Advisors for your Startup - why have them and how to use them
Why would any company engage someone as an advisor, let alone me?
Because advisors improve the speed and outcomes for the businesses they advise.
Building a successful business is extremely difficult. The things you think will be easy are really hard. And the things you think will be hard are way harder than you expect.
So you should do everything you can to improve your likelihood of success.
My role as an Advisor is to ask the difficult questions, to help the founder understand the wider business context of what she is doing.
Because I’ve done this before I help the founder zoom out to see the big-picture view of her business dreams, goals and strategic plans; but I can also help with the close-up view of the problems and roadblocks that need specific attention as well.
Because I’m an advisor, not an employee or a member of the Board of Directors, and am acting more as a mentor to the founder, she can share with me things she might not be able to share with her BOD or her employees. We can simply chat.
The founders I work with are very smart. They have all the answers. It’s just the questions they don’t have yet, and that’s what I can provide.
Types of Advisor Help
Startup advisors help management teams make better decisions, move faster, and improve outcomes. Examples of the sorts of things advisors often help with include:
Advice on business model strategy and positioning
Advice on key areas of the business (e.g., user acquisition, product architecture)
Honing the pitch decks and presentations
Introductions to potential investors
Introductions to key customers
Help to identify and recruit talent
Acting as a sounding board for organizational and people issues
One of the most important things a good advisor will do is force you to reconsider your assumptions.
Advisors vs. Directors
Legally and practically, advisors are not Board Directors. Directors also advise and support the company, but the context is quite different. Board directors have a legal status that comes with certain rights and duties that don’t accrue to advisors. Directors have the right to contribute to decisions about the strategy and operations of the company, and a right to be informed about the company. They also have a fiduciary duty to act on behalf of the interests of all the company’s shareholders, ensure they remain suitably informed about the company and a duty of care in performing their duties.
Advisors are independent contractors that have no such duties or rights outside those expressed in a written advisory agreement.
Because advisors are not directors, they often act more like mentors. This means they emphasize the interests of the management team over the other shareholders. For that reason, in many cases, entrepreneurs find they can be more open with advisors and more easily avoid conflict with them when dealing with high-stress situations.
Helpful mentors dramatically increase fundraising success
The Startup Genome Report shows that average funding raised by stage was dramatically higher for startups with helpful advisors.
If you look at funding raised as a reasonable proxy for startup success and progress, the findings from the Startup Genome Report imply that beyond the validation stage, in particular, startup advisors add tremendous value. In fact, it appears that startups that “don’t have helpful mentors” don’t raise any money at the scaling stage—another way of saying that most never get there.
Many founders understand they need advisors. After all, they hear it all the time and see other companies doing it, so they look to do the same.
Unfortunately, many founders seem to think of advisors as more of a checklist or branding exercise than a real resource. They put their headshots in a pitch deck as some sort of endorsement or validation. It's as if they're saying, "I'm going to be successful, just look at my advisors!"
But the headshot doesn't do any good unless the advisor is actively engaged. And that's on the founder.
If you're raising money from VCs they're very likely to check-in with your advisors and it will be quite awkward for the founder if the advisor almost never works with the company.
Flashy but uninvolved advisors aren’t helpful. Poorly suited advisors can be even worse.
You can find Advisors from your network. It starts by simply asking people for advice. You'll start to form a network of people that you go to with questions in areas where you need help. This forms the basis of your advisory network. This is a loose and informal relationship.
Your Advisors will come from this group. These will be the people who provide the most value to you, both because their capabilities match your needs and because they reliably offer assistance that you find particularly helpful.
This is how I became an official advisor to the companies listed above. I worked with them over a period of several months. We developed a relationship. Ultimately, they found my contribution to be of enough value that they invited me to formally be an Advisor to the company.
As you get to know your advisors you will start to identify a few who stand out for their advice and assistance. It tends to happen naturally due to the nature of your relationship. That’s when you might consider adding an advisor to your advisory board.
If you choose to form an Advisory Board, and many early-stage companies do this because they don't have a need for a formal Board of Directors yet, your advisory board should be formed of key advisors who agree to engage on a regular basis for 1-2 years. The board should be small enough to be nimble, but large enough to offer the key expertise and experience that you need during any given time period. That usually means between 2-4 people.
These advisors should be compensated with equity. Offering equity allows you to require an advisory agreement, which can clarify expectations and offer important intellectual property protections for the company.
How to Manage an Advisor
It’s not enough to just find and recruit advisors. You have to take the initiative necessary to maximize the value of their contributions. For the most part, your advisors will be very busy, and it will be up to you to ensure that you pull the most value from them.
Just as importantly, you need to minimize the management overhead associated with your advisory team. Running your startups is already hard enough without adding more work to your plate than necessary.
So keep it easy and simple. I recommend listing the specific area(s) where you’d like their help, and where possible describe the options you’re considering. Once you’ve framed the issue(s), you’re much more likely to get a response that will help you make a better decision and get the most out of your advisor. The advisor will be more engaged, too.
Advisors and advisory boards can be helpful and rewarding, or they can be a waste of time.
In the end, you get out of them what you put into their creation, development, and operation.
If you're looking for business help and are interested in accelerating your success and growing your own business, contact me at firstname.lastname@example.org.
Feel free to also visit our website to learn more about the services we offer to help you Position Your Potential: https://www.therevenuegroup.net/.
I also invite you to download the white paper and learn the 5 step process on How to Quickly Increase Your Valuation: a Proven 5 Step Process.