Lasso a Star Advisor for Your Start-up
Bo Fishback believes that Zaarly, the e-commerce start-up he co-founded six months ago, can change the world. But he knows he will need help building it.
Zaarly, an online bazaar aiming to facilitate commerce between buyers and sellers (think Craigslist meets eBay), announced its first round of funding Tuesday: a $14.1 million stake from venture capital powerhouse Kleiner Perkins.
On top of the funding, the company announced another addition that might prove to be an equally valuable asset in the long-run: Meg Whitman, the e-commerce pioneer that helped turn eBay from a scrappy start-up to an online behemoth with more than $9 billion in yearly revenues. Whitman, who now serves as the CEO of Hewlett-Packard, is joining Zaarly's board of directors.
"She is going to make me a better CEO," says Fishback, who previously co-founded two biotech companies, Orbis Biosciences and Lightspeed Genomics. "I thought, 'She is going to help us build this organization towards the scale we're hoping it can achieve.'"
Fishback, who is also an angel investor who serves as an advisor and board member of several start-ups (and who previously served as the vice president of entrepreneurship for the Ewing Marion Kauffman Foundation) has plenty of experience working with celebrity-status board members. Ashton Kutcher and Michael Arrington, for instance, led Zaarly's seed round of funding in March, and LeVar Burton and actress Demi Moore, serve as advisors.
"We met with high-profile people, but Meg was the one wanted to work with," he says.
Landing celebrity investors and advisors like Kutcher and Burton is hardly a matter of luck. In Fishback's case, it took years to cultivate personal relationships that eventually became business relationships. Fishback met Ashton Kutcher through his work with the Kauffmann Foundation, but the two quickly became friendly. About a year ago, Fishback invited his Kutcher to check out Startup Weekend in Los Angeles, a 54-hour event in which start-ups assemble and pitch their ideas. Kutcher brought his wife, Moore, to the event. Fishback happened to be presenting his own start-up idea, Zaarly, and Kutcher was impressed.
"It's impossible to overestimate the importance of relationships and something more there than just a pitch," says Fishback, who, coincedentally just finished breakfast with Kutcher this morning in New York when he spoke to Inc.com ("We spent all morning talking about marketing campaigns," he says. "And there was soap in his dish...the manager felt terrible.")
It also comes in handy to have had the opportunity to help a potential investor in the past.
Take LeVar Burton, for instance. Fishack met Burton when he was working on his own start-up, RRKidz, which publishes digital children's books for tablets. Fishback helped Burton assemble the company's term sheet, and says he was "instrumental" in getting RRKidz funded. The two became friends in the process.
So later, when Fishback was began work on Zaarly, he casually sent Burton an e-mail to let him know about his own new project. Impressed, Burton tweeted out a link to Zaarly to his 1.8 million followers, which resulted in about 30,000 page views—within about the first week of site's launch.
"If you have a relationship in place with them, and you've been helpful to them, it creates a different level of dialogue," Fishback says. "But it means that before you even have your idea, you have to invest your time and energy to cultivate those relationships. The truth is, all of those rounds of funding were made possible by 10 years of working in the start-up ecosystem. It was a no-brainer for those guys to get involved because they loved the team and they loved the idea."
Certainly, high profile celebrities open doors and provide a certain level of visibility—even if it's just from tweets. But Fishback says working with a celebrity needs to be more than just about boosting your brand's image.
"Ashton's an outlier in celebrity investors because he takes it very seriously," Fishback says. "It's not like he's a celebrity first and an investor second. He's an investor who happens to be a celebrity."
So how can you know whether a boldfaced name is right for your company?
Dharmesh Shah, a serial entrepreneur and founder of OnStartups.com, says an ideal board member posesses two main qualities: Advisory Value ("The person you are inviting has experience and knowledge and can act as an advisor to your start-up") and Brand Value ("The person you are inviting has 'brand' and credibility. By placing them on your advisor board, you are hoping that some of that credibility will rub-off on your start-up.")
In a more corporate setting, attracting a celebrity board member can even yield positive sharelholder value. In the study Reaching for the Stars: The Appointment of Celebrities to Corporate Boards, economists found that companies experienced a jump in share price from merely announcing a celebrity board member.
"To explain this, the economists point to the 'visibility effect'—that appointing a celebrity helps draw the attention of investors to a company which, all else being equal, increases demand for its shares and thus its share price," noted The Economist in 2010, when the study was released.
But Bo Fishback has his set own criteria to help start-ups find the right advisors.
First, he says, seek people who understand what you want to accomplish.
"Don't be seduced by the fame or the chase," he says. "Look for people that resonate with the vision of your company. Yes, it happens to be that she's Meg Whitman, but the truth is that I love her and I think she's going to help us abuild a successful company."
Second, he says, don't be afraid to ask for help when you find that person. Fishback says that an entrepreneur's inclination may be to overstate or oversell the company's successes in order to impress the potential board member. But that approach is bound for failure.
"The truth is that if you're not open, these are people that will figure that out," he says. "Overselling is a huge risk."
Finally, Fishback says it's essential to land someone that is willing to admit what they don't know.
"Meg is one of the rare people in that category [of celebrity] who has a great sense of self-awareness," he says. "That humility is really rare."