There will come a day when your startup needs an expert perspective that doesn’t exist within its core team. Whether it be a regulatory hurdle, technical matter, industry connection, key hire, or inside scoop, having a well-constructed advisory board will help your startup break through barriers and get to the next level. But like every key decision a founding team makes, be careful about potential pitfalls. The entrepreneurs and VCs we talked to offer tips to help you build an advisory board that truly works for you.

For entrepreneur Margot Schmorak, recruiting a circle of startup advisors has been key to the growth of Hostfully, the San Francisco-based property management and guest experience software company she co-founded more than three years ago.

“It has helped us move faster,” says Schmorak, who is Hostfully’s CEO. “Our advisors act as an extension of our team — sometimes there are these hard decisions when you need to talk only to people you trust. Advisors are really, really great for that.” They can also give you a “third-party” perspective, she adds.

Building an active startup advisory board can help startup founders fill expertise and experience gaps, but as Schmorak has learned, there are pitfalls to be avoided.

Know the difference between an advisor, a mentor and a consultant

The term “advisory board” is somewhat of a misnomer as advisors generally do not meet as a group regularly and have don’t have the legal and fiduciary responsibilities of a board of directors.

Advisors:
● Tend to consult one-on-one with founders and executives as needed;
● Sign agreements with startups specifying their roles;
● Typically get compensated with equity (more on that later).

In contrast:
● Mentors are unpaid and act in an informal capacity;
● Consultants can play a similar role as advisors but most often are hired to perform one or more specific tasks or projects and are paid in cash.

When to start signing up startup advisors

As an attorney who counsels entrepreneurs, Peter Szymanski says that advisors can prove most useful when a startup begins hiring key staff or needs to ramp up sales and partnerships. “Recruiting an operations person who has a wide network can help you can tap into outside vendors and potential employees,” says Szymanski, founder of Silicon Valley Counsel. “Other advisors with industry experience and connections can help with partnerships and revenue growth.”

Some startups may want to bring advisors on board to tackle distinct challenges. For instance, an electric scooter company that’s trying to break into a new city may need an expert who knows how to navigate around regulatory roadblocks in its target market. Or a medical device maker could benefit from an advisor with connections to top …