Guest author, Eli Portnoy, is the co-founder and CEO of Sense360 and former co-founder and GM of Thinknear. Eli is also a mentor for Techstars in LA.
Advisory boards get a bad rep, and most of them deserve it. They are generally nothing more than head shots on a slide deck — impressive people who “validate” that the company is interesting. But advisory boards can and should be so much more.
Over the last two companies I have co-founded, advisors played an outsized role in whatever success we have had. They have helped me think through tough problems, fill-in knowledge gaps, made key introductions, and generally made me smarter and better. The only thing they haven’t done is validate our business.
I think the problem with advisory boards comes down to how CEOs approach them. They look for the big names, like the CEOs with multiple hundred million dollar exits, the luminaries in the field, and the well-known personalities. This sounds like a good idea, but is it really helpful?
Perceived Benefits of a Big Name
First of all, it feels terrific when someone who’s “made it” thinks what you are doing is great. I’ve been there. You’re hands down working so hard, being questioned all the time, going through the typical ups and painful downs of a startup, and one day this super important person says they like your business. Not only that, but they want to be involved. This feels like a stamp of approval you can take to investors, employees, and even to let your friends know that you aren’t absolutely crazy. I don’t underestimate the little ego wins in startups to maintaining sanity, but does it really help the company? My experience is that almost no sophisticated investor (or recruit or partner or customer) pays too much attention to your advisor slide, probably because you are giving them equity for free. Investors actually have to pay for their equity.
The second argument for a big shot advisor is that they must be incredibly smart and know a lot more about how to make your business successful than you. Their advice is going to be gold!
Maybe, but in general big shots are pretty removed from the day to day of building a company and almost certainly not the expert you are in what you are trying to do. I am betting that they will likely learn more from you than you will from them.
The other reason why I don’t believe impressive advisors provide that much help is that they are generally extremely busy and don’t have the time to dive deep with you on your business.
A third rationale for getting a high profile advisor is that they are generally very well connected and will open doors for you. This could be huge, but you need to make sure that you set expectations. I’ve seen it many times where an advisor agrees to join a board, but then is reluctant to tap into his or her personal network.
What Makes a Great Advisory Board
In my opinion, a great advisory board is a set of people who make you better. Being a startup CEO is a very difficult job, you have an ever evolving organization, an ever changing set of problems, and an ever increasing set of new challenges. You are constantly doing things you have never done before. Scaling from 5 to 10 people, hiring a VP of Sales, raising a Series A, selling to a new market, signing a multi-year BD contact, sponsoring your first conference, firing a senior executive, dealing with your first PR fiasco. A CEO needs a stable of advisors he or she can turn to to get quick help.
So what should you look for?
Subject Matter Expertise
Due to the multitude of areas a CEO needs to be competent in, it helps to find advisors that fill in your knowledge gaps. If you’ve never sold or built a sales team, find a CRO advisor rather than a CEO. Yes, CEO’s have dealt with sales teams, but the subject matter expertise is going to reside with a CRO. Find the people who are experts at solving a set of problems you have, bring them on, and turn to them whenever you have issues related to that problem.
During my time at Thinknear, I needed to sell to agencies. I had never sold anything – let alone sold ads to a media buyer — and I was really struggling. I brought on Stu Libby as an advisor. He was an acting CRO selling every day into media agencies and he helped me quickly get up to speed — giving me advice on my deck, how to talk to agencies, what things mattered. I was soon selling millions of dollars.
Another quick example: we were building an AdTech focused product but felt like we were missing some of the subtle elements that mattered in this new industry. We convinced Nat Turner to join our advisory board as he was considered one of the very best product people in AdTech (and had just sold Invite Media to Google). He quickly helped us understand the nuances of the customer and how to build the right products for them.
In addition to industry and functional-level advisors, I think every startup CEO should also have one advisor for CEO-specific issues, like boards and fundraising. Having someone to turn to who understands the nuances of being a startup CEO is critical, but I think more than one is overkill.
Advisors Who Can Commit The Time
Once you’ve identified the areas that you want to hire advisors for, you need to gauge their willingness to commit time. Be upfront about your expectations and only bring on people who will really give you the time you need. I typically put in my advisory agreement a minimum of one meeting/call every other week, and one lunch or dinner a quarter. As soon as they join I set up a recurring meeting and I am aggressive to make sure I get my time.
When I interview advisors I am always trying to get a sense for how well they will be able to teach me what they know.
Being a subject matter expert isn’t enough if all they know is how to do, but not how to teach me to do. I am not hiring advisors to actually do the work, only to advise me so I can do the work. So after affirming that they are in fact subject matter experts, most of what I try to suss out is if they are deep thinkers who can externalize their expertise and pass it on.
A Final Note: Firing Advisors
No one bats 1000 when building an advisory board. Some advisors just don’t provide as much value as they intended or don’t live up to the promised time commitment. It is incredibly uncomfortable, but if someone isn’t pulling their weight you cannot dilute the rest of the shareholders by continuing to give them equity. I suggest all advisory agreements vest equity over two years so that if it isn’t working the two parties can part ways.
Advisory boards can be an entrepreneur’s secret weapon — giving you access to a group of experts who help you solve problems you would have had to spend years figuring out on your own. This is an amazingly powerful opportunity available to almost every startup CEO, yet many squander it in search of false validation.
I hope you take full advantage and build a terrific advisory board of people you can turn to regularly to help you solve your hardest challenges. This will help you build a better business, make you a better CEO, and ultimately lead to the greatest validation of all — a hugely successful company.
Learn more about advisory boards and how to the best CEO you can be from other Techstars Mentors.
This post was originally published on Medium.
I vividly remember my first VC meeting like it was yesterday, even though it happened over 10 years ago.
I was awed and intimidated to meet an industry insider, someone who with a single decision could transform my business prospects. I prepared for weeks, polishing my deck, practicing my talking points, and rehearsing answers. I couldn’t sleep the night before I was so nervous, anxious, and excited.
For the past year, I had sacrificed an incredible amount to build my business. I had quit my consulting job, I had spent almost all of my savings, I was sleeping sporadically and not enough, and I had spurned social events and family obligations. In other words, I was living the startup dream and loving every second of it.
But that didn’t make the sacrifices any less real. I had put it all on the line and I was now about to meet with a VC who could make it all worthwhile. The magnitude of the meeting was huge for me.
I got to my meeting a full hour early and waited in my car. As I counted down the minutes I day dreamed about all of the incredible ways the meeting would go. I finally walked out and made my way up to the office. When I got there a very friendly person walked me over to a conference room where I set myself up. I expected the meeting to start on time, but the partner was 20 minutes late. He was cordial and nice, but clearly wasn’t nearly as excited to see me as I was to see him.
The meeting started and I began my perfectly rehearsed presentation. I hadn’t finished the first sentence when the VC interrupted me with an idea. I hadn’t even said what I was working on, yet he already knew how to improve my business. He pontificated for a full five minutes and then let me continue with my presentation. Within one slide he was already tuned out.
At the end of the meeting, he told me all of the reasons why my business wouldn’t work, why my concept was obviously terrible. He then highlighted all of the brilliant companies in his portfolio and why they were so much better than mine. We parted ways with him asking me to stay in touch.
I left feeling like I had been punched in the stomach repeatedly and then kicked for good measure. The entire weight of failure fell on my shoulders as I grappled with what had happened. I was prepared to be told no. I knew VC’s say no to 100 businesses before they say yes to one. I knew it was my very first pitch and that I would get better. I understood the odds were widely not in my favor. And yet, I hadn’t expected this.
The meeting felt the way I imagine an artist would feel if someone not only didn’t appreciate his art, but went out of their way to criticize every last brush stroke without ever looking at one of his paintings. Why couldn’t he have just said it wasn’t for him? Why couldn’t he have just listened and then given me feedback as to how I could improve my business or my pitch? Why did he have to make it so painfully obvious that he had no interest in my business and zero respect for me.
Ten years later the memory of that meeting is still vivid, but I think I have a much better perspective for why it was so painful and what I hope VCs consider as they reject entrepreneurs.
First and foremost there is a massively asymmetrical importance to the meeting. To the VC, the meeting is just another one of many in the day, to the young entrepreneur it is THE meeting. Every word you speak he or she will hold onto for years (and they may even write a blog post about it 10 years later). More importantly, entrepreneurs make massive sacrifices to build their business. It might not be a great business, they might not present it well, and they maybe have zero chance of actually succeeding, but as humans they have worked tirelessly, tried hard, and built something. If nothing else, I hope VCs can respect and empathize with the incredible work and dedication it takes to be an entrepreneur.
At the end of the day VC’s have a hard job. They have to say no over and over and over again. That can easily desensitize someone and make it hard to have the level of empathy required for the job. Fortunately there are many VCs who are exceptional people who treat every entrepreneur well (I know firsthand because I get to work with incredible VC partners everyday at Sense360).
That said, I still come across VCs who lack basic empathy when they deal with unknown entrepreneurs. They are late, they check email constantly during the meeting, they pontificate, they interrupt constantly, they don’t respond to emails, they don’t follow-up after the meeting, they are unnecessarily harsh in their criticism, and many other bad behaviors. I really hope that the next time they reject an entrepreneur they consider the sacrifice and hard work the person across the table put in. They don’t have to love them, their idea, or their business, but remember that the founder probably slept on a couch, spent their life savings, and risked a lot personally to try and make it happen.
Hopefully every VC can at least respect the commitment and love for entrepreneurship.
Read the original article on Medium. Copyright 2016.