Zeo has benefited massively from the advice of many as we have grown and developed. Lunch with a fellow company founder, investor feedback, specific trade advice around everything from legal to graphic design – there are literally thousands of people that offer up their advice over the years. All are valuable. I’d like to call out one class of advisors though – what I call a ‘key business advisor.’
Key business advisors constitute only a handful of the larger subset of people who give advice to the business. And yet they deliver a huge portion of the value – the Pareto Principle in action. I’d like to explore what makes these relationships tick – and try my hand at the other side of the table.
Zeo Key Business Advisors
To give you a feel for what I am talking about – here are some (by no means all!) of the key business advisors that Zeo has benefited tremendously from over the years.
Colin Angle – We cold called Colin when we were still students. He had co-founded and was about to take public iRobot. We thought that as a local consumer electronics success story that he would have allot to teach us. Our engagement with Colin started lightly – a meeting in his office, inviting him down to a brainstorm session on the product – but over time grew into angel investment, board membership, and being one of our key business advisors. Colin introduced us to our first (and second!) VCs – they were both investors in iRobot. The majority of the Zeo board is on the iRobot board – which is pretty awesome.
David Barone – David bumped into Zeo at one of the many Boston-area networking events that we attended early on. David is a successful medical device entrepreneur and now runs a consulting shop. David helped us deal with early team issues, helped us recruit a CEO, and gave invaluable product advice (which we mostly ignored – to our detriment). I remember genuinely trying to convince David that a product that we had barely envisioned would surely be on the market in 6 months. He called my BS – and helped build a better plan. David also served on the early Zeo board and invested personally.
Characteristics of the Few
What makes these relationships different and so hugely valuable to a startