Should you have advisors? Who should they be? How much equity should you give them? Aigerim Shorman answers all your advisor questions. By Aigerim Shorman (Co-founder & CEO, Wist)
Our company, Wist, has a number of advisors who we brought on board at various stages in the company’s history. As a first time entrepreneur, I can’t emphasize enough how critically important it has been having experienced advisors by our side to help guide us through product launches, fundraising, crisis management and so much more. So, from my point of view, yes, you absolutely do want to have advisors!
However, you have to have a clear understanding of why a specific person would be valuable to you and your company and also understand his or her motivation. Most advisors are very successful individuals who genuinely want to help you. Becoming an advisor is a way of giving back. So bear that in mind when you discuss equity compensation and commitment with them (more on that later).
Who Should Be Your Advisor?
Too often entrepreneurs fall into the trap of chasing "big names" for advisors and mentors. That’s not the right strategy. First of all because those are also some of the busiest people in the world and, even if they wanted to, they probably wouldn't be able to dedicate enough time to you.
Instead, try to find people who have domain expertise in whatever it is that you are trying to do. For example, if you are doing e-commerce startup, find someone who experience scaling e-commerce companies. A person like that will be much more valuable to you than some big name that has never done anything in e-commerce.
If you are a first time entrepreneur who doesn’t have any background or relationships in the startup world, recruiting one or two advisors who are respected in the community gets you a certain level of credibility. Most importantly, these advisors will become a voice of wisdom that you can rely on as you try to navigate unchartered territory.
As your company grows, your needs will change and so you will the types of advisors you should recruit. The key here is to know what you don’t know and find advisors who are strong in your areas of weakness. For instance, if you are entering enterprise sales market and nobody on your team has prior experience in enterprise, you would do well getting someone who has a few decades of experience and connections to help you get off the ground.
The best advisors are those with whom you can build a true trusting relationship. You have to be able to be 100% transparent in order to make this a worthwhile investment of time for both of you. True advisors WANT to help. But the caveat is that they only want to help those of us who actually WANT to be helped. There is nothing more frustrating for someone who is busy than to spend hours with a young entrepreneur only to see her disregard the advice given. Though that doesn’t mean you have to take every single word and implement it literally as you’ve been told.
Manage Expectations on All Sides
Managing expectations is by far one of the most important points in building a successful advisory relationship. Start with a base expectation of how often you’d like to meet. In general, you can’t expect more than a few hours a month. As your relationship grows, you will learn how to best communicate, the frequency, the best channels, etc. For example, I talk with some of my advisors on Skype, others via text and others on Facebook chat. You will also go through waves when you will need one advisor more often than another (think fundraising time vs product development). No matter what, don’t forget to keep all of your advisors up to date. You don’t get to just call someone an advisor and never talk to them again or only catch up once every six months. You have to keep them informed and excited about being your advisor so that they can be helpful when you need them.
How Much Equity Should I Give Up?
Equity compensation depends on the stage of your company and amount of time you expect the advisor to spend with you. If you are pre-funding, most likely you would be looking at single digits. The further along the growth path you are, the less equity you’d have to give up. But remember, most advisors are not helping you for money. Equity compensation, especially early on, doesn’t really mean a lot. Still, you don’t want to come across as not valuing their time. So show your appreciation from the get go and start with a strong foundation (read between the lines: Don’t be cheap).
In a nutshell, respect their time, be crisp, focused, and gracious. Always, always, always follow up to let them know the results of any discussion. They are advising you for the intangible gratification of knowing that they were helpful and made a difference. That is the most precious reward in life!
Do you have any other unanswered questions about advisors?
About the guest bloggers: Aigerim Shorman (@aigerimd) is co-founder and CEO of Wist. Previously, she was a Teach For America corps member in Los Angeles and investment banking analyst at UBS. Aigerim is originally from Kazakhstan and is an avid world traveler. Image credit: Brian Ujiie via Flickr.