Tag Archives: ventures

Beware – “Advisors” Slide

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.
Advertisements

Device Death Blossom

It looks like a beautiful flower.  Sniff it too long and you’ll have plenty of time to dream about it.

I have seen probably a dozen component venture presentations (I just found one of my own!) that have what I call the “Death Blossom” slide.  Apologies to those who aren’t B-Grade SciFi fans and have seen The Last Starfighter.  The GunStar (wow, I remember I was blown away by those graphics!) is equipped with the “Death Blossom” feature which spins the ship like mad and fires its missiles to vaporize every bad guy in sight.

Ventures formed around a materials science or novel device breakthrough often imply they can do the same.  More likely, they will spin out of control and launch a battery of very expensive missiles into deep space.

The Standard Optoelectronic Death Blossom

The Standard Optoelectronic Death Blossom

Yes, I’m picking on optoelectronics for this one– since I’m familiar with building this diagram myself 12 years ago.  The one where you have a device that allows some exchange between electrons and photons… and it can do everything better than what’s in the market today!

The temptation, particularly among first-time entrepreneurs, is to develop the “platform” and license off applications to companies who actually build things.  This may work in pharmaceuticals– I am no expert on that market– but it certainly does not work in optoelectronic devices.

The simple truth is that to commercialize a single device, with a single advantage over the incumbent technology, typically takes 5-10 years.  It requires an incredibly focused, systematic effort around a specific set of requirements.  Usually you need to make a lot of system trade-offs around the peculiarities of the new device– and hopefully to bring its advantage to the fore.

So pick a market for your device that is big enough at the system level, and can grow quickly. Pick an axis along which to compete— and unless you are beating the competition by 5-10x on cost at the device level, don’t pick cost (subject of future post).  Put the blueprints for world domination of every other sector into your “future ventures” file.  And start working!