If you read startup publications every week, you may start to think that startups grow up and get funding regularly. After all, it seems like celebrated, well-funded startups crop up week after week, almost as though it’s a part of the process. Unfortunately, this couldn’t be farther from the truth.
Success stories tell us that startups get that way by being smart with their product development cycles, gathering the right team members and creating an early-stage support ecosystem of savvy advisors and mentors.
Look at Facebook’s Mark Zuckerberg. Even he didn’t get to be the prodigy he became without mentors and advisors. In Facebook’s earliest days, Zuckerberg relied on mentors, including the renowned Steve Jobs!
Here’s the truth: the smartest startup founders realize they don’t know everything. Many twenty-somethings become founders; but the mere spark of an idea doesn’t make you an overnight expert. Leading a team, steering a company and driving true innovation requires expertise and wisdom—and money. The best thing a startup can do early in the game, pre-investors, is to ask for help.
What does an early stage startup advisor relationship look like?
Remember, these early stage advisors are separate from a Board of Directors. There are no formal team meetings, no need to take and publish notes and no voting. Having an early stage advisor usually translates to a one-on-one relationship with the founder. It’s private, and it may be very personal.
Each advisor may be bringing different value to the table for your startup. Think about why you’re bringing on a specific advisor: is it because of their deep industry expertise? Is it their contacts? Do you need assistance with a specific area of your startup, like fund raising or marketing? You need to consider the advisor’s level of effort and the value they are bringing to the table for you.
In short, yes, most pre-funded startup advisors will expect an equity stake in your company for their involvement. While this may be painful for you to give up, remember that these folks are working for no cash and no reward—that is, if and until your startup ever becomes something. It’s a give and take—literally. Expect to give each advisor an equity stake of between 0.15% to 1%. Shares are typically vested over a two-year term.
What to look for in a startup advisor
Sylvester Kaczmarek, an entrepreneur and mentor to more than 150 founders, said, “It is essential to put together a team of smart and invested advisors that will help you to get through your startup years and beyond. They will help you to develop your ideas and imaginations into a startup business.”
Kaczmarek feels there are 7 critical “must-have” qualities in an early stage advisor. They must have comfort with conflict; a complementary set of skills; a strong network; a passion for your venture; credibility; dedicated time and be cooperative.
And the right number of advisors matter, said Kaczmarek. “You should have a perfect combination of advisors according to the needs of your company.” The right number of advisors will maximize innovation and accelerate growth.
Where to find your startup advisors
Karolyn Hart, COO of InspireHUB, reminded startups to rely on their network as a starting point in finding advisors. “To find great advisors I would starting within the existing network you have and simply ask. If this is your first startup, having those with experience in other startups is essential. They will help you understand when something is normal growing pains versus something that is a serious issue.”
Terena Bell, cofounder and CEO of TVRunway, echoes this sentiment. She feels it’s critical for startup founders to have at least three key founder friends in their circle: “One who is ahead of you who knows more than you, whom you can learn from. One who is at the same place you are so you can walk together and feel a little less alone. One who is behind you so that you have someone to teach.”