How to Find Great Startup Advisors (and Avoid Bad Ones)
When I founded customer loyalty management company Loyalty Lab in 2003, it wasn’t my first go-round as an entrepreneur. I’d started a handful of other companies (some with quite positive outcomes) and I was confident in my ability to take an idea and grow it into a big business. Very quickly, we built a great team and, by 2004, we’d secured $4 million in venture funding. We were off and running.
But, even with that momentum, I knew there were holes we needed to fill. Some of us had experience working in the retail industry in the past (our target market), but we weren’t experts by any means. If we wanted to scale more quickly and efficiently, I knew we needed someone who deeply understood the complexities of retail and could push us through the right doors.
That’s where Gilbert Harrison came in.
Gilbert’s entire career was built in the retail world. He was one of the leading dealmakers in that space and had great relationships with CEOs at retailers like Toys ‘R Us, Target, and Sears. He understood larger retailers’ challenges and needs, and could quite literally spin his rolodex and land on a key industry decision maker.
I recruited him as one of Loyalty Labs’ first advisors and, frankly, it was one of the best decisions I made as CEO. With Gilbert’s expertise, we were infinitely more knowledgeable about — and connected in — the retail industry. By 2008 the business was profitable and, in 2010, it was acquired by Tibco.
Not All Advisors are Created Equal
Of course, it’s important to point out that my experience with Gilbert Harrison was a classic advisor-advisee love story. His skills and expertise aligned perfectly with our gaps, and he ended up adding incredible value to the business — well beyond our loftiest expectations.
That’s not always the case with startup advisors.
In fact, in today’s world where everyone seems to be an “expert” at something, it’s easier than ever for startups to get fooled into hiring advisors who are little more than generic consultants (or, worse yet, total pretenders). Similarly, with the flood of startups being created, it’s becoming more difficult for truly qualified advisors to find/partner with great companies that actually need their help. According to the Kauffman Index, the rate of new entrepreneurs in 2014 exceeded the numbers set during the dot-com boom in the late-90s. And even with tools like AngelList, Crunchbase, and Mattermark, it can still be difficult for qualified advisors to determine whether their skills align well with a particular startup’s needs.
This is why I founded Bad Ass Advisors. You might think of it like a private matchmaking service designed to vet, qualify, and pair great advisors with great startups, but I’d like to think we’re more than that. At a high-level, our goal is to help entrepreneurs simplify and optimize the selection process by assessing four key advisor criteria:
- Relevant experience, skill set, and connections: Where does your business have gaps? How do you like to work? Which skills do you need (but aren’t ready to hire)? Which connections could provide immediate value to your company’s bottom line? All of these factors are critically important to finding and partnering with the right advisor.
- Availability and desire: Growing companies can’t wait for an advisor to try to fit them into his or her schedule. When you look for an advisor, it’s critical to determine how frequently someone will be available and how passionate they’ll be about helping your business grow.
- Goals and compensation: Advisor/advisee relationships won’t be productive if both parties aren’t aligned around achievable goals, milestones, and compensation (for more on advisor compensation, read this post). If you don’t have a clear plan, you won’t accomplish anything
- Meeting cadence: How often will you meet with the advisor? Where will you meet? It’s incredibly important to establish rules of engagement and timing expectations before you sign an agreement with an advisor.
When I was an entrepreneur, the best advisors I worked with were the ones I could call at any time and who knew my business. They were people I could trust for advice when I got a term sheet, when my top engineer walked out the door, or when my best customer threatened to cancel. And they weren’t just empathetic amateur psychologists who were willing to listen to me moan. They were problem solvers who would say, “We know what you’re going through. Now, here’s how we fix it.”
When is the Right Time to Hire an Advisor?
Truthfully, there’s no such thing as the “right” time. It has everything to do with your company’s stage and needs.
If you’ve built a minimum viable product and you’re looking for someone to help you close a seed round, then the type of advisor you need will be very different than if you’re trying to land your first whale customer. Similarly, if you’ve reached the expansion-stage and you’re preparing to build out structured sales and marketing organizations, you’ll need a completely different advisor than if you’re managing a 500-person company that’s preparing for an IPO.
With that said, it’s critical to truly understand your needs and goals before ever beginning the process of searching for an advisor. In some ways, this process is a little bit like getting married. If you prematurely dive into a relationship without a clear understanding of who the person is and why you’re a good fit together, it rarely works out well. The same goes for advisors and startups. Both parties must understand each other’s needs and opportunities, and they must be passionate about the opportunity work together to accomplish something special.
The good news is that there are plenty of fish in the sea on both sides of the table. Thanks to a huge number of very successful tech exits in the last decade, there’s no shortage of highly-qualified advisors who are eager to help an increasingly large number of first-time entrepreneurs. This ecosystem didn’t exist when I was an entrepreneur 10 years ago and I think that’s an incredibly exciting thing for founders.
But, for this evolution to be beneficial for your business, you can’t just focus on an advisor’s name or resume. You need to study who they are and what makes them tick, and assess why their unique skills are an ideal fit for your company’s stage and needs. This is super hard stuff and time consuming when you are running an early stage business 24×7, which is why I built Bad Ass Advisors — a free ‘eHarmony’ to match the right advisor to right company — without all the posturing, posing and unnecessary dating. When that match happens, it can be the start of a perfect marriage.