Picking the right advisors for your startup
Building a world class startup is hard! As a founder, you are building so many things together -- from a team and a business model, to a product and a marketing strategy-- there is never enough bandwidth or skills to do everything that your business demands!
However, you don’t have to do all of this alone. Picking the right advisors for your startup along your journey can help you with several of these aspects. Why not just go to your investors, one may ask. The answer is not that simple, and sometimes, your investor may just as well be your best advisor. Often, that's not that case.
"It is, in fact, a role that founders believe financial and strategic investors can't play."
Advisors are primarily people that founders can open up to and trust, without the fear of being judged. These people also have enough context about the company, team, and the market, to meaningfully weigh on any decision. Founders believe that financial and strategic investors can't play this role due to the long term conflicts of interest between the two parties.
We spoke to more than a dozen startup entrepreneurs, investors, and advisors, on how to go about picking the right advisors for your startup:
Disclaimer: Most entrepreneurs and all investors requested anonymity for this story.
Understand where & why you need advice in the first place
There are several kinds of advisors, but they can be broadly grouped in two buckets.Some people are brands unto themselves and add value through association. For example, executives like Ratan Tata, Peter Thiel or Bill Gates, by associating with a startup, can add significant value, even without spending time with the business. However, very few make it to that list.
The second set is people who come with deep expertise in functional areas such as product, supply chain or marketing, e.g. Arun Sarin (Vodafone), Gokul Rajaram (Square), and Neeraj Arora (Whatsapp). This list is long, and it will serve you well to compile one that is best aligned to your business/industry.
Before getting an advisor on board, spend some time to figure your weaknesses and areas where you most need guidance and to what extent.
“Remember, just putting a name on paper, without any real value add won’t change the destiny of your company!” Aprameya Radhakrishna, Cofounder, TaxiForSure
Different founders have different needs based on their background. Sometimes, you need a person who can teach you how to set up a sales organization, or open the doors to a few early customers, or help you navigate the entire early stage of the company from fundraising to hiring to finding product-market fit.
Back in 2007, Jack Abraham was an undergraduate student at Penn working on his first venture - Milo. As with all founders that start early, he had zero expertise in the operational aspects of running his business. That's where he used the power of an extensive advisory board in overcoming some of the regular business challenges that would have stumped an otherwise inexperienced founder.
To give a sense of his advisory board, it had Kartik Hosanagar - entrepreneurship professor at The Wharton School. Kartik helped him through the operational complexities of setting up the startup. The board also had Aditya Agarwal, now Dropbox CTO, who advised him on how to setup and manage the engineering organization. Keith Rabois (now Khosla Ventures) helped him think through business models and helped the founder pivot multiple times until he found the right opportunity to pursue. And there were many more. The company eventually got acquired by eBay within two years of founding.
Should you get a specialist on board?
Being a 'first principles' startup founder, you are always challenging status quo and building disruptive products. During this process, getting an expert deeply involved in the very early stage can risk a company’s ability to think outside the box.
Often, getting an advisor who is closely linked to the problem, only adds incremental value and in most cases negatively impacts the thought process of the product.
A specialist in a field, for example, a doctor taking an advisory position in a health tech company, can lead to the risk of an incrementally innovative product and a skew towards super users (as a result of tapping your advisor’s network). In the short term, this can give the illusion of product-market fit. It’s almost like an early stage growth hack that has the potential to backfire.
This is not to say that a specialist doesn't help. In fact, after a certain stage, some specialist advisors can significantly boost the growth of the company.
MakeMyTrip, for instance, has Frederic Lalonde (Fred) as an advisor. Fred is a veteran in the travel domain and sold his startup Newtrade Technologies, a travel commerce machinery company, to Expedia in 2002. He is now building another travel company Tnooz.
MakeMyTrip sets up a date with Fred every quarter, to work through a whole bunch of departments including technology and engineering. Such people who have functional and domain expertise add real value to the company.
3. Ask for an investment
Approaching industry experts that you (and your competition) would die to work with, and asking them for first their time, and then, their money, sounds crazy, right? Well, don’t be shy!
