The advisory relationship is one of the most helpful and misunderstood relationships in the startup world. In the last week alone, I had two founders ask for advice on advisors and one advisor ask for advice on how to structure his first advisory role. Here’s my personal take on how to get the best out of an advisory relationship from either side.
When we first started Twenty20, I felt utterly lost. We started the company in Los Angeles in 2010. And I could count on one-hand the number of people I knew who had ever worked at a venture-backed company let alone run one.
Those first few months, I fell big-time into the coffee trap. Essentially having coffee with anyone who would meet me. I was vaguely looking for capital, advice, and probably reassurance that I hadn’t completely lost my mind by moving to LA to start my first real tech company.
Ultimately, the advisors who came around us and helped me through the steep learning curve of being a first-time, venture-backed CEO would save me. These dear friends and mentors guided me through endless late-night phone calls and patiently helped me learn my way through finding customers, raising money, building a team, and all the dozens of other hurdles to building a real company. But before I found these dozen or so mensches who made all the difference, I was confronted with more charlatans than I can count. People who claimed the could help, who asked for steep equity grants in exchange, and who I realize looking back knew nearly nothing about the impossibly difficult journey of building a venture-backed company.
Here’s what I learned as a stumbled my way through resourcing our company with world class, company-saving outside guidance.
Part 1: Advice for founders:
Signal vs. noise
There are so many morons out there. Let’s just start with that.
So many wannabe’s who just want to be around you as a first-time founder. Some of them are well-intentioned but lost in their own lives and thus drawn to spending any time they can get around a driven founder hoping subconsciously some of the magic dust will rub off. Others really do want to make the relationship about helping you but have absolutely no idea how. Both types are equal time-sucks.
What you’re looking for are people who possess the following characteristics:
- They are a domain expert in an area that is critical to the company over the next 12-18 months. It’s easy to get lost working with advisors who know a lot about a helpful domain but who are entirely unable to relate that knowledge to your company stage.
- They possess the ability to apply lessons and logic to different, amorphous problem sets. One of the keys the great advising is the recognition that all markets, companies, and challenges are unique. Lessons learned elsewhere, in a different company at a different time, are not magic maps to the solution here. Rather, they are information fed into the machine that help you to broaden your quiver of options and more clearly see the array of potential solutions. To be helpful, an advisor must therefore be able and willing to sit with the uniqueness and complexity of your current objectives, help bring to bear her experiences and prior data, and then partner with you to explore the nuances and prospective solutions to the challenges at hand.
- They are a person who’s values match or complement your own. In startup building, the how matters as much as the what. If you care about scale and impact at all costs, find advisors who see the world as ‘go big or go home.’ If building a human-centric culture is your calling card, find advisors who share that vision for the world. The match doesn’t need to be perfect, but a dramatic mismatch can prove unhelpful.
- Aim for low-ego. This might be your single best filter. You’re looking for brilliance and expertise here, no doubt, but the key to a valuable advisory relationship is that person’s willingness to make the time about you not them.
How to find the great ones
You don’t need to find a dozen people the first day. Smart, low-ego people tend to be drawn to one another, know each other, and hang out together. So start by finding one or two. They’ll help you find the rest.
If you have such prospective people in your network already, reach out directly or ask for a warm introduction. Warm intros are the single best tool you have when they’re available.
If you don’t have anyone 1-2 degrees removed from you in an area where you need help, Twitter and Medium can be great places to go looking. Medium is great because someone’s writing gives you insight into both their expertise and their personality. This allows you to filter in advance for knowledge /and/ ego.
Many first-time founders are reticent to reach out cold to other CEO’s or people they deem ‘too accomplished or famous.’ I definitely felt that way in my first few years starting out. But most of the people you /want/ to work with will actually respond to other good, kind people looking for help. After all, most of us were there not long ago. And most of ‘us’ that ‘look’ crazy successful through the eyes of a younger, first-time founder don’t ‘feel’ much more successful than we did starting out. This whole strange success ladder is really just a bunch of slightly more evolved monkeys trying to feel a little more secure with our lot in life. There’s no point where you wake up and feel successful, which is why so many billionaires still feel like they aren’t accomplished enough or safe enough.
