Advisers can be incredibly impactful for early-stage companies that may lack the resources, network, or tactical expertise. They can also be fundamentally worthless to a startup and cause unnecessary friction if they bring uninformed opinions to the table.
After years of working with startup advisers and advising a number of startups myself, I have found that the process in matching with the right adviser matters immensely. You need to be clear on expectations and make sure that they continue to deliver value for your team.
That said, here are four tips to ensure your advisers are successful.
Are they filling a gap?
Early-stage startups often have several gaps throughout the organization. Commonly, founders are building from the ground up with minimal resources and many are doing this building for the first time. The right advisers can step in and bridge the gap without the monetary burn.
The key is that you need to have clear objectives and to be laser-focused on understanding your own blind spots and how a potential adviser can help. Having advisers can quickly become worthless endeavors when there is a lack of understanding in terms of the expectations of advisers and the role they are supposed to play. When talking to a potential adviser, clearly outline the needs and blind spots you hope this person will address and fill.
Advisers can be a good sounding board to a leadership team around everything from hiring to breaking into new verticals. They can also be incredibly valuable by opening their network to facilitate warm introductions and key referrals. Finding advisers who can perform these multiplex roles are rare. Focus on what matters now.
Are you truly looking for an adviser or a mentor?
One of the wonderful things about startup culture is that so many people are willing to help out and offer advice. Mentors tend to be informal unpaid relationships. Founders should fully take advantage of finding the right mentors, but when you are trying to fill a gap or shine a light on a blind spot, holding out for favors can prove detrimental.
Advisers tend to work directly with the leadership team--within early-stage companies, the leadership team is often made up of just the founders. In venture-backed startups, it is usual to give equity to advisers for their help--especially if they aren't flushed with capital.
Giving a small slice of equity is a great way to solidify your advisers' motivations to see you succeed. If you do offer your advisers equity tied to outlined expectations, make sure you understand the power of dilution and how much equity you have to work with. Also, set up annual contracts so you can review their contributions.
Include the following in advisory contracts:
The objective of the relationship
Length of agreement
How will you follow up with them?
If you are offering compensation for your advisers, you need to build in some type of regular cadence for checking in. This can be as simple as a coffee once a month to bounce ideas off, ask for advice, and ask them if their network can open any doors. Consider these individuals as an extension of your team. Their network alone can make the small equity share worthwhile.
Conversely, I have seen plenty of advisers go completely under the radar collecting equity yet completely disassociated from anyone at the company for months if not years. Check-in with whomever owns the relationship with the adviser and make sure the time and advice is valuable.
As you grow, are they still needed?
A common startup pitfall is building loose-ended agreements with advisers. It is best to establish yearly contracts and review the expectations at that time. It is not uncommon to see advisers be incredibly impactful for the first year or two until the startup outgrows their needs.
It is normal to move on from advisers as the company grows, your team expands, and your blind spots change. If you set clear expectations at the start, these situations will be easier to navigate.
As you think about which advisers might be right for your startup, think carefully about your expectations and make sure everyone is on the same page. Advisers aren't always helpful. Choose wisely and ensure that they are committed to helping you fill the gap.