Health Tech Startup Advisory Board: How to Establish One

The Importance of an Advisory Board for Health Tech Startups

Establishing an advisory board represents a vital initial undertaking when a new startup ventures into the health tech sector. Such a board can offer direction through the complexities inherent in the industry.

It can also facilitate critical decision-making processes and bolster a startup’s credibility with investors who prioritize a robust understanding of the industry landscape.

Strategic Guidance and Industry Insights

An advisory board is equipped to provide valuable strategic perspectives, encompassing both the specifics of your company and the broader dynamics of the healthcare and technology arenas.

These insights can be instrumental in navigating challenges and capitalizing on opportunities.

Leveraging an Advisory Board During Financial Uncertainty

Personal experience demonstrates the significant impact of an advisory board during times of financial instability.

For instance, during the initial stages of the pandemic, a $2 million funding round was nearly jeopardized, but a secured commitment of $250,000 – subsequently leveraged to generate $500,000 in revenue – proved pivotal.

The Power of Focused Specialization

A key factor in this success was the deliberate construction of the advisory board and a strategy of starting small.

Rather than attempting to encompass all of healthcare, the focus was narrowed to two specific healthcare verticals.

This targeted approach enabled the demonstration of the core concept, the development of compelling case studies, and the acquisition of contracts with dedicated teams within client organizations.

Championing Your Startup in Niche Markets

Maintaining focus and demonstrating value are crucial for empowering advisory board members to advocate for your startup within specialized markets.

This advocacy can pave the way for future expansion.

Defining Your Board's Purpose and Composition

Therefore, it is essential to clearly define the primary objective of your advisory board and meticulously identify the individuals best suited to contribute to its success.

Strategic planning and careful selection are paramount to maximizing the benefits of this valuable resource.

Assembling Your Advisory Team

Determining the optimal size for an advisory board typically falls between three and five members, contingent upon your company’s scale and developmental phase. Within the health tech sector, expertise shouldn't be limited to healthcare alone; insights from individuals with a proven track record in technology company growth – even outside the healthcare domain – are invaluable.

Our organization benefits from an evenly balanced board comprising two healthcare and two technology advisors. Ideally, a fifth member possessing proficiency in both industries should be sought.

Key Advisor Profiles

A physician (M.D.), a researcher with a doctorate (Ph.D.) from a reputable institution, or a recognized thought leader within your specific healthcare niche represents the most crucial asset for an advisory board.

These highly accomplished professionals possess extensive networks and serve as credible references within their fields.

They immediately enhance your company’s credibility, facilitate a deeper understanding of both patient and provider perspectives, and can elucidate the intricacies of diverse healthcare systems.

Following this, securing an advisor from outside the healthcare realm is essential. This individual should demonstrate expertise in technology, health tech platforms, or have a history of successfully establishing or divesting a company mirroring your own.

Their contributions will center on product development and technological frameworks, offering perspectives often absent among healthcare specialists. Furthermore, their network can prove beneficial in attracting talent to your development or product teams.

Strategic Insight and Market Access

Next, prioritize recruiting an industry insider or a high-level executive from a potential client organization. This person will provide critical understanding of the client landscape.

They can illuminate optimal go-to-market strategies and identify key decision-makers involved in integrating your company’s solutions into their existing ecosystems.

Beyond broadening your healthcare perspective, this advisor offers strategic insights derived from their own professional experiences. However, thorough conflict-of-interest checks are paramount before onboarding.

The final advisory role can be more flexible. This individual might specialize in fundraising or possess a combined background in health and technology.

These individuals are often the most challenging to recruit, but their impact can be substantial.

Leveraging these advisors allows you to maintain a holistic view of the company, ensuring its alignment with both market demands and investor expectations. Typically, these are seasoned executives or founders of other ventures, and occasionally, physicians who have also launched their own companies.

Building a Strategic Advisory Board

Establishing an advisory board requires a forward-thinking approach. Focus on identifying individuals who can contribute not only to your present needs but also to your future growth and objectives.

A well-constructed advisory board should demonstrate diversity and comprise individuals possessing a significantly greater level of experience than your own.

Leveraging Your Existing Connections

Begin by examining your current professional network to determine if it provides access to potential advisors who align with your vision. Should a suitable connection exist, initiate contact and inquire about their willingness to serve in an advisory capacity.

