When I’m asked what has had the biggest impact on Earbits so far, I often cite our participation in Y Combinator.  The reality is, we wouldn’t have even applied for the w2011 session if it weren’t for the advice of one of our awesome advisors, Avichal Garg, of stealth SF startup Spool.  Having a great team of advisors has been invaluable for our company and will continue to be so as we move forward into more treacherous waters.  (To read about our all-star advisors, please check out our About Us.)

Picking the right advisors, approaching them correctly and making sure they get involved can be challenging and extremely rewarding.  Here is how we did it:

Secure One Great Advisor You Already Know

When we first started the company I began reading about the importance of an advisory board for both guidance and social proof.  The first thing I did was ask someone who had been a strong mentor to me at a previous job, who would also be a strong signal to others.  As such, our first advisor was Jordon Keltz, CEO of lead generation startup SeniorsForLiving.  He was previously CEO of ClassesUSA, which was acquired by Experian for about $60M.  He’s a dynamic guy I really enjoyed working with and he is a very energizing leader.  He said yes without even knowing what we had planned, which is why you start with someone who knows and supports you.

Once we had Jordon, we felt we were in a much better position to approach people we didn’t already know.

Think About Your Gaps and Biggest Near Term Challenges

The best thing you can do when you pick your board of advisors is to think about the gaps in your management team, as well as the most difficult things your company is going to face, and find people who have done something similar and successfully before.  While adding “big names” to your board helps demonstrate social proof, picking the right people is truly much better for your business.

At the time that we were building our advisory board, Yotam and I hadn’t yet found Ben Bryant, our co-founder and head of technology.  We knew that we would have no way to vet potential technology co-founders, so finding some great technologists for our board seemed like a necessary move.  We also know that we were building something similar to Google’s Advertising programs and Search Ranking Algorithms.

I jumped onto LinkedIn, looked for current CTO’s with prior Google experience and found Avichal Garg and Sean Knapp.  Avichal was the CTO of PrepMe at the time and was formerly the Product Manager of Google’s Search Ranking Algorithms and Ads Quality.  Sean was formerly the lead developer of Google’s Advertiser UI and iGoogle, and is now the head of technology for Ooyala, a massive and well-funded video streaming platform company.

Here is the format of the letter that I sent to Avichal and Sean:

My name is _____.  I am the CEO of _____.  Our company does _____.

I am writing to you because we are in the process of recruiting a Board of Advisors.  Searching LinkedIn for extremely qualified people, I found your experience to be highly relevant.  The complex systems we need to build are not unlike what you have built at ______.  We believe we are very much on the right track but we are eager to find a senior technologist who can ensure that we are doing things as effectively as possible.  Earlier this week, a Board position was accepted by ______.  He will be advising us on funding initiatives, large scale media partnerships, sales team development and overall startup management.  Our goal is to create a board that can assist us in all matters of our business, which will require experts in startup operations, marketing, personalization technology, and media.

Our team here consists of _[team and bios]_.

We would be pleased to send you more information about the company and open a discussion about an advisory role.  We hope to create an exciting environment for our team and our advisors, where we will exchange ideas and ultimately build the number one destination online for _____.

Please let me know your thoughts.  Thanks in advance for your consideration.

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Based on this email, several more and a phone call or two, both Avichal and Sean agreed to meet.  I flew to SF to talk to them about where we were at and where we’re headed.  After a great chat, Avichal came on board right away.  Sean said that he didn’t think he could add appropriate value for us without a technologist on board but agreed to help us source and vet candidates, and then come on board once we had one, which he did.

To demonstrate the value your board can have, both Avichal and Sean did phone interviews with our potential co-founders and let us know what they thought of their technology chops.  To keep their time investment to a minimum, we only asked them to do this after we had already spent time with each candidate and decided that we liked them in every other area.  Both have reached out to investors on our behalf, and both have answered countless questions ranging from fundraising to technology and more.

Good Advice Can Be More Valuable Than Money

As we were getting going, we asked some of our friends if they knew anybody who might be interested in investing.  One of them said he thought he knew someone and made the intro to Dina Hellerstein.  When we found out that she was the former VP of Legal Affairs for EMI Music, and then Associate General Counsel for Yahoo! Music, we immediately knew we wanted her as an advisor more than an investor.  We talked to her about the business and she agreed to join our board.

Dina has helped us with everything from drafting our licensing agreements to negotiating our licenses with the performance rights organizations.  Between these more cumbersome tasks, she’s answered a heap of legal questions that you’d have to pay a fortune to get from a hired attorney.

Now, that brings me to an important point, which is knowing what is and is not reasonable to expect from your advisors.  We could throw work at Dina all day long if we wanted to, but that would not be an acceptable thing to expect from your advisors.  So, we made sure everyone understood where her role as advisor ended and our role as paying client began.  The questions are free, the licensing work and other actual legal stuff gets paid for.  It’s a more than fair trade and it has been far more beneficial than any small investment would have been.

We have four more amazing advisors, whom you can read about on our About Us page.  But those advisors all came through referrals and were recruited in a manner similar to the first few, so I won’t talk too much about how that happened.  That being said, they’ve all paid for themselves in full and are incredible people we’re lucky to have.

Compensating Your Advisors

If you read around on the net you’ll see recommendations for equity compensation ranging from 0.25% up to 2% for what they call Super Advisors.  How much you choose to give your advisors really ought to be based on how involved they are expected to be, and potentially how much their name adds to your company’s value.  If Mark Zuckerberg joins your board of advisors, I would imagine the actual value of the company would go up, so giving him a bit more seems like smart business.  That being said, for the typical relationship with a great, passionate and helpful advisor, I think 0.5% or around there is pretty fair.  At the end of the day, you want them to feel invested, but you also want them to be doing it for more than the equity.  Typical agreements are for two years with two year vesting on the stock options you provide.

Don’t Think Too Long Term About Your Advisors

The last thing I’ll say is that it is not uncommon for your board of advisors to change over time.  You should pick the people who you think you will need for the next two years and not worry about picking those who you will need 4 years from now.

A really easy example is, don’t pick someone at the beginning of your company’s life cycle who is unrelated to your particular business just because they had a big exit, hoping they’ll help navigate your exit with you.  Pick people that are good builders, and then you can ask the exit expert to join 3 years from now when your exit is closer to fruition.  Similarly, don’t pick people who have raised only institutional money if you want help connecting with Angels or writing grants, etc.

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That ought to just about cover most of what I’ve experienced recruiting our board of advisors.  If you have any questions, don’t hesitate to email me.  I have some outstanding Karma to repay for the kindness our advisors have bestowed upon us.

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Joey Flores
CEO, earbits.com
joey@earbits.com
Listen at www.earbits.com
Connect with us on Facebook: www.facebook.com/earbits
Listen on iPhone: itunes.apple.com/us/app/earbits-radio/id397894402
Twitter: @earbits

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2. Bring It On – a Comment on Competition
3. The Pros and Cons of Raising Money from Friends and Family
4. New Music Releases: June 28th, 2011
5. Thank God I’m Surrounded by Idiots