Patrick Frank
When you enter the health tech industry as a new startup, an advisory board is a crucial foundational step. A board can guide you through industry-specific nuances, help you make important decisions and prove your legitimacy to investors looking for a strong industry background.
An advisory board will be able to give you strategic insights about both your company and the wider healthcare and technology industries.
In my experience of raising capital, the unpredictable financial situation at the beginning of the pandemic meant we nearly lost our $2 million round, but came through with a committed $250,000, which we used to bring in about $500,000 in revenue.
Something that helped this process was building our advisory board and starting small — we didn’t go for all of healthcare but instead focused on two healthcare verticals. This allowed us to prove our concept, build case studies and win contracts with specific teams in our customers’ companies.
It pays off to stay focused and prove your worth so that your advisory board members can champion you in niche markets, with the potential to expand in the future. For this reason, it’s important to identify the main intention behind your board, and exactly who should be on it.
Who to recruit
Three to five people is an ideal starting point for an advisory board, depending on the size and stage of your company. In health tech, you need more than just the healthcare perspective — you also need the insight of those who have already grown technology companies, perhaps outside of the industry. Our company’s board is an even split of two healthcare and two technology advisers, and, ideally, you want to find a fifth who is well versed in both industries.
An M.D., a Ph.D. from a respected institution or a thought leader in your relevant field of healthcare is the most important asset to an advisory board. These are the highly decorated physicians who have strong connections and act as a reference for their peers.
They provide instant credibility for your company, help you get into the minds of both patients and healthcare providers, and can outline how various health systems work.
The next individual you want to bring on is someone from outside the healthcare space. This could be someone who understands technology, health tech platforms, or has successfully created or sold a company similar to yours.
They can provide insight directly correlated to product building and technological frameworks outside of the knowledge of healthcare experts. You might also be able to tap into their networks to hire talent for your development or product teams. There may be differences, but you can draw comparisons and identify lessons that have worked in other industries and apply them to healthcare.
Next you want to source either an industry insider or a high-ranking official at a company that could potentially be a client. This person will help you understand the client landscape, the best ways to go to market, and who the decision-makers are when it comes to integrating your company as part of a solution within their ecosystem.
They will not only cover an additional aspect of healthcare, but they also are available to provide strategic insight into business problems from their own experience. It’s important to check for conflicts of interest prior to onboarding this individual.
The last individual can be more of a wild card. This can be someone who is more focused on the fundraising side or offers a blend of health and tech. These are typically the hardest to recruit, but if you find the right one, it pays off.
You want to leverage these individuals so you are able to focus on the full view of the company to ensure it is something that both the market and investors want at scale. These individuals are typically executives or founders of other companies, and in some cases, you can even find M.D.s that have founded their own companies.
Look within your network
When putting together an advisory board, you must be focused on where you want to be in the future. This means recruiting individuals who will not only help you now but will propel you forward. Your advisory board should be diverse and consist of people who are far more experienced than you.
Always check your current network first to see if they have access to your ideal adviser. If someone does, reach out and ask if they would be open to an advisory role. If you don’t have access via your network, you can go the more traditional route of contacting ideal candidates via email, letter or phone call.
Alternatively, you can follow them on social media, comment on their posts with thoughtful contributions, repost their work, direct message them and show them you are invested in their work. Also, don’t be afraid to tag them in your LinkedIn posts that may ask questions about their expertise.
It’s also important to make sure that your initial expectations do not get in the way. Your favorite candidate might not be the best fit. If this happens, don’t be afraid to ask if they know anyone else in their network that would also be suited for an advisory role position. Advisory roles are typically in place for more than a year, so you want to make sure that these individuals will be able to bring value beyond your current model.
People who want a lot won’t give a lot
The two most common requests that prospective advisers will ask for are equity and cash, in that order. The best advisers are those who are willing to help you out pro bono; however, that is very rarely the case.
There’s something to be said of the level of dedication they will provide when there is actual monetary or equity compensation involved, because there is more at stake on both ends. If you go the equity route, the amount you want to target as an early-stage company should be less than 0.1%. A typical scale looks like the following:
- Pre-seed: 0.25%-0.1%.
- Seed: 0.1%-0.05%.
- Series A: 0.05%-0.01%.
Beyond a Series A, you should focus on monetary compensation because it will most likely be significantly cheaper than any equity option. I have noticed that people who tend to ask for a lot don’t give a lot. The right advisers are typically the ones who organically suggest ways they can help you, whether that be introducing you to a key stakeholder at a potential client or providing strategic insight to an initiative at no cost.
People who want to “charge” typically pose greater risks in the long term and you are left wondering if they are there for the right reasons.
Establish clear expectations
It’s important to establish early on what is expected from all parties. If you don’t do this, you can very easily damage relationships you have worked hard to build. It’s also crucial to not establish a hierarchy and ensure there is as minimal overlap in professional background, networks and opinions.
Diversity is valuable because you want to be able to understand as much information as possible before making decisions. It’s important to establish the following criteria for advisers:
- The length of the role.
- Terms of cancellation.
- Conflicts of interests.
- Compensation for the advisory role.
- How often you can contact them.
- How frequently advisory board meetings are held.
- What type of strategic advice is expected of them.
- How often both parties would like updates.
- Openness to introductions within networks.
- NDAs and other legal paperwork.
Unspoken expectations are future resentments. Before entering into a relationship with an adviser, make sure all expectations and terms are on the table.
Know what not to use
Once you have your advisory board put together, the challenge then becomes knowing what advice to use. No matter how experienced the board member may be, not all advice is good advice.
You know your business best, so it is up to you to listen to all parties and act on what is most applicable to your company. With a diverse board, you will get diverse opinions, and you have to be able to balance this.
One way to keep your advice focused is to ask specific questions to only the advisers that have experience in that particular issue. An alternative is to use a combination of all of the advice you get and put together the pieces to make up your own solution.
These core strategies proved to be one of the most valuable resources in growing my company, winning new clients and keeping our team on the right trajectory. As founders, you want to make sure there are checks and balances because you just don’t have all of the answers.
An advisory board will help you stay on track and give you the ability to leverage years of experience that you don’t yet have. The best advisory boards will help you move past the startup phase and into a fully fledged, well-respected industry player.
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