It’s instant credibility. For the fresh entrepreneur. For the veteran entrepreneur starting in a new area. The Advisors slide. I have used them. I have been used on them. I have made mistakes on both ends. Some cautions…
As an entrepreneur you probably know exactly what you are building. You have very few cycles to spare. The last thing you are looking for is hours on end hearing from an “expert” why this or that is impossible, has been tried before, etc.
But to show VCs that you have tapped the experts in the technology, market, etc. you need a couple of advisor names. You network to a few, meet for coffee and a chat, even send a slide deck. You ask them to be an advisor, with some vague talk about equity. They say “sure,” and you put them on your slide, and get on with your many other tasks.
I have learned this is a mistake.
For many entrepreneurs the threshold to agreeing to be an “Advisor” is pretty low. I enjoy helping other entrepreneurs. I don’t do it based on whether I believe its a $1B opportunity. Helping someone build something new and interesting, and learning the ropes– that’s good enough for me and many others.
The problem comes when the advisor gets a reference call from a VC. The truth is anything short of “I love the team, I love the business, I want to invest and/or work with them” on that call is bad for the company. Even having a big name say “they seem like smart guys, not sure exactly what their current approach is” doesn’t do much for you.
I remember getting an echo of so-so feedback (through a VC) from an Advisor in my first company. I was pissed. But in truth I had spent little time actually talking through the business, getting advice and making him feel “heard.”
Some advice for entrepreneurs:
- Clearly separate “advisor” from “Advisor.” It’s great to have lots of advisors. But list only capital-A Advisors in your slide deck/website.
- Make the threshold for official Advisors high:
- A certain number of hours per month; per week leading up to fundraising.
- Make them a shareholder.
- Preferably with cash out of pocket so they have skin in the game… and you have tested their commitment to your vision.
- Prep Advisors well before you pitch VCs: walk through the pitch, in person, and answer questions/objections. Either walk away agreeing it’s good, or take them off your slide.
Some advice for potential advisors:
- Keep an open door for entrepreneurs seeking advice. It’s good for the community.
- Draw a clear distinction between informal advice and being an Advisor. Before agreeing to the latter answer: would I be comfortable sitting with the team at a VC pitch?
- If not, tell the team. Don’t take stock. Give them occasional advice if you have time.
- If so, get a stake in the company. Work with the team to really understand the business. And get ready to take reference calls as if they were a continuation of the pitch.