Posts Tagged ‘advisors’
Looking for wisdom? So are your competitors and fellow entrepreneurs. Here are some thoughts about how your company can increase its odds of landing in-demand advisors.
Recently, we received a question from an entrepreneur: “We are a technology startup and have got to a level of mild traction with a user base that’s engaged. Now that we know that we are creating value its time to transcend to the next level and get a great set of advisers on board and we are not looking for big names but advisers who are proactive and interested in what we do. Any tips on going about and getting great advisers on board would be useful.”
The tactics for attracting good advisors are similar to the tactics for attracting a top team. Be prepared to compensate them.
Sometimes equity is enough of a lure, but most advisors don’t get excited about a single digit or fraction of a percent ownership to really dig into an advisory role. Compensating the advisor with even a nominal consulting fee is a strong signal that the advisor is valued and is viewed as a signal that value is expected from the advisor in return.
Good advisors are usually in high demand by many more startups than can be served; therefore, it’s important to understand that relevant wisdom isn’t a commodity, but rather a scarce resource. In today’s economy, cash is king more than it used to be. Investors want to see customers paying cash, not consuming free services. Employees want to see cash, not just stock options in expectation that a small slice of equity alone will be worth something material in the future.
Establishing a solid core advisory board – formal or informal – means choosing a select few (not trying to “collect lots of names for the letterhead”) and treating them like a co-founder. Engaging them equally. Listening to them equally. Compensating them properly. Expecting value accordingly.
Founders who don’t understand this should consider just asking an occasional cold-call question to various subject matter experts, but not expecting an advisory relationship with much substance. Too often, founders don’t manage or engage or compensate advisors properly and then blame the advisors for not being useful, helpful or valuable. Too often, the founder-advisory board relationship is structured for failure or at best, it turns out to be a mild distraction to all involved.
You may find advisor candidates who are interested in what you do, but you still must find the right amount of equity and/or cash compensation to make those who are interested also proactive and committed.
Instead of a conventional perspective of “seed money is the first step towards validation”, the mantra today is likely the converse: “validation is the first step toward seed money.” In more than half of all startups nowadays, the initial validation comes from the wallets of the founders (i.e. first phase is bootstrapping). If the marginal costs of starting a business includes some compensation to key individuals in the budget, the prospects of beating out a competing startup for that same wisdom is very good, and this early tactic sets the pace for startup success, just like proper planning and preparation does.
In summary, wisdom is often a scarce resource. Like anything of value, be prepared to pay a fair price for the advisory expertise you need and your chances of acquiring that wisdom will increase.
RNN9JSHBCTWX “Though unemployment is at a 25?year high, work will eventually return. But it won’t look the same. No one is going to pay you just to show up. We will see a more flexible, more freelance, more collaborative and far less secure work world.” This was the cover story for Time Magazine on May 25, 2009, and it captures a significant portion of my thinking about how we work.
My contemporary labor mantra is that we no longer manage our careers one job at a time. We manage our careers one project or even one hour at a time.
From an entrepreneur’s or small business owner’s perspective, I often view an FTE (“full time equivalent” job opening) as possibly being filled by 2, 3 or sometimes even 4 different people working less than full time for me. When your company has a dozen employees, give or take …a dozen, then each decision regarding labor is super critical and has significant ramifications. Often, labor makes up a dominant portion of our entire budget.
Understanding the trends in the labor market and the trends in building and managing our own teams – including our interns, freelancers, contractors, full time employees, part time employees and advisors – is what we intend to convey in this Labor Trends section. Some of our company’s greatest resources leave the office every night (ok, maybe some of us don’t have offices or pull all-nighters leading up to a big business event, but you get what I mean!). We must always be cognizant of this fact and appreciate what it means – and what it takes to keep our teams cohesive and productive.