advisors

What’s the difference between a board advisor and a NED, and other big questions for growing startups

Invigorate

Dec 14, 2022 • 4 min read

We recently ran a fantastic masterclass for London and Partners on how to build advisory boards and external support networks. They are a vital resource for growing startups, and should form the basis of your support and accountability network, helping you grow and setting your business up for scale.

The scaleups that participated had some great questions about managing boards and external support, from how much to pay to how to get your team on board with external advisors. So if you’ve also found yourself asking questions about advisors and boards read on for answers, resources and more!

Q | How do other scaleups actually use external support?

External support comes in many forms, designed to help you achieve different goals for your business.

Graphic representing company structure as a triangle, with employees supported by peer mentors at the bottom; middle management supported by external mentors above that, executive management supported by advisors, exec coaches and mentors above that; and the CEO supported by NEDs, investors, fellow founders, board advisors and exec coaches at the top

There is often some confusion about the differences between all these kinds of support, but at a very basic level: a mentor is someone who might provide free, non-specific advice over a cup of coffee; an executive coach helps executives reach their personal and professional goals; an advisor provides paid support to help businesses reach specific business goals; and a NED or non-executive director is an advisor on your board with governance responsibilities.

Advisors are a valuable and versatile source of expertise, commonly used to provide:

Experience in running and scaling businesses in growth & crisis times
Knowledge of common pitfalls
Lessons learned from across different businesses
Structure and the ability to guide teams
Access to personal and commercial networks
Assistance formulating and executing business strategies and processes, from fundraising and exit planning to product development
Credibility for the leadership team
Fresh and unbiased strategic advice

You can find more information on the roles and responsibilities of advisors and external support can here.

Scaleups can also acquire expertise and feedback through customer advisory boards and industry councils. One example of a business which has done this well is Cervest, whose Climate Intelligence Council brings together industry leaders and experts from across several sectors in a mutually beneficial arrangement which raises awareness whilst also advancing Cervest’s business.

Q | How much should I pay an advisor?

Advisor pay can vary wildly, depending on stage, challenges, and timeframes. Professional advisors often have set rates, which they may agree to vary for earlier stage or particularly promising businesses (often in exchange for equity), but other advisors (such as founders and operators working side-of-desk) often will not have established rates.

You can also choose to offer all or part of the pay in equity. This has some key advantages and disadvantages:

✓ Aligns business and advisor incentives

✓ More affordable for earlier-stage and cash-poor start-ups

x Can be less flexible, tying businesses to advisors who may no longer meet their requirements

x Riskier for advisors – particularly those advising full-time

Whatever you choose to do, it is important that you tie whatever fees you agree on back to expected and delivered impact, for example – growth outcomes like raising investment, growing a team, or bringing in revenue. This will allow you to decide whether a fee is reasonable, how much an advisor’s time is worth to your business, and whether they are actually delivering this value – or whether the relationship needs to be reassessed.

You can find more information on engaging advisors here.

Q | What is the difference between a board advisor and a NED?

NEDs and board advisors are easy to mix up, but there are some key differences between the two:

Board Advisor: Solve specific challenges; More hands-on, practical input to board and execs; flexible basis over shorter timeframes; no governance and fiduciary responsibilities, no organisational decision making authority; quicker selection process
NED: Wider advice and insight; a few days a year providing guidance on strategic direction and priorities; typically retained n a 1-3 year basis; corporate governance responsibilities, voting rights on strategic decision making; in-depth selection process

Businesses will sometimes ‘graduate’ board advisors they have been working with into NED roles. At this point, the advisor will acquire the NED’s fiduciary and governance responsibilities, and move to providing more strategic than project-based or day-to-day advice.

You can find out more about building and managing boards here.

Q | How do you get your team on board with advisory support?

If you have a great team, it can sometimes feel a bit daunting to hire an external advisor, in case they feel undermined or disempowered. But there are a few steps you can take to make sure your team is comfortable with and fully supported by any external help you bring on:

Involve key affected team members in the process of hiring the advisor, so they can make their voices heard
Ensure you have properly onboarded the advisor and introduced them to everyone, so there are no misunderstanding about why they are there, and the advisor is empowered to do their role properly
Consider your current company culture and the communications skills of the advisor when making hiring decisions

It is also worth remembering that advisors are not just good for accomplishing business goals, they can also form an incredibly valuable professional support and development tool, helping team members grow and establish efficient, scalable departments.

If you’d like more information on how to ensure advisory engagements go smoothly, and to ensure you are getting the most value possible from your advisor, check out this resource.

Q | How do I find advisors or strategic investors for a more niche business challenge?

It can be much harder to find advisors for less standard or very industry-specific business challenges. Likewise, if your business operates in a niche space, finding investors with the know-how to provide strategic support can be a difficult task.

One great way to locate this expertise, is to go straight to the other businesses and operators you know in this space or who would have faced the same challenges, and find out who has supported them through their journey. These people may be able to directly advise or mentor you and your execs through these challenges, may have advisors and other external support in the space to recommend, and can even put you in touch with investors.

You can find more information on locating suitable advisors here.

Got more questions?

We have a whole host of incredible resources helping you get to grips with external support here. If you aren’t sure where to start, we’d recommend our basic guide to external support and advisors, which covers everything from sourcing help, to setting an advisory strategy and building a board.

We also run a regular newsletter, keeping you updated on major trends and challenges in the scaleup and venture ecosystems, which you can read and subscribe to here.