To surround yourself with people of great knowledge and experience, of strong mind and willing you forward is a good recipe to achieve the seemingly impossible. Asking a startup founder to go from an idea, a concept and a prototype to become a global market leader in their industry or an internationally recognised commercial brand, is a big ask. Yet we seem to liberally encourage people to take on the entrepreneur mantra without providing them with an environment fraught with talent within which to enable them to grow. The hard truth is that in an ecosystem like Malta’s, where early stage startups are a new phenomenon, there are very few people around who truly have been through a successful founder journey. Finding the right advisor will prove invaluable to a startup founder.
What provides hope and inspiration is that when entrepreneurs successfully exit a previous project, the likelihood is that they will remain involved and give back to the ecosystem that allowed them to earn success. In Malta, we have seen early examples of this, where GFI technologists inspired the founders of early Malta based startups like Altaro and Hotjar, and now that these have earned success, their founders are actively seeking to support the next generation of Malta connected startups. Add to the mix the wider financial services sector, which attracts High Net Worth individuals from multiple spheres who use Malta as a head quarters for their personal investment companies and projects, as well as the attractive grants offered by Malta Enterprise, and you have the makings of a network wherein both chance meetings and strategic encounters can take place to form the foundations for new international grade startups to emerge, guided by experienced advisors.
First time founders, or rather startup entrepreneurs who have never been involved in a world class organization have little chance of achieving such scale and success. Being a startup founder often feels like there are too many variables, nothing is within control, and the expectation on your shoulder might swallow you up at any moment. Founders rarely possess all the knowhow, they don’t have the network and they lack the right access. Simply put, they need to surround themselves with individuals who have earned the scars and emerged successful against all the early stage odds. One can be forgiven to believe that the return on investment from attracting such individuals to your startup is derived from the signal it portrays to the outside market of your ability to recruit top talent. Yet, able startup founders go far beyond this, and embrace the presence of such talent as great advisors. These individuals can provide founders with direction and decision making tools when every other option available to them fails to work. Recruiting the advisor is just the first step, learning how to tap into their super-powers as introducers, ambassadors, consultants and mentors is what separates the good from the great. Furthermore, if you can recruit a well known figure from the space you’re working in, it can open some doors and be attractive to other people who may want to get involved or invest just so that they can get next to your advisor.
We’d probably have crashed and burned years ago without our advisors. They all helped, but one in particular, a former Cisco CEO, probably had the biggest impact. Not through any single piece of advice — but by having someone super experienced for us to go to before taking any big decisions, especially in the tough times. Eternally grateful — Max Thake, PEAQ co-founder
Surprisingly, but only for those who dare, such advisors are not so inaccessible as budding founders may initially think. Many first-time founders are reticent to reach out cold to other CEO’s or people they deem too accomplished or famous. The trick is in aligning the interests of the parties involved. Whereas financial compensation is a factor here, it’s not what I mean. Entrepreneurs are life-long learners and successful entrepreneurs love having access to the latest and most daring technologies and business models. Successful entrepreneurs are infected with the bug, even after their personal startup journey has completed. This means, early stage founders owe it to themselves to woe influential advisors, and luckily for them the main ingredient is the startup they have on offer. Successful entrepreneurs are probably wealthy, money and network is not what they want from you, what they ask for is a compelling startup story, an intelligent product and an exciting founding team to back. There is great power that comes from connecting the right person with the right company at the right time to solve a specific problem, being able to recruit the right person as an advisor, should be one of the first validation points not only of your business, but probably more importantly, of your ability as a company leader and motivator. After all, most of the people you will seek out as advisors were there not too long ago, they will be more empathetic than most to your situation.
Here is where culture and the mindset of the players involved takes a central role. Unfortunately, I have often learned of startups who had mishaps with advisors simply because the relationship was built upon transactional motivations. A typical storyline is that the founder encounters a problem they have never faced before, for example partnering with a supplier in Asia, they hire an advisor their lawyer cousin recommends, and it all ends in tears and money down the drain, and a sham advisor chasing the poor entrepreneur for compensation. The onus here is on the startup founders to show skill in identifying the right advisor for the task at hand. A lot depends on the market concerned and scale of the business. If you are scaling fast and have specific challenges, bringing experience on board is invaluable. Similarly if you are entering a specific space you don’t know it’s a great idea to use external help, and yes, it may prove expensive at times. Another critical aspect is finding advisors that understand the uniqueness of operating within a startup context.
The form of the relationship can vary. I would advise caution in the beginning and the first interactions should be about nothing more than relationship building and simply discussing the future goals and milestones of the startup. Think of friendship first, assistance later. I would also advise not to discuss compensation until you are a couple of interactions into the relationship already. Prospective advisors should first and foremost decide if they fundamentally believe in the entrepreneur and their vision for the company.
With some advisors, the relationship may be purely functional, and short-term in nature, for example getting advice for a trademark or patent application, with others the relationship may be more strategic. Strategic advisors are distinct to members of the board of directors, the latter have legal ramifications attached to the relationship, advisor agreements can be flexible and constantly renewable. A typical startup advisor, one who is of ongoing strategic value to the founders (using the US model) can expect to receive somewhere around 0.1%-1% in startup equity, on top of any one-off compensation from specific operational projects they may be involved with. The equity should be enabled through vesting periods to ensure value is earned over-time and should the relationship end prematurely, as they organically and often do, there is a legal mechanism in place to adjust the compensation accordingly. Be careful not to assemble members for an advisory board (or group of advisors) who are too similar either to you and your startup team or to each other (i.e., functioning as a deeply homogeneous group that lacks diversity in abilities, knowledge, and connections).
Here is what the profile of an attractive advisor for your startup could look like:
- They are a domain expert in an area that is critical to your company over the next 12–18 months. They’re well connected to a class of people you’re trying to reach
- They possess the ability to apply lessons and logic to different, flexible problem sets. They are problem solvers.
- They are a person who’s values match or complement your own, whether these are social or impact driven, or of the go big or go home mentality.
- Aim for low-ego. You’re looking for brilliance and expertise here, no doubt, but the key to a valuable advisory relationship is that person’s willingness to make the time about you, not them.
The great ones, if they’ve bought into you and your story, will gladly engage during the initial period without asking for anything in return.They will be highly responsive, helpful on the key hard questions. They will be able and willing to share knowledge and learnings without insisting that their experience marks the obvious right path for your company.
The final point about advisors is that often they will provide you with advice you do not want to hear, because you are very connected to your startup and thus do not see the bigger picture. You need guidance from people who aren’t afraid to unpack their instincts. Whilst advisors might not always be right, often their more neutral perspective and experience mean that their advice is usually sound, and thus you should be looking to take it on board, at least giving it lengthy consideration. It’s this process of collaboration and debate that brings out the best and most valuable attributes of the founder and the business. Because of this, I believe the most valuable advisors deliver clarity of thought and structured arguments through empathetic and meaningful discussion.Interactions will result in being encouraging to you and your advisor will be fun to spend time with.
Adrian Galea is a professional in venture capital and portfolio management for early stage startup investors. He also manages a facebook group called Malta Startup Space that inspires startup culture in Malta. For more information: www.clutchplayadvisors.com