, Undertone), Constance Freedman (Founder & Managing Partner, Moderne Ventures), Jason Kunesh (Co-Founder/CEO, Public Good Software), and Mark Tebbe (Chairman, ChicagoNEXT. Co-Founder, Vice-Chairman of the Board and Lead Director of Answers Corporation; Former Founder/Chairman of the Board, Lante Corporation) to share their insights on best practices for finding and building strong working relationships with advisors, investors, and board members with moderator Pete Wilkins (Managing Director, Hyde Park Angels).
If you missed the event or just want a quick recap, read on for highlights from the discussion and watch the full recording.
Key Takeaways Bruce Barron and Pete Wilkins started the discussion by clearly defining the differences between advisors, investors, and board members, providing the framework for the rest of the night. Namely, as they both explained, advisors provide guidance, advice, and mentorship, but don’t have legal responsibilities and can take on varying degrees of involvement in your company. Investors have a legal stake in the company that they obtained by transferring funds to the company. Finally, board members are appointed: seats come from the founding side, the investing side, and often one independent. Board members have a fiduciary responsibility to all shareholders and work to provide oversight of a company, in addition to exercising certain control over its development and decisions.
Advisors
The overall consensus from the panel was that bringing on advisors early — so long as they understand your business and how to achieve its objectives — is tremendously beneficial, not just because their key expertise can help you grow it, but because they can move on to become investors and board members.
Jason Kunesh’s experience at Hyde Park Angels portfolio company Public Good Software aligned with this idea. He emphasized, “We had several early advisors become investors and even become board members. It’s always sort of a job interview. You’re always creating these relationships.”
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However, since these relationships can develop into much more, it’s extremely important to choose them wisely. As Constance Freedman pointed out, you need to “find those advisors and mentors who are a target customer or group that you’re targeting for your product or service.” Finding advisors who are subject matter experts is critical, as are finding those who can fill in gaps or strengthen your weak spots, but ultimately, finding links to customers is the different between an unsuccessful company and a successful one. If your advisor is a customer or part of a customer company, you can open up crucial sales channels.
It’s also important to remember that while advisors can play a central role in your startup, the best advisors are the ones who know their own limitations. Constance made sure to underscore: “there’s something to be said about an advisor who knows when they’ve reached their capacity as a good advisor.” There’s nothing wrong with cycling through advisors as your business grows and changes; that’s where having strong, honest relationships can make the transitions smooth.
Investors
One of the most important lessons the panelists said entrepreneurs learn the hard way is that the investor-entrepreneur dynamic is not like the advisor-entrepreneur dynamic for a number of reasons. Of these reasons, Pete Wilkins stressed the most important, “If you’re seeking investment, control changes.”
Investing in startups is not like investing in stocks. You’re going to work with active investors who are hands-on and have certain rights in the development of your business. Specifically, investors will claim board seats, and as all of the panelists highlighted at the end of the panel, your board is your boss.
That doesn’t mean you should be afraid of your investors, but instead, aware of finding the right ones who truly understand your startup and the best ways to help it move from one stage to the next. As Mark Tebbe pointed out, “You have to be cognizant of the permanency of the investors.”
Board Members
You always have to be cognizant of the permanency of board members. Depending on your terms, it can be extremely difficult to impossible to remove a board member. That means you have to choose them wisely, and once the choice is made, learn to make compromises and work together productively.
Jason Kunesh explained, “When you come into conflict with board members, you need to step back and listen because they may see a way to maximize value.” Coming from a place of open-mindedness and being willing to see the board member’s perspective can not only help you resolve conflict, but potentially come to decisions that are better for your company in the long run. Moreover, showing this willingness to work together will help strengthen a relationship that could go on across years and years. Building this partnership benefits all involved.
In particular, because your board members are really invested (literally and figuratively) in your company reaching a successful exit. They are charged with determining the best strategies to get there. Corey Ferengul pointed out that as a board member “ You’re trying to make sure the company is using the money in the smartest way for the best result.” Essentially, your board members are providing the oversight to make sure sound business decisions are made, which can be a very valuable sounding board for entrepreneurs juggling so many big picture and small tactical responsibilities.
Finally, when you as an entrepreneur are faced with having to focus on the day-to-day operations of your business, you can rest assured that you have a whole team of board members thinking strategically. As Mark Tebbe noted, “In both startup and public boards, [board members are] charged with looking forward at the future.” As long as you communicate your vision for the future effectively and consistently, your board members will be thinking about that future in accordance with your objectives, even when you don’t have the bandwidth.
Get more insights and context around building and maintaining strong advisor, investor, and board member insights from our full recording of the panel.
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About Hyde Park Angels
Hyde Park Angels is transforming early-stage investing by taking a people first approach. The organization is the largest and most active angel group in the Midwest. With a membership of over 100 successful entrepreneurs, executives, and venture capitalists, the group provides critical strategic expertise to entrepreneurs and the entrepreneurial community. Nearly 40% of our members have founded a company, 88% are CEO’s, top executives or corporate board members, and 100% invest in startups. By leveraging the members’ deep and broad knowledge of multiple industries and financial capital, Hyde Park Angels has driven multiple exits and invested millions of dollars in over 40 portfolio companies that have created over hundreds of jobs in the Midwest since 2006.
About the Author
Alida Miranda-Wolff
Alida Miranda-Wolff heads up communications and strategy at Hyde Park Angels, crafting and disseminating the organization’s brand in all forms across all channels. In addition to single-handedly building HPA’s integrated communications plan and executing its core elements, Alida manages membership, partnerships, portfolio company support, and all community engagement.
Prior to joining Hyde Park Angels, Alida served in a variety of journalism, marketing, communications, and management roles, specializing in creating spreadable multimedia content for tech-enabled businesses at all stages. Alida has run several Kickstarter campaigns, including one of the most successful in Chicago history, and still mentors companies running their own campaigns.
Alida graduated Phi Beta Kappa from the University of Chicago in 2014 with multiple honors and awards. She remains active in the university of alumni network, serving on five advisory boards and committees. Alida is also a published author and poet, with two poetry chapbooks currently in print, Domestic Scenes and Tree Fingers.
