How (and when) to select advisors for your new venture
Like all entrepreneurs who have been in the game for awhile, I too am forever grateful for the advisors who helped shap the course of my career and the ventures I've co-founded. However, finding the right advisors and formalizing the relationship properly is often a confusing process.
I've fallen into many traps (as both a founder and an advisor) that are avoidable with — you guessed it— the right advice.
The time to start finding advisors is yesterday. Even before you have an idea for a new venture, get to know seasoned entrepreneurs in your community. There are more successful founders willing to chat and get to know you than you probably realize, as most are always looking for new founders to invest in. While of course it's hard to get time on their calendars, it is relatively easy to attend events and casually get to know them, collect their business cards, and invite them to coffee. The key is to avoid aiming for the “big names” right away and instead look for the slightly-under-the-radar folks with experience. Especially as you start formalizing your idea and team, the conversation points (i.e. the “hooks” to land coffee meetings) start to increase.
FORMALIZING THE RELATIONSHIP
The name of the pre-launch game is idea validation. You should be convincing yourself via ideation methods and market analysis that it is worthwhile to proceed. Work on landing a co-founder to get in the trenches with you, as this is a critical validation step (i.e. if you can't find a legit co-founder, your idea likely needs to be significantly refined or pivoted). Conduct surveys with friends that meet your ideal customer profile, and do interviews with a slightly wider audience to make sure you are building something people want.
If after all this idea validation you are still feeling like it's a “go”, then further validation comes from successfully landing advisors. I'd recommend recruiting a lead advisor and two supporting advisors.
The best pre-launch advisors will help with:
- Your mental sanity as a founder
- Shaping the product
- Solidifying your team
- Designing validation experiments
- Connections to funding sources, including themselves, when the time is right (this is usually much later than founders realize. You should have rapidly growing revenue and/or user engagement first, so much so that investors are ideally asking you if they can invest. Your advisors should help make those eager connections.)
Googling around for how much equity you should give your advisors will inevitably lead you to this table:
…where the “idea” stage is the pre-launch stage we're talking about here and the percentages assume a two-year vest.
However, it's important to keep in mind the following:
- This chart is most applicable for intense startup communities. If you're outside, say, the Bay Area or New York City, you should expect these numbers to be a bit higher.
- In the “idea”/pre-launch stage, it's best to select a lead advisor who can dive in with strategy, recruiting, and connections (i.e. the bottom row of the table, supporting advisors can be the other rows). In other words, expect to compensate your lead advisor much higher than 1%. If that person is doing any bit of operational help (e.g. code review, admin tasks, sales calls, etc…), compensate them even more.
MARATHON, NOT A SPRINT
At the end of the day, some of the best advice I've been given is that “it's a marathon, not a sprint.” In other words, entrepreneurs (and advisors) tend to chase after shiny objects and get easily distracted. Without losing passion and intensity, it is best for everyone to adopt a long-term posture.
Find people who are willing to stick with you through the inevitable ups and downs of startup life. Experienced angel investors know to expect ten years (or more) before any kind of return on investment, if any. In fact, it is always best to convince yourself and your team/advisors/investors that you are actually in it for the long haul. Otherwise, you and your co-founder(s) should seriously consider pausing the process at this point until you are ready to fully commit.
Author's note: this is the 9th post in a series of articles outlining a pre-launch operational framework that I've been developing over the last 10+ years of building web products. Feel free to subscribe to my newsletter and I'll let you know when I get new content up. Thanks!