Saturday, September 17, 2005

Startup Advisor

I serve as an advisor to couple startups and get calls asking about advisors -who should be one, how to compensate them, what to expect of them, how to go about finding an advisor etc etc etc.

My advisors:
First, I had an amazing set of advisors for my first startup Coola, without whom I could not have taken off. They helped me find the enterprenuer in me. I am so thankful for them.
I cannot even list all of them here. Three people who helped me from start to finish were Paul English(then GM of Intuit Boston), Piyush Patel (CEO of Cabletron) and Ashish Gupta(VP of Amazon).
All of them were enterprenuers who built companies and sold to a large company.
All of them were very busy people who cared and found the time for me, who did not intimidate me for my dumb questions and set a high threshold for me to strive for, most important they have set role models for being an enterprenuer and a startup advisor.
Who were not my advisors:
I had my share of people who were patronizing. I met 120 people within 40 days when I raised my first $1MM venture money, when I met all kinds of people. There were people who asked me to pay a chunk of my company to come raise money for me and do all kinds of jobs they thought I could not do.

The key to being a successful enterprenuer is to learn to differentiate good people from not just bad, but mediocre people - for advisors, investors and employees.

Why do you need advisors:
They are like your sounding board, the can guide you, they can give you different point of views. This is needed when you try new things which is always in a startup and you want direction, help, validation. Then you decide and make decisions on the right course and execute on it.
From my experience of advisors, I find you need them for different purposes:
1. Advisors as your mentors
2. Advisors as industry experts
3.Advisors as sounding boards
4.Advisors as future potential team.
This is particularly important if you have a huge potential and want to scale your management team and someone you respect can come as an advisor and can get the confidence and synergy and come on board as your management team or future CEO.

How not to select advisors:
I have made my mistakes too. Here we go!
1. Don't go after someone just because they have a brand name in your industry. You can try someone with a brand name, but the variable should always be trust, respect and compatability.
2.Don't go after someone for his or her network
This always fails. My advisors all had great networks and made great intros, but that was not the reason to ask them to be your adviosr in the first place.
I found someone as my advisor for his association with a potential customer (large one) and wasted a lot of time as the underlying trust and respect was not built and he did not understand my company nor share my passion.

Advisor compensation:
I never paid my advisors. I do feel bad about it. They would not take any percentage of the company, which would have been trivial for them anyways. Writing this blog and helping other enterprenuers is my way of givig back what I got from my advisors.
The industry norm is 1/4 of 1 percent for advisor. Don't start by offering it. See if the relationship works both sides and then make the offer.
I offered all my advisors a choice to invest in my company early on and many took it. This way they get to participate in the upside of your growth when you exit.

Getting started with advisors:
This is the most common dilemma startup founders have. Do I just go ask someone to be my advisor? What would they say?
I would suggest that you make sure you like, trust and respect this person first. Then you can approach them and see if they get excited about you and your company.
Please start with a compensation plan. Advisors who start with asking for one and a startup founder starting offering one are not focusing on the trust in the relationship.
Some people are very structured and may ask the demands on their time and what you expect. Have an open honest discussion and it will help build the relationship or to decide if this person will not workout as your advisor.

Interesting Advisor Attempts of mine that failed to make by Advisory:
In the initial Coola days, since we were building out a horizontal software platform, we had no focus. I thought of it as a standard setting game. So I went to W3C and tried to get an advisor to help me out. Obviously, I found a great person, but there are no synergy in our passion towards mobile technology and Coola and it did not work out. The lesson was to wait before declaring some one as your advisors.

Similarly, I had a VC who was a great advisor. I decided to keep him as a friend and informal advisor than pitch to him for money as our styles were different, but he was a great sceptic and sounding board. I did not get an advisor, but got a friend.

Interesting Advisors and Rare Sources:

One of my investors wanted to get someone on my board when I was not quite ready instead that person became a friend and advisor and eventually invested his money too.


Anonymous said...

Hi Sudha,

Stumbled upon this post via a google search for "startup advisors" and it had just what i was searching for.

I particularly like the idea of identifying one's need for startup advisors and clearing expectations upfront. While network and experience are one of the most common reasons to have an advisor its not wise to have someone as an advisor just because of their brand name or network.

Advisors investing in the company is a win-win for both sides involved and ensures better results

venky said...

I certainly can relate to your experience. I had similar experience in my early career as an entrepreneur. However, more recently, I have taken the role of advisor or BoD.,myself. I make it a point to express my beliefs based on the pitch I'm presented it, and if I can not help - I just say No, and may also redirect them to somebody in my network who might be able to help the founders. There have been numerous instances, where in I have turned down an advisor role, just because I didnt "gel" with the founder(s) vision. It has saved me lots of time, effort and sour relationships! I'm sure it did the same for the founders. Best part is, being open helps create a relationship based on trust, and I usually, end up being the unofficial sounding board- for healthy debates. I just love discussions with a "fired up" mind.

As a matter of fact, one of the start-ups I'm working with is based on just a "hand-shake". I took me just 1 email,a 30min phone conversation and 1pg/3paragraphs of business plan (yup! its 1pg/3paragraphs) to believe the technology/product of the said founder of the start up. And knowing the founder does not have enough funds to pay me, I accepted the role..Now, we have a very health business relationship thats based on trust and shared mission & vision. I sure can afford to wait for the business to grow before I expect compensation.

Secondly, you try to avoid advisors with Ego issues ("I seen it all kind!). Find, somebody who is willing to step back and advice or let the founders bring in another expert when the business needs change. A good way to recognize this type of advisors - is if and when you suggest to bring others on board - the tone of advice change. There will be a renewed debate of compensation! One who was available all the time, is suddenly very busy...etc

I sure would like to caution all entrepreneurs/starts up that "hand-shake deals" dont happen all the time. There will be disappointments, meeting wrong people who end up wasting your time -however dont give up! its like the sales process - you will get 20 No's before you get one Yes!

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