More and more of our members at the Society of Physician Entrepreneurs (SoPE) are considering serving on advisory boards of life science companies in early stages of development. For companies getting started, having an advisory board adds the three C's: content expertise, credibility and connections. Advisory board members can help with product development, access to customers and suppliers, links to potential investors, strategic advice and much more.
If you are invited to serve on an advisory board of a startup, you should ask yourself three questions before signing on the dotted line.
1) Can I work with these people?
Working with others in a startup requires the right chemistry. Often compared to a marriage, the relationship between founders and advisors can, at times, be confrontational and stressful if the advisory board members are doing their jobs properly. Trust is the keystone of teamwork and engagement. Without it, all else will likely fail in the relationship. You should also have a clear understanding of the risk profiles of the principles and whether you are in agreement.
2) Is this a viable business?
Be sure you do an analysis of the long-term commercial feasibility of the business and how the firm proposes to generate revenue. There is no point in spending any time working with a company that has little or no likelihood of survival beyond the short term.
3) Does the advisory board agreement spell out the expectations, deliverables and timelines of members, and is the compensation fair?
An advisory board agreement can be as complex or as simple as you like. At a minimum, it should define the expectations of members and be time-defined, particularly at the start. Leave yourself some wiggle room should things not work out as expected, particularly if compensation is based on stock or option awards. In general, compensation -- whether it be cash or equity -- is typically awarded for performance and the amount of time and effort expected of members.
Serving on an advisory board, under the right circumstances, adds value to the company and is a rewarding experience for the advisory board members. Under the wrong circumstances, it can be stressful and result in the loss of friendships. Before you agree, ask yourself the three questions and try to get it right from the start.
Arlen Meyers, MD, MBA, is president of SoPE.