"Is it worth my time?" Given that the compensation from an advisory board is equity in a private company with no actual market for it's securities, this is really the most important question. The likelihood that advisory board compensation will result in real financial compensation is very low, and yet the demands on your time are very real and can be significant. Is your time better spent in other areas?
"Is this company the most deserving of my generosity?" Because I enter into advisory relationships understanding that the likelihood of real compensation is so low, I evaluate whether to have such a role more from a perspective of how much I like the founder(s) and how much I want their product in my own life. If I don't really enjoy spending time with the founder(s), it's really not worth my time and energy. If I don't want the product in my own life, why would I spend time thinking about it and the business behind it?
To get clarity on those two main questions, I don't enter into advisory agreements immediately. I only do so after I have spent some time with the founder(s) on more than one occasion. And what I'm particularly observing is the founders' willingness and ability to receive feedback. Ideally, the founder updates you specifically on the actions taken and not-taken from the last time you were with them. We all observe differently, but I think it's paramount that you trust the advisor actually can implement your advice and counsel.
Is the Company "hoarding" advisors? More than 3 advisors to a Company is generally indicative that the founder is more interested in building social proof than getting advice and counsel. That can sometimes be acceptable in industries where proven expertise is really helpful and almost required in the early days of the business.
"Are expectations aligned?" Has the company articulated clearly the expectations of your time and involvement in a way you feel comfortable with being able to deliver upon?
Happy to speak to you in a quick call to answer any further questions on the topic.
When I'm asked to sit on a board I ask myself:
1. Will this entertain me and will I have fun?
2. Can I contribute something of value?
3. Will these people listen to my advice if they aren't paying for it?
4. Will I learn something or become connected with other board members who matter to me?
All of these factors play a big part for me. They're all valuable components. So if too many don't add up in my favor I pass on the board.
When being asked to serve in an advisory role where you are not being compensated and will not have authority (I.e. Like a board member) you still should ask some fundamental questions. You are in effect exposing your credibility to how this business operates in the market and how market sentiment will impact you.
You want to identify some sense of financial health (you would be getting this by default if you were being compensated as an advisor)
I would suggest speaking to a board member will be beneficial
I would also do some homework to establish your own sentiment on this company if they have any public visibility (including searching for their team members on social networks)
- who are competitors
- how do you differentiate and head off roadblocks set by more established competitors
- what is your position in funding and when do you need additional rounds (impacts how your recommendations can be put to use in realistic fashion)
- who are you trying to reach, both influencers and prospective customers
This should give you a beginning picture of the company and help you decide if you can really help.
I've both recruited advisory boards and served on those boards as well as serving as a board member.
I'd be glad to dive into specific due diligence or other factors if you have more specifics about your possible participation. Glad to hold a brief call to discuss.