If direct access isn't available through your network, consider more conventional outreach methods, such as email correspondence, formal letters, or direct phone calls to your desired candidates.

Cultivating Relationships Through Engagement

Another effective strategy involves engaging with potential advisors on social media platforms. Share insightful comments on their posts, amplify their content through reposts, and initiate direct message conversations.

Demonstrate genuine interest in their work and expertise. Consider tagging them in relevant LinkedIn posts that pose questions related to their areas of specialization.

Managing Expectations and Expanding Your Search

It’s crucial to remain open-minded and avoid letting preconceived notions influence your decisions. Your preferred candidate may not ultimately be the most suitable choice for the role.

Should this occur, respectfully inquire if they can recommend other individuals within their network who might be a better fit for the advisory position. Given that advisory engagements typically extend beyond a single year, ensure prospective members can provide sustained value to your organization.

The Correlation Between Requested Compensation and Advisor Dedication

When seeking guidance, the two most frequently requested forms of remuneration from potential advisors are equity and direct financial compensation, with equity generally being prioritized. Truly exceptional advisors are those prepared to offer their expertise pro bono, though this scenario is uncommon.

The level of commitment an advisor demonstrates is often directly linked to the presence of tangible rewards, be it financial or in the form of company equity, as it establishes a higher degree of mutual investment. When considering equity-based compensation, early-stage companies should aim for allocations below 0.1%.

Typical Equity Ranges

A common structure for advisor equity looks like this:

• Pre-seed Stage: 0.25% to 0.1%.
• Seed Stage: 0.1% to 0.05%.
• Series A Funding: 0.05% to 0.01%.

Following a Series A funding round, prioritizing monetary compensation is generally more cost-effective than offering further equity. A pattern often observed is that individuals requesting substantial compensation tend to offer less in return.

The most valuable advisors are often those who proactively identify opportunities to assist, such as facilitating introductions to crucial contacts or offering strategic guidance, without expecting immediate compensation.

Those who immediately focus on fees may present greater long-term risks, leaving you questioning their underlying motivations. It's important to assess whether their involvement stems from a genuine desire to help your company succeed.

Setting Expectations for Advisory Relationships

Establishing clear expectations from the outset is paramount for successful collaborations. Failure to do so can jeopardize relationships that have taken considerable effort to cultivate.

Equally important is avoiding the creation of a hierarchical structure and minimizing overlap in professional experience, existing networks, and viewpoints.

The Value of Diverse Perspectives

A diverse advisory group is beneficial as it allows for a more comprehensive understanding of available information prior to decision-making.

Specific criteria should be defined when selecting advisors, encompassing the following points:

• The duration of their engagement.
• Conditions for terminating the advisory role.
• Potential conflicts of interest.
• Remuneration for their services.
• The permissible frequency of contact.
• The schedule for advisory board meetings.
• The nature of the strategic guidance anticipated.
• Desired frequency of updates between meetings.
• Willingness to facilitate introductions to their networks.
• The necessity of Non-Disclosure Agreements (NDAs) and other legal documentation.

Unaddressed expectations often lead to future dissatisfaction. Therefore, a thorough discussion of all expectations and terms is essential before formalizing any advisory relationship.

Understanding When to Disregard Counsel

Having established an advisory board, the subsequent task involves discerning which guidance to implement. Despite the expertise of each member, not all recommendations will necessarily be beneficial.

A thorough understanding of your own business is paramount; therefore, it falls to you to evaluate all input and proceed with actions most aligned with your company’s needs. A varied board will inevitably present differing viewpoints, requiring a capacity for balanced consideration.

To maintain focus in your advisory process, direct specific inquiries to those advisors possessing relevant experience concerning the issue at hand. Alternatively, a synthesized approach – combining elements from all received advice – can be utilized to formulate a unique solution.

These fundamental tactics demonstrated significant value in the expansion of my enterprise, facilitating client acquisition and ensuring team alignment. Founders should prioritize establishing checks and balances, acknowledging that complete knowledge is rarely attainable.

An advisory board serves as a crucial mechanism for maintaining progress and capitalizing on accumulated experience that you may not yet possess. Effective advisory boards are instrumental in transitioning a startup beyond its initial phase, establishing it as a reputable force within its industry.