Tell me more ×
Answers OnStartups is a question and answer site for entrepreneurs looking to start or run a new business. It's 100% free, no registration required.
up vote 1 down vote favorite

We recently met a person through our contacts and he has shown interest in our startup & super liked the Idea. We had initially requested him to be our mentor, for which he agreed. In our next meet he suggested that he is willing to extend his support more than mentor and shown interest to be board of director.

He hasn't made any investments or any contribution so far but has very good contacts in private, government and our industry related network. He suggested that we can use his name to present or promote our product as one of the board member, which he claims can trigger sales with other 2 mentors. He has good contacts with angels, VCs and also assist us in the business idea compitions and so on.
He also said that he would not mind and still be our mentor if we are not making him director, but if he is made part of our company then he can put lot of efforts and do lot of research. Find the partners, find potential clients, get clients, speak to investors, spread the company name and make brand in the market.

About us - we are co-founders doing everything now, but of course looking for people like these.

So he can be director or should be advisor? what is the compensation or stakes/percentage he should be allocated, if at all?

share|improve this question

2 Answers

up vote 1 down vote

Sounds like a new relationship. I would recommend developing and cultivating that relationship -- providing that it is one that both you and he would like to continue before formalizing it into a board position.

The Board represents shareholders.

If he is not a shareholder-- then he will be representing you equity interest in the company. Before you give him that responsibility you need to be sure that he has both earned and learned the ability to represent your interests.

Now, if he becomes an investor . . . .

share|improve this answer
Thanks a lot for your suggestions Mr Joseph, so i was thinking i would continue the relationship, till we get any funding or benefits by any means he would be our board of advisors and in the mean time we will also notice his abilities & value he brings to the table (for around 6 months). Then decide to move him to director role or not? – kumar K Jul 29 '11 at 7:59
Yes. And I think that you want to continue to remind yourself that the Board of Director's represents the investors. Everyone on that board should have a financial interest in the company. They really should all be investors. In his own words -- he will have a greater impact if he is on the board -- he will have a MUCH greater impact if he is an investor who is on the Board. But you hardly know him: hold hands, go for a walk, go to movies -- don't need to get married yet. – Joseph Barisonzi Jul 29 '11 at 15:07
up vote 1 down vote

I would set up a board of advisors. This means you could bring him (and others who could make a strategic contribution) on board and develop those relationships. When you are looking for funding you could offer the investment opportunity to your board of advisors and they could choose to become investors (and perhaps formal directors) at that stage.

Meanwhile you need to work out how you can recompense and incentivise your mentors for the contribution you want them to make. If you don't think you will call on them too much, taking them out to lunch and paying when you want to have a conversation may be ebough

Anyone that you want to make a strategic contribution will need to be incentivised in some way.

  • You could pay them (but cash is probably tight) or
  • You could offer them a small shareholding in exchange for their contribution when you get your first round of funding (1-2%) or
  • You could offer them free use of your product in their business (if appropriate) or
  • There may be some other way you can do something of value for them.

If you pick advisors whose interests are aligned with yours, it should be possible to work out some way to involve them that benefits them and the startup

share|improve this answer
Thanks Susan, So your suggesting that make him director only if he invest money and if he brings stategic contribution and potential clients/investors still keep him as advisors and incentivise him. What are the other criteria which can allow him to be our directors if we want to? – kumar K Jul 29 '11 at 8:04
Basically as Joseph says. If he is a director he should be making a major contribution to the company - usually as an investor (or sometimes by bringing something else very valuable to the table for which you might give him shares.) Joseph's comment has a lot of wisdom - take time to get to know him first before you put the company in his hands. – Susan Jones Jul 31 '11 at 14:00

Your Answer

 
discard

By posting your answer, you agree to the privacy policy and terms of service.

Not the answer you're looking for? Browse other questions tagged or ask your own question.