Building your startup’s customer advisory board

A customer advisory board (CAB) can be an invaluable resource for startups, but many founders struggle with putting together the right group of advisors and how to incentivize them. At our TechCrunch Early Stage event, Saam Motamedi, a general partner at Greylock Partners, talked about how he thinks about putting together the right CAB.

“We encourage all of our early-stage companies to put this in place,” Motamedi said. The goal here is to speed up the process to get to product/market fit since your CAB will provide you with regular feedback.

“The idea here is [that] you have this feedback loop from customers back to your product where you build, you go get feedback, you iterate — and the tighter this feedback loop is, the faster you’ll get to product-market fit. And you want to do things structurally to make this feedback loop tighter, starting with a CAB.”

Motamedi said a CAB should consist of about three to six customers. These should be “luminaries or forward thinkers” in the market you are serving. “You add them to the CAB — you might give them small advisory grants — and they become stakeholders and give you feedback as you work through the early stages of product development.”

Image Credits: Greylock Partners

As for the people who you put on the CAB, Motamedi suggests first setting the right expectations for the board.

“There are three components. Number one, the most valuable thing you can get from these customer advisors is their time. So the first piece is you want them to commit to a monthly cadence, that could be 60 minutes, it could be 90 minutes, where you’re going to say, ‘Hey, I’m going to come to the meeting, I’m going to bring two of my teammates, we’re going to show you the latest product demo, and you’re going to drill us with feedback. We’re going to do that once a month.’  […] And then piece two is this notion of customer days, you could do quarterly, you could also do twice a year.

“The idea is you want to bring the customers together. Because if you and I are both CIOs at Fortune 500 companies and we independently react to a product, that’s one thing, but if we sit in a room together, we all look at the product together, there’s going to be interesting data amongst us as customers and the founder is going to learn a lot from that.[…] And I think the third piece is just an expectation that as the company progresses and product maturity increases, that folks on the CAB are going to be advocates and evangelists for the company with their customer networks.”

Motamedi recommends outlining those expectations in a short document.

As for who exactly you want on the board, he stressed that you want to work with forward-leaning companies. And those can be established companies — Motamedi used the example of Capital One — as long as they are looking to the future the same way a founder does.

“Piece one is you want to find people who are forward-leaning. The second piece is, often the people in the CAB cannot be early customers because they’re conflicted. It’s not that their companies can’t be, but they, individually, can’t be sponsors. So just recognize that because you’re making them advisors to the company, they’re less likely to actually buy our software early. And that’s fine because you’re putting them in place for learning. But you don’t want to take customers that actually are going to be really, really early prospects and put them on your CAB because you’re going to conflict them out of purchasing.”

He also noted that the board doesn’t have to be permanent. Once you have everything in place, you run your CAB for a year, he recommends, and then you revisit it. Maybe you want to replace some CAB members, maybe you want to add additional advisors. “Often we see changes happen as the product becomes more mature, the go-to-market focus changes, etc.”

Once you have this board in place, how do you then best make use of this group? Motamedi argues there are two main ways: monthly check-ins and leveraging this group’s network.

“We like to see companies chat with customers on their CAB every month, do the latest product demo, get feedback,” he said. But in addition, he also likes to see companies organize a quarterly customer day where they invite all the CAB members into a single session. “The great thing about those sessions, as you see customers interact with each other and ideate with each other — you get to benefit from that group-rate brainstorming.”

These sessions, he also noted, are also great for figuring out your pricing structure. “What we see people do on customer days is say ‘hey, let’s spend an hour on pricing.’ We have these three potential structures, […] how do you think about and react to these structures. And you can iterate and work really closely with those customers to help define that early pricing structure.”

The networking part here is pretty straightforward. “Ideally, you’ve picked luminaries who have strong networks and peers and can actually be introduction sources for you to other customers,” he said.

How, then, do you incentivize the members of your advisory board? During a Q&A session after Motamedi’s presentation, an audience member asked if you should pay them in cash. The answer there is ‘no,’ but you do want the board members to be owners of the businesses.

“When we have seed-stage or early-stage companies that bring people onto their CAB, we see grants in this sort of .1 to .25% range of the company. And so you could think about — across the whole CAB — perhaps half a point of the company and that will vest you know — you’ll apply a vest to that the same way you would for an employee,” he explained. “And so the idea is that these are people who will really be helpful to you not just in the next year but who signed up for a multi-year journey of working with you and driving value.”

You can find a video (below) of our full conversation with Motamedi from our Early Stage event. In it, we talk about everything from building a product roadmap to finding product/market fit, setting up POCs and finding the right pricing strategies for SaaS startups, especially in the enterprise space.