The earliest phases of a startup’s journey are treacherous. Product market fit is elusive. Opportunities, when they appear, can come from too many directions. Your financial runway grows shorter by the day. Usually in these times, you rightly seek outside advice to ensure you’re moving in the right direction.
These opinions can sometimes be the assurances you need. But beware - you may find that the people giving you counsel may want strings attached. How do you distinguish between counsel that can cost you time, equity, and opportunity, vs. advice that can rocket you to the next phase of growth? Or as my guilty pleasure Food Network show would say, how do you distinguish the advisors who “Cook” vs the ones that “Con”?
As a co-founder of two startups that were both acquired (one to Facebook & the other to Chegg), hopefully my experience can help you avoid some common mistakes. For our new Solitaire gaming & learning project, we're only onboarding advisors that pass the below criteria.
Table stakes
Let’s get this out of the way first: introductions. Advisors of all stripes can and should be helping you network with anyone and everyone. In some cases, these connections may turn out to be truly useful. But those are table stakes - an advisor that wants to trade on this value alone is an advisor that wants to work as little as possible to make you successful.
Several years ago, I met someone who literally held up introductions until we discussed what’s in it for him. In his case, nothing - I got those intros elsewhere.
Besides introductions, what else should you look out for when onboarding advisors?
Your goals
First figure out if this advisor makes sense for what you want to achieve. Do you need help on revenue? Product-market fit? Organizational design? Make sure you know what you want before agreeing to bring on the advisor.
For example, we had a strong B2C educational platform, and needed to get more insight into B2B sales. We found an advisor to help us navigate this market. Ultimately we both collectively determined that B2C was a better space for us, but we benefited from her guidance during that learning process.
Subject matter expertise
In the ideal world, an advisor is like the expensive consultant you happen to be friends with. Their subject matter expertise helps you overcome the hurdles you’ve outlined in your goals.
An important caveat here: make sure the experience actually lines up. There are some industries, like advertising, that have multiple subsectors that seem similar but are different.
For example, a large chunk of our business at Imagine Easy was advertising-based. But ad tech evolves so quickly that every few years you’re running something totally new. We had an advisor early on who had deep expertise in direct advertising, but that expertise just wasn’t relevant in an emerging and complex ad tech industry.
Concrete examples
One way of validating whether your potential advisor will be valuable is listening to how they speak about their experience. If you’re hearing platitudes that sound like your daily horoscope, you might find a psychic reading more cost-effective (just don’t go when Saturn is in retrograde).
Instead, if you learn that when they added a registration wall at the beginning of their freemium workflow vs. the end, their a/b test showed a 70% decline in usage, you might find that valuable.
Or if they also struggled with using Google Web Experiments too, and found better success with ruby’s split library, that could save you and your team a lot of time and trouble.
Respect
Sometimes wisdom breeds arrogance. Even if you’re one month into your new startup, you shouldn’t feel like your advisor is trying to grab the steering wheel away from you. Strong opinions are great (and can be a sign of passion), but if you don’t think this potential advisor is listening to your issues or addressing specifics, move on.
Early on in our startup for EasyBib, we had an advisor tell us to sell to a better-financed competitor. When we rejected the advice, they were condescending, and we eventually parted ways. The well-financed competitor went broke a few years later, but we kept growing.
Expectations
When you do find an advisor that seems like a good fit, and the relationship is moving in a direction where having that advisor on board is valuable to your startup, make sure you discuss expectations.
Generally speaking, you should be looking at giving no more than about 0.5%, with vesting, to an advisor (that’s worth about $125K if you sell your company for $25M). A good place to start is the The Founder Advisor Startup Template (FAST) document from Founders Institute.
The bottom line is that you should expect consistent contributions from your advisor - whether that’s a day long brainstorming session, a few hours observing customers / teams, or just a meeting.
Make sure you get someone consistent that can hold you accountable to your business. Of course, it also needs to make sense to your advisor - ensure you are fairly thinking about your business and that your advisor has enough incentive to help.
Remember - the right advisors can be critical assets to your burgeoning startup. But there are also a lot of opportunists out there that would just love to hang out on your cap table. Hopefully the strategies above can give you confidence in navigating this part of your startup journey.