Point being, no one feels all that different from you. And if they do, it’s probably bad parenting not success. So go ahead and reach out.
How to engage
Once you’ve tracked down a prospective advisor, the real goal is to connect as people and invite him or her into your story. Think friendship first, assistance later.
Of course, this is easiest with people with whom you have something or someone in common and who can get quickly beyond their own ego to get interested in what you have to say. Which is why we started with your network and optimized for low-ego.
But beyond that, this is about showing up human and sharing the real you with this person. I’ve written about the greatest change any CEO (or leader) can make - shifting from mask-wearing to allowing people to truly know you. This is one of the many areas where just being the real fucking you will really pay off.
Humans are drawn to other humans who are willing to be real, get real, or share real.
If you’re willing and able to let others really in, this is a great time to do it. Share your story. Let this new person know where you come from. Tell them why what your building matters to you (if, hopefully it does; for me it didn’t always.)
If you’re lucky, if there’s a connection, and if you or your project spark the interest of your could-be advisor, you’re onto something.
The next step is not to ask him or her if they are willing to be an advisor. That’s a little like asking someone if they want to get married on your first date. Let’s give this thing a little time to blossom.
How to manage
Ask him or her if they’d be up for you asking for some advise in the coming months about your project. You can share that you’re really hoping for advice on an area where you believe they have unique expertise. Tell them you have a regular monthly company update [HINT: you should have such for your investors and advisors] and ask if it would be ok to add them. If they opt in, add them to the list and also put a note in your calendar to follow up every 3-4 weeks as the relationship progresses.
Now begins the trial period.
You can begin to treat this person as if you have a formal advisory relationship. Reach out over the coming weeks and months about the areas where you believe they can be helpful. The great ones, if they’ve bought into you and your story, will gladly engage during this period without, and this is key, asking for anything in return.
Some prospective advisors will flame out here, or perhaps even already did in your original call or meeting, by asking for stock in your company. This may not be a hard and fast rule (although in my experience it is), but generally the best advisors will ask for nothing in return and the people you don’t want will ask quickly for big stock grants. I’ll leave you to your own judgment here.
Engage your prospective advisor 3-5 times over the course of a few months. If they have what it takes to be a valuable, long-term advisor, you’ll find them during this trial time period to be:
- Highly responsive
- Helpful on the key hard questions
- Able to share knowledge and learnings without insisting that their experience marks the obvious right path for your company
- Encouraging to you and fun to spend time with
If they don’t check all the boxes, cut ‘em and move on. If they do, formalize things and let’s dump some equity on them.
How to structure
For advisory relationships, I’m a big fan of generous equity grants and 2-3 year vesting periods. Because they have already given value, and because their value isn’t contingent in their sticking around the way it is with an employee, I wouldn’t advocate for a vesting cliff.
If you want a market comp for grants, I would suggest they should be in-line with a junior or mid-level engineer. There isn’t great market data for advisor grants, and you’ll read all kinds of ranges online, but there’s great data for engineering roles. I’d peg to that.
As with all roles, as you formalize the advisory relationship it’s also helpful to have:
- A job description (what are the accountabilities and key areas of focus)
- Written agreement on time commitment and other commitments
- An NDA and invention-assignment agreement (do NOT forget this part as you’ll want to ensure the advisors work with the company belongs to the company)
And you’re off to the races!
When to gracefully end advising relationships
This is a tough one. Generally, there’s not a big need to formally ‘end’ an advisory relationship. If your advisor is on a vesting schedule, the only upside to formally ending the relationship is to save equity. But hopefully they’ve already provided enough value by this point that we’re ok with their vesting the remainder of the equity even if the urgency of the assistance has passed.
If you’re finding the advisor unresponsive or if they aren’t following through on the agreed upon accountabilities, that’s a different story. In that case, an honest, open conversation is step one. If that doesn’t result in a shift in the relationship, then a call to share your rationale in ending the advisory agreement along with a formal termination of the relationship is likely appropriate. But as always, no need to burn any bridges here; a little human honesty and compassion for their busy life can go a long way.
My thoughts are by no means the final word on advisory relationships, and this is definitely an area where bright people will differ. But I hope you’ll at least feel more armed than I did we weed through the bad apples and find the first few real partners who might make you feel more equipped and less alone on your own journey.
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