"If someone can take equity and draw a salary without any consequence, no one cares."
Most seasoned entrepreneurs and advisors strongly recommend that founders ask their advisors to put some skin in the game, even if that means investing a small token amount at a discounted price.
“A buy-in makes an advisor more serious and aligned,” points out Ramakant Sharma, co-founder of Myntra and Livspace. “If a founder is not worth my money, he is most definitely not worth my time and network (which I have worked very hard to build).”
The reasoning is simple: A person who puts money will think twice, be more productive and take out time to give advice keeping in mind what’s best for the company.
If someone can take equity and draw a salary without any consequence, no one cares. “My strong advice to all businesses is, asking every advisor to put at least $10,000 in the company," says a managing partner at a top venture capital firm with more than $300 million assets under management.
“A pure advisor (without a cash investment) advises 50 companies, he has nothing to lose, it’s like a lottery system,” commented Aprameya, co-founder of TaxiForSure and an active angel investor, recommending not to give out equity for a pure advisory role.
Remember, most successful entrepreneurs/advisors share their knowledge as a way of giving back. They do not demand compensation. “Those who do are usually trying to take advantage of you. Avoid them at all costs,” warns Vivek Wadhwa, a Distinguished Fellow at Carnegie Mellon University.
Set expectations straight
There are successful entrepreneurs and business executives with strong domain knowledge all over the world.
“The hard part is getting people to sign up to advise you—unless, of course, they happen to be an uncle or a family friend,” comments Vivek. In fact, he believes that finding the right advisor is hard, even in Silicon Valley.
“Advisors appreciate clarity on their involvement before they come on board.”
The people you want to know will neither have the time nor be ready to take on the responsibility of helping your startup. You will need to find a way to persuade them to find the time and to make an investment in you, he says.
Once they agree, spend time interviewing these people and asking them how, as advisors, do they plan to engage with you, before you make a formal commitment.
Here are some of the questions you should have answers to, according to our research:
- How much time is this person willing to dedicate?
- Will this person be liberal in connecting me to his network?
- How resourceful/how much value has he added to his other portfolio companies?
- How do I communicate with him? Phone/email/ in person meeting
Being honest and transparent about your expectations is key, and avoids any conflict in the long run. In fact, most people stated that they would appreciate clarity on the level and topics of involvement with a startup even before they come on board.
Pick chemistry over brand value
The need for top advisors (with invaluable experience of chartering companies successfully) goes beyond having glittering names to lend legitimacy to leveraging connections and strategy-related advice they bring to the table.
So how do you go about finding the right person? Investors and entrepreneurs advise to pick chemistry over brand value.
"Be confident, that nothing you tell this person will change the way they think about you"
Look for someone who intellectually challenges you, questions your thesis, and isn’t afraid to make bold statements or completely trash your argument for the benefit of your startup.
Ask yourself, do you trust this person enough to be honest and vulnerable around them. Remember, very few people inspire trust and connect with you on a personal level. The key is in finding those people who complement your working style. Be confident, that nothing you tell this person will change the way they think about you.
Each person also has a different style when it comes to advising, which can be anywhere from confrontational to encouraging to analytical. Founders first need to introspect and understand which style they’ll relate to best before they agree to work with anyone.
At Livspace, the founders (Anuj & Ramakant) picked Gokul Rajaram, the product engineering lead at Square, to be a part of their advisory board, because of the long relationship and comfort they shared with him.
According to them, bringing in the personal touch made Gokul go the extra mile for Livspace. During the early days of Livspace, Gokul helped the core team come up with the fundamental tenets of strategy (including the category, platform, growth, business ops, and last mile) and ensure that every person in the company is directly aligned to one or more of these critical goals.
“It helps that we've known each other for some time, so our conversations cut across emails, Whatsapp, and, scheduled 1:1 time,” - Anuj
Most of the time, advisors are willing to be much more helpful than most founders think!
Remember, time is the most valuable asset for any advisor, so if they choose to spend time with you, they want it to be productive.