What It Means to Have an Advisory Team and How It Can Help Your Startup Grow Tapping into collective expertise helps founders fill in knowledge gaps when trying to take their business to the next level.

When starting a business from scratch, many entrepreneurs believe they should be in control of everything, from customer acquisition to packaging design to human resources. Truly successful entrepreneurs understand, however, that no matter how smart and capable they are, they don't know everything and will need advice along their growth journey.

That's where a startup advisory board, or a group of advisers who typically meet one-on-one with founders to provide insights and expertise, comes in. Because no matter the depth and breadth of a founding team's knowledge, "there will inevitably come a day when they lack the expert perspective on a topic," says Jake Mendel, senior vice president of startup banking at Silicon Valley Bank. And when that day arrives, having a group of well-chosen advisors will allow you to "maintain pace—or in some cases, move even faster—when making decisions in uncharted territory," he says.

Here's how to find potential advisors and manage advisor relationships to bring your startup to the next level.

Finding potential advisers.

Unlike with a mentor, an advisor is typically compensated for their time and their role is formalized through a contract. That said, most founder-advisor relationships don't begin as formal agreements—instead, they start as informal connections and progress from there.

Because potential advisors are often people who are already in your network, Mendel recommends investing in building a diverse portfolio of professional relationships. In your startup's earliest days, this could include searching for advisors on networks like Bolster* or tapping startup-focused service providers like Silicon Valley Bank to identify attorneys, bankers, or agencies that could fill an important advisory role, now or in the future.

Once your company starts to fundraise, "treat every engagement with an investor as an opportunity to identify mentors or advisors," Mendel says. Remember: Venture capitalists are used to playing the role of connector for their portfolio companies. If you're looking for someone with a specific background, they'll likely be able to introduce you to several useful contacts.

Building a balanced board.

To determine what kind of advisor you're looking for, "start by understanding where your team has gaps," Mendel says. If your team has experience scaling but is looking to enter a new, relatively unknown sector it might be worth bringing on someone with deep, industry-specific knowledge.

Broadly speaking, most advisory relationships fall into one of three categories: startup generalists, industry veterans, and function specialists. All can serve important roles—generalists are individuals with experience helping companies grow quickly; industry veterans have expertise in a specific sector; and function specialists can help with specific business areas, such as regulatory issues, research and development, or sales.

How you populate your board between these three categories depends on your startup's individual needs. If you're a first-time founder, you'll want the experience and strategies of a startup generalist. If you're a serial entrepreneur who's looking to enter a new sector, however, an industry veteran might be a more valuable addition.

Managing advisor relationships.

An advisor's role is typically formalized through a contract. (Online templates outline the basic tenets of this document, which include confidentiality and non-disclosure provisions, duties and responsibilities, the length of the agreement, and compensation.) Due to the binding nature of the relationship, it's important to vet potential advisors just as you would a full-time hire.

Ideally, an advisor's role and duties should be laid out before the contract is signed. "I've often found the most effective advisory agreements to be those tied to specific deliverables, such as a clear regulatory milestone or the launch of a new feature," Mendel says. "This ensures that compensation is commensurate with the value provided – something that can be more challenging to quantity if just tied to "hours worked.'"

In most situations, advisors are compensated for their time with equity in the company. If it doesn't make sense to tether compensation to deliverables, Mendel recommends setting up a payment agreement, such as a two-year vesting schedule with a six-month cliff. "That way," he says, "if the relationship doesn't work out during the first six months and the advisor leaves, the company retains the equity.

Click here to learn more about how Silicon Valley Bank can help you find the expertise you need to grow your business.

* Bolster is an on-demand executive talent marketplace to help companies accelerate growth by connecting them with experienced, highly vetted, and diverse startup executives and board members. SVB Financial Group is an investor in Bolster.