In today's landscape--where startups are sexy--founders can sometimes become hoarders. They might hoard capital because they don't want to spend it unwisely or give it away foolishly (which makes sense). Or they may tend to hoard equity to keep control of their company.
This can be a big mistake. Handing out equity early to qualified advisors might be one of the smartest things you do. Strategic advisors can provide a wealth of value right from the start. They exist to provide the expertise that your startup needs but doesn't have the money to acquire.
Think of these advisors as business sherpas: people more experienced than you who help you navigate and climb the startup mountain.
Still, engaging advisors without foresight can be tricky. They're busy, successful people (or should be!), and you're probably one of several companies they work with. However, if you do your research to match the right advisor to your business, it will be worth every penny to you.
The Benefits of Working With Advisors
There are two key ways engaging a quality advisor can work to your advantage:
1. Advisors can help you secure financing. Advisors bring a lot of expertise to the table, especially when it comes to fundraising. They can bring cultivated relationships with investors, insights, and tips from their own successful campaigns to give you an edge.
Often, simply having an industry expert on the team can help you attract funds. If investors can Google your industry and quickly find your advisor's name--or, better yet, if they know and have worked with your advisor previously--you've likely got a credible asset on your team.
2. Advisors help solve specific problems. Bringing on advisors can help you solve a particularly thorny challenge. Maybe they have industry relationships that would take you years to build, or perhaps they have solutions to specific issues you didn't know were available.
Advisors can also be an amazing resource for technical expertise, especially before your funding really kicks in. If you can't afford to hire the experts you need, chances are your advisor has the knowledge you need (or knows how to access it on your behalf).
Finding the Right Match
Once you've decided an advisor is worth your equity, how do you find one?
If you already have investors, you might receive recommendations from them on potential advisors. Referrals from your investors or colleagues are often the gold standard; take these seriously because your investors care as much about your success as you do.
Even without an investor's help, a scrappy entrepreneur can find advisors with some creative thinking. I've been approached as a potential advisor in plenty of non-traditional ways. Often, people will reach out directly during conferences or through a simple Google search. Other times, they'll overhear a conversation and decide to get in touch with me. It's that simple.
The most important piece is knowing who you can trust. I've heard and experienced some horror stories--both as a founder and as an advisor--that taught me what to avoid. So it's incredibly important to thoroughly vet all candidates. Talk to people they know and have worked with, and ask good questions that will give you a solid understanding of their personalities and track records.
The easiest way to avoid pitfalls and ensure the best possible relationship with an advisor is open and active communication. Make sure you discuss everything upfront, and make your expectations clear. From the outset, outline exactly how much equity you're offering and what you expect in return. The details may change as your company adjusts its focus, but renegotiating is no problem. Just start with a basic alignment of everyone's expectations.
The best thing you can do to build traction early in development is to bring on knowledgeable, well-connected, and respected advisors. Their experience can help you get through the initial obstacles much more quickly than you could alone. Yes, there are always challenges--bumps and bruises and skinned knees--in the process of growing as a business, but an advisor can help you avoid pitfalls and escalate the trajectory of your success.
All of these facets combined can make for an amazing partnership that will help your venture take off in ways you hadn't thought possible. Great advisors are worthy of your equity.