Raising Money to Support a Great Idea? Consider Forming an Advisory Board. The right group of advisers can help streamline a plan to get your hot new product to the right markets.
By Micah Johnson •
Opinions expressed by Entrepreneur contributors are their own.
Sometimes, a great idea can run away from you if it becomes an immediate success -- especially if you do not have the proper plan in place to meet that instant demand for your product.
After seven years running a service business that helps large organizations with multiple locations manage social media and online reputation, my company and I 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 it. 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 concept. We took the development one step further and started building a beta version. One that would allow us to demo the app firsthand to anyone who was interested. This is where things got a little crazy. We set up a no-frills booth at an automotive trade show to demo an experience with our initial beta version of the app. The auto industry is our biggest no-brainer target industry. During the two-day show, we ended up being one of the most trafficked booths and had a total of 400 dealerships interested in using our app.
Related: Where to Get the Money to Build Your Mobile App
At the same time, our test marketing was spreading and, in total, we identified three industries that our app would work perfectly 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!" However, 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 our target industries.
- We don't need dumb money, we need a strategic investor that can provide these 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 where we want strong market share.
- We giving incentive to 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 kind of information is extremely valuable and helps us stay leaps ahead of any competition.
Related: Inside the Smart Game of Late Fundraising Rounds
Start building your advisory board.
- Define the objective you want your advisory board to fulfill.
- Build your dream list of people you'd like on your advisory board. As tempting as it is to ask buddies, it's ideal to have a mix of representatives with experience in your target industries and the capital world. Left and right brains should help dissuade too much conformity.
- Contact every person on your wish list with an individualized pitch. Whether it's a direct ask to be an advisor or some serious wooing, do your best to get them as excited about the offering as you are.
- Set the expectations for board members such as meeting frequency, bringing solutions with problems, honesty, transparency, etc.
- Establish the compensation (options, stipend, travel, meals, etc.)
- Create an advisory board contract that keeps everyone on the same page with expectations, term, compensation and confidentiality.
Finally, we don't want to dread meetings with our advisory board. Hopefully these tips will help you avoid that too.
Related:What Entrepreneurs Can Learn From the 5 Craziest Investor Meetings I've Had With Founders
