What do you need to know about startup advisors before you launch and to get to the next level?
Startup advisors can make a huge difference in your venture. Though there can be a substantial difference in the outcome or bringing them in based on a variety of factors.
Here’s what to know and how to get the most out of this opportunity.
The Value of Startup Advisors
The right startup advisors can pack in a lot of value. You’re going to need them.
This is a tremendous opportunity to leverage expertise as you get started and grow your company. There is a whole lot you’ll need to learn and master as you begin and scale-up.
You may be the best talent in your industry. You may have two co-founders who really know their domains. Yet, there are many roles to take care of. Advisors can bring incredible experience in a much more efficient way than just hiring.
Startup advisors can add a lot of credibilities when it comes to winning key customers, getting into powerful distribution channels and fundraising.
They can round out the gaps in your founding team, and make it much more attractive for investors to get involved. According to Medium’s most popular startup column, those with advisors raise 7x more money and enjoy 3.5x more user growth.
There Are Many Kinds Of Startup Advisors
There are many different ways startup advisors can help. Some will be more active. Some will be on your pitch deck and website more to add credibility and trust. For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) where the most critical slides are highlighted. Moreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400M (see it here).
Leadership and executive coaches can really help you grow as a leader. If you’re going from zero to 100 to 1,000 employees and managing hundreds of millions of dollars you’ll have to grow fast.
They can also help give you the 30,000-foot view of growing your business, and their experience and insights of what really works and how to champion common challenges from what they see in the whole market.
Fundraising consultants can help you with the right strategy, materials, and connections to raise funds well from the best investors.
On the other hand, a good M&A advisor can help prepare you for and navigate the process of mergers and acquisitions. They can help you grow by acquiring other companies, and strategically position your business to be acquired, as well and negotiating and getting through the due diligence process.
How Startup Advisors Get Paid
Quality startup advisors can be extremely valuable. Their time is very valuable. They have to be very careful about who they tie their names to.
You may find some informal mentors who are willing to donate some time to help you. Though most formal advisors will be compensated in some way.
Depending on their exact role and if they will be involved on a regular basis helping with specific tasks, this may be some form of a paycheck. Others will take specific set fees for specific tasks, like fundraising and M&A transactions.
The most common way to compensate advisors who are not doing work for you is equity. This may be a very small percentage, depending on how much value they will add. This can be one of the most efficient ways for early-stage startups to get great help without forking out precious cash.
Even the best startup advisors can’t help if you don’t let them. Startup advisors are not there to just tell you what to do and be your boss. If you have multiple advisors they may even have different opinions.
They provide the benefit of their experience. It is up to you to integrate their recommendations. You can pick and choose, but do keep in mind that they can only help to the extent that you let them and implement their suggestions.
Many highly successful entrepreneurs talk about the value of going with your gut. Yet, if you are bringing in an advisor who has proven to get the results you want, then it’s worth listening and acting on it, even if you don’t necessarily get the reasons for their directions 100%.
How To Choose The Right Startup Advisors
A great startup advisor will pay back many times what you invest in their help. What you don’t want is deadweight that you may have on your cap table, that isn’t adding any tangible benefit.
Start by knowing who you really want and need on your advisory board. Do you need specific help with fundraising and M&A? Do you really need help with advice in a certain area of logistics for your business? Do you just want a celebrity startup advisor who can make your startup look like a better bet?
What areas of your business are your founding team weak in? Savvy investors know that it takes both engineering expertise and the ability to execute to build a successful business.
So, do you have the domain and product expertise, as well as the business acumen, and marketing ability to generate real revenues and profit? If you’re heavy on the tech background, do you have someone who has strong experience within the industry you are trying to disrupt and improve?
Which startup advisor will best align with your brand and help the most? How may they help attract certain other investors in the future, or turn them off?
Make a shortlist, and reach out. Then get to know their motivations before bringing them on board. What’s in it for them?
Are they just looking to take a piece of as many startups as they can with the hopes that one or two will create big wins for their personal wealth?
Is taking compensation for sitting on advisory boards or lending their name just a business for them? Or are they simply passionate about giving back and helping other entrepreneurs after having sold their own company?
Ask yourself the right questions and really understand what drives them as well as their agenda to make sure it aligns with your goals.