Advisors can be a fantastic opportunity for startups to broaden their view and get this little extra push. In my view it is a “must” for every startup founder or team to have a group of advisors or even an advisory board.
However, you must be careful when choosing advisors, as there are different kinds that are drawn to startups like bees to honey. To be clear, I am not discussing here advisors such as accountants or legal advisors or even “growth hackers”, but rather advisors for the field of general management of your startup. Typically the people you want to have on an advisory board.
How do you choose advisors? Your network and personal preferences as well as maturity and experience as a startup founder play of course a role here, but in my experience there are three types you should avoid, and three types you should absolutely look out for.
Three types you don’t want to have as advisors
Three types of advisors you do not want to have in your pool of advisors or on your advisory board:
This is somebody who wants to “do something with startups”. The problem is, that somebody might not have the time, ideas and thoughts ready to be of full use in the startup world. That might even be somebody who lives for and in the corporate world, and who only gives advise coming from the corporate world a la “just do another budget meeting and alignment round”. This type can in the end distract you more than help you. To be clear, advise from individuals from the corporate world can be highly valuable, if done with the right mindset.
This is the person who always agrees with you and does not dare to challenge you. This is a typical problem in startups, people come and support your idea, as it “sounds great”. Or they say everything that makes you happy and shy away from conflict. The thing is, opposed to what you might read on Social Media, you will have a lot of people who will support you and will encourage you and say “Wow, great idea”. But it does not cost a lot to say “great idea”. Execution and the pain for detail of implementation and a penchant for action are the real challenges for startups and you will need to hear about those. As the adage goes: “When to people in business always agree, one of them is unnecessary”.
These are people who in fact want to get a job via advising you. I am not against paying your advisory board – on the contrary. But the question is for what you are paying for if you want to have general advice. With only focus on billable hours the person will not care too much if you succeed or not, and might shy away from the truly difficult questions.
Three types of advisors you want to have
Luckily, not all advisors are like this, and there are fantastic advisors out there. Here are three qualities and types of advisors you want for your startup:
Think about somebody who is on a diet. When you loose weight, everybody will tell the person “Wow, you have lost weight, great”. But if you gain weight, nobody will tell you.
You need an advisor who will tell you also where things go wrong, to challenge you, to criticize every step and play the advocate of the other side. You do not want confirmation of your great ideas. As mentioned above, you can get that from anywhere. You want instead somebody who can shift your thinking, who constantly challenges our set beliefs and assumptions in a positive and engaging way.
The “Sector Expert”
Find somebody who complements you in terms of expertise. If you want to enter the consumer goods world, it is fantastic to have industry-specific thoughts and experiences from former consumer goods start-up and business leaders. Here, truly somebody’s hindsight can become your foresight. The other kind of expert would be the individual who has true insights into a specific process, for instance for government subsidies or VC funding.
This is all about somebody who can introduce you to new talent, companies, and, most importantly, customers. Be sure that you get personally involved and don’t take this lightly. A serious advisor might also want to get compensated for an introduction & facilitation of a large sale. Often, inexperienced startup founders don’t like this and think paying for an introduction is over-rated. Here it is not recommended to be cheap but rather invest, as rain-making and sales are the hardest part of every company.
Go out and get advisors
Great advisors, ideally organized in a (flexible) advisory board set-up, can be your sparring-partners and make your startup successful. Ideally these are people who have “skin in the game” with your startup, to quote Nassim Thaleb, the author of Anti-Fragility. This can be achieved by creating highly involved compensation structures, for instance for advice for equity or to agree on success-based fees. Truly successful advisors would like to have this, to be tied to your success and will be highly choiceful of the companies they get engaged in.
Finally, it is important that your advisors, and maybe even your total board of advisors compliments you. The biggest mistake is going out and seeking only advice from people like you – a fallacy known as the confirmation bias. Especially in the highly challenging startup world, where often by definition the path is unclear, it is important to go out and get the more difficult but highly engaging advice. This is not easy. Truth can hurt. But it is necessary.
So go out and get advice – but be highly critical where you get it from.