How to Startup: Advisors
"How to Startup” series. This week we will talk about Advisors: when is the right time to get them onboard and how you might maximise the benefits of the relationship for both sides.
Kia ora my fellow entrepreneurs, I’m starting the series “How to Startup” with the idea of sharing a wee bit of my experience sitting on both sides of the table and, well, making heaps of mistakes on both positions. I’ve chosen this as my opening topic because, well, people keep sending me pitches where the advisors are front and center and the team comes next, so I thought about sharing a piece of advice about how to manage this discussion.
Through the last decade, a lot of entrepreneurs have asked me if I want to be an advisor to their companies, and usually, I end up convincing them that I'm not the best option. Why is that? Because usually, they haven't thought about what they want me to do for them (and why I'm the best person for that job), neither how to incentivise me. I wrote this piece to share some ideas about how to make this relationship more effective and how to make sure it's legal (if you want to jump to the uber-useful Advisor Agreement template, just click the button below).
Download Advisor Agreement Template
Mentors and advisors have always been there, to all sorts of leaders and high achievers, from the long-standing Chinese and Roman traditions to the ancestral tribes in Australasia. If you have seen Star Wars, The Matrix, Goonies or even the original Wizard of Oz, you know that there's always a mentor there to help the troubled here understand what needs to be done (check the Hero's Journey from Campbell). Mentors and advisers allow leaders to broaden their perceptions and make peace with their instincts. They are also an excellent receptacle for blame, as you can always say that the advisor told you differently (just kidding, don't do that, own your decisions).
I've personally benefited heaps from the help of mentors and advisers throughout my professional and personal life. Many of the conversations were painful; many felt useless at the time but made heaps of sense after in my journey. I also mentored more than a couple hundred startups through the last 13 years, but I can't say that I had the most profound impact on most of them. Some ended up proving me wrong, and many of them made me think extensively about my journey. Little did I know that years after, some of my mentees became employees, friends and business partners. Some appeared just to say that I’ve said that thing that was life-changing for them even though it was excruciating for them at that moment.
However, I should not confuse the two roles because even though both have the role to help you through your journey, many can advise; but few can mentor. That's because an adviser directs and a mentor, on the other hand, guides. So, an adviser might be more efficient for a narrow-focused role where he/she/they will direct you and your team into a specific part of your journey, without enormous regard to your particular personal situation, needs, or passions. It's all about the mission, and that focus is essential.
Finding those humans is not easy because, well, it shouldn't be easy to find great people aligned with your mission and with availability to help. You need to know exactly what you are looking for to make sure you can engage and agree upon a mission. I've made a step-by-step guide to help you to find them:
1) Make peace with the fact that you/your company needs advisors
Advisors are people that have had more experience than you/your team in a specific topic, and most importantly, serve as a sounding board for your ideas, plans and decisions in that direction. You are not omniscient nor omnipresent (if so, please help me find my bike lock keys, I really can't find them); hence, you cannot know everything all the time.
An advisor will help you with a challenge, not all of them. Choose 2-3 of your main challenges as a starting point and search for people who will help you on those journeys. This is not a marriage, this is a mission, and all assignments have goals, timeframes and constrictions. Know those well before you engage with them.
It's essential to define if this is a case for building a board of advisors, hoovering around the company in a less structured fashion, or having a more formal board of directors. The main difference between them, according to this simple chart shared at MBIE's website:
If you don't need a board of directors right now, avoid the hassle. If you need one, make sure that your company voice is being heard and well represented. Once shareholders are on the board, there's always a risk of an Agency Problem. Ensure that everyone on the board has the exact alignment about the company, and mostly, they understand the journey ahead, without the need to cut corners and maximise return for a single entity there, against the will or interest of the other shareholders.
2) How to find them
I was about to say that there's no "Tinder" for it, but there are some platforms out there (I can't comment on them, but as with all marketplaces, there might be a problem of adverse selection). Usually, as a high achieving entrepreneur, you want to be talking to industry leaders and people that will help you with their vast knowledge, network and wisdom. If you are profoundly dedicated to your market, chances are you will know some of those people. If not, use your networking skills and reach out to them at events and online.
Be persistent; however, most likely, they will be swamped, so don't be a jerk and find a way to get that person's attention in a very respectful and engaging way. If you can't get the best one, try the second-best or the third... you get the drill. If you have investors or are part of incubators and accelerators, they should help you expand your reach.
3) Choose the right person
Have options and go through "advisor dating". As in any relationship, you need to know what you are searching for (go back to topic 1) and ensure that this human will understand where you are coming from and answer your enquiries well. I love this list of questions from Guy Kawasaki’s, even though they are a wee bit broader. Remember that if they don't even understand what a startup is, they won't be able to empathise with your journey.
They don't need to be the most successful and experienced entrepreneurs, but they need to understand how hard it is to be one. Some traits to look for in an advisor:
Has experience within your vertical (past experience) and does not have any conflicts of interest through their current role.
Understands your startup’s unique vision.
Is invested (financially or emotionally... some skin in the game always unites both) in your company and team.
Can actually build rapport with your team and other advisors: I had some nasty people as mentors/advisors along my journey that were less effective due to the fact that we couldn’t connect, even though they had a lot to add.
Can bring a diverse point of view through their personal story - we usually search for people that resemble us and our journey, which might create an echo chamber. At least not with your entire board. It is absolutely important to have different voices that you usually wouldn't normally engage.
These people are the people that you will need to have full transparency (on both sides), be on your speed-dial for you to know that you can call immediately when you run into a problem, and make sure that they will be up-to-date with your companies journey (worst thing as an advisor is to discover that the company pivoted and now the initial SaaS business has become a pizzeria).
4) How to run your journey
This is a purpose-driven relationship that needs to work exceptionally well. Making sure that you have habits and structure in place will help. In my personal experience on both sides, I feel that there are three things and three things only that you need to make sure of:
Structured communication: As you have clear goals for your advisors, you should have key performance indicators (KPIs) or other methods to evaluate how close you are to the conclusion of your journey together. Ensure that there's a clear cycle of updates (weekly, bi-weekly) with relevant information about the topic that you are working on, as well as overall updates about the startup journey. Don't miss follow-ups; make sure that you won't drift apart.
Clear expectation: Aligning clear what you expect is mandatory in terms of, well, everything. Make sure that your advisor knows when he/she/they need to be at meetings, what sort of advice, connections and time that you want from them and for how long.
Proper documentation: Having people spending time with you to solve your problems is fair if you can incentivise them. I dully recommend that you check our advisor agreement template on our resources tab. Once you have aligned all points above, sign it and start the journey together.
One day this relationship will end, at least the formal part of it. Make sure that you celebrate; this is key for your company culture.
An essential part of this journey is to remember that it ends. An advisor, independent of the amount of time she is investing in the company, is NOT a part of the team. You could leverage an experienced group in a market by having someone with leverage in a particular market. You should mention to your potential investors, maybe even to your clients, that you have a formal advisory relationship with them, but bear in mind that this is a mission-based relationship and should not be the actual value behind your company.
This exercise is a relatively profound one and will help you to look at your team weaknesses. Be proud of them, find help to protect your company from its impacts, and search for humans who will advise you through your journey. Just, please, don’t forget to have fun.