Advisors are one of the most crucial assets of any new startup. The roles of an advisor can vary: helping with fundraising, gaining early clients, and being a clear visionary. Many advisors (as many venture capitalists) "suck" and have a tendency to "orbit" around a startup: sticking around without creating any value hoping that it will become successful without their effort. This creates negative enterprise value as it serves as a "pseudo-solution" to important issues: not fixing the problem while masking the urgency of the matter from the founder.
Advisors are one of the most crucial aspects of any new company. A good advisor can make or break a company. Unfortunately, through my own experience, I have found that at least 80% of advisors create very little or negative enterprise value. On the other hand, some advisors create more value than founding members of teams.
Where is it best to utilize advisors?
Before I answer this question I wanted to go deeper into the purpose of an advisor and the advisor's strengths/weaknesses. It is important to know what an advisor should do and what an an advisor should not do.
Clearly, it is not the advisor's role to be an executor. Rather, it is an advisor's role to help with high level issues. These issues include (but are not limited to): fundraising, gaining early clients, giving perspective on the industry, recruiting, etc.
Fundraising: Mostly self explanatory. It is one of the advisor's jobs to connect you with the appropriate investors at the appropriate time. The advisor can also help iterate on your slide deck and expose flaws in your presentation.
Gaining Early Clients: This is the #1 role of an advisor in a B-2-B company. Some of the best advisors are veterans of a specific industry. Great advisors help solve the chicken & egg problem. Great advisors bring visionary executives that are willing to take small bets on huge potential payoffs. The best advisors allow you to make a sale to the executive solely based on the reputation of an advisor (sh*t if I can do this anybody can do it).
Recruiting Team Members: Great advisors help attract A or A+ team members. Net-negative advisors attract B-F team members.
Serving as CLEAR thought leaders: A great advisor's role is to be "more visionary" than the entrepreneur. Conversely, it is the entrepreneur's role to be "1000x more active" than the advisor. A great advisor will give simple and clear direction for the company. A net-negative advisor will use hyperbole, industry terms, and masking.
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Rewards for an advisor: As picky as I am about advisors I believe strongly in rewarding those who create value. Outside of being part of a great company, I believe advisors should be rewarded well for their help to the company. One of my beliefs is that a great advisor should have first rights to invest at the time of "least risk" (said with caution around the "risky" world of startups). What I mean by the "time of least risk" is times, such as bridge rounds or right before/after rounds are closed or great new clients are signed (especially if it was at the hands of the advisor), where much risk has JUST been taken off the table.
Try Before You Buy:
I believe that every advisor, such as every employee, should first be test driven (either implicitly or explicitly). Many advisors are opposed to this concept. It is safe to say that 90% of those who oppose this concept would not make great advisors. The reason I can say this is because being an A player is negatively correlated with ego. If you believe that you are "entitled" to anything, than you are by definition not an A player (although you may have been an A player at some point in your career). Believe me when I say that I have seen people without any startup experience show more entitlement than some who have built multiple 9 figure ventures. Ego is not as correlated with success as one might think.
Keep in mind, advisors are not primarily driven by money so it is not a great idea to create direct compensation (you do X for X). Rather it is a good idea to work a little with this advisor and see what value he creates, after all, people are pretty damn consistent. At the very least, it is great to be clear about the potential role of the advisor: "We are looking for an advisor that will bring in the first two key clients for our company, do you think you are in a position to do this?" There is nothing that very ambitious people love more than when somebody is being direct with them.
Look, I don't want to be harsh, mean or rude. It just pains me to see the negative dilution that most advisors create in companies.
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