As a startup founder, you’re juggling a hundred different roles and responsibilities, some within your field of expertise and some that are way outside your comfort zone. A founding team typically has combined experience and in-depth domain knowledge but there will likely be gaps, particularly in areas like compliance, go-to-market, recruitment, or very niche subject matter expertise. This is where a startup advisor or an advisory board can make a huge difference.
A startup advisor can be thought of as a mentor, but one who has a specific role, which is outlined in a contract. They may be bringing in technical expertise, market knowledge, or a robust list of business contacts and networking opportunities.
An advisor is brought in to meet a focused need, so choose them for their ability to meet that need. For a startup that is technically sound but requires marketing and growth expertise, a marketing or GTM leader can help guide the company to scale from a few hundred users to thousands or millions. An advisor is usually compensated through equity in the form of stock options.
An advisory board is different from the board of directors since it consists of individuals who typically meet with and advise startups one-on-one, rather than as a group. The legal responsibilities and expectations for the two are also different.
Before diving into how to choose the right type of advisor for your company, ask yourself if you actually need an advisor.
Some ways to think about this question are:
If you’ve gone through this list and decided that you do require an advisor or several of them, it’s time to drill down and be laser-focused on what you want from them.
This is where an advisor differs from a general mentor. A successful advisor comes in and shares insights on how best to do a particular task or hit a target milestone. So the more detailed and granular you are in what you are asking them, the more value you will derive from the partnership. This is also because you have limited time with an advisor and you want to get strategic inputs and not get lost in the weeds of tactics.
Your first go-to will be your immediate network of other founders, partners, and investors, and thereafter their network i.e. your second degree of connections. Chances are, if you have a good rapport with someone in your industry, you have already discussed some of your challenges and sought their inputs informally. The world of entrepreneurship is built on word-of-mouth and it never hurts to ask your network for recommendations and introductions. Converting a casual connection who proves valuable into a formal startup-advisor relationship will speed up the process immensely and put you on track to leverage insights in an environment of trust.
Mentorship platforms and strong online communities are also good places to find experts who have the depth of knowledge and passion to interact with founders early in their startup lifecycle.
If you know exactly the right person to advise your startup but find no connections to them in your sphere of influence, take a chance and reach out to them directly. If you have a strong reason why they should engage with you, you may just hear back and secure your dream startup advisor.
Just as working with the right advisor can fast-track your problem-solving, the wrong one can set you back drastically. In an environment where everyone is a LinkedIn expert, approach your advisor search as you would the recruitment process for a full-time hire: objectively and methodically. You will be working just as closely with your advisor, albeit under different parameters. You want to be sure that your advisor is the right fit for you and your team, particularly when you’re handing over precious equity, in exchange for their time and expertise.
If you’ve answered the questions listed earlier, you already have a fair idea of the type of person you need to help you thrive. Look at a person who has the kind of expertise you need at that time, be it in recruitment, marketing, technology, or any other areas that are critical to your business.
While assessing an advisor’s credentials, look beyond the brands and titles to
understand what their contributions to a company & team’s success were, and the structures they have experience in. A growth marketer at a lean startup plays a different role and has different insights from a marketer at a FAANG company.
An advisor who is hard to get in touch with defeats the purpose of having an advisor. So work out the cadence and format of communication with your advisor during the negotiation process, to avoid being ghosted or intruding on their time. The frequency depends on how much time you need and how much they have to offer. For example, in a month where you have several product launches, you may want to factor in more time with a GTM-focused advisor or one who can guide the technical roadmap.
Some advisors offer expertise of their own, while others are a gateway to other experts and networking opportunities. If you’re bringing in an advisor on the strength of their network, do your diligence to ensure that they are in a position to and are willing to make the introductions you need, either to hire your teams or to form strategic partnerships.
You’ll be sharing your startup’s most critical challenges and there has to be a level of trust and good faith between you and your advisors. There will be paperwork to seal the deal but a good working relationship stems from clear communication and genuine investment on the part of the advisor to help you solve your problems and move to the next stage of development.
Once you have found the right advisor, work with them to negotiate compensation terms. Advisors typically look for equity in the company, and this is typically anywhere from 0.25% to 1%, which is usually the maximum. A vesting schedule and cliffs should also be agreed upon, to ensure the longevity of the relationship. There are different schools of thought here. Some say that the advisory role is most crucial in the early days of the relationship when the need is critical, and with this in mind, vesting should be from day 1, without a cliff. In a similar vein, the vesting period could also be two years, instead of the traditional four-year deal offered to employees.
Once this is chalked out, put pen to paper and chart out an agreement that includes confidentiality components, compensation, duration of the advisory role, and what the expectations from the advisor are.
Then it’s off to the races with the relationship. First Round Review shares some tactics to make the most of your advisors.
An advisory relationship is not meant to be perennial, so be sure to evaluate it at every stage to see if it still serves its purpose. As we’ve seen before, the needs of the startup vary by year or even quarter and the team of experts must evolve to meet these needs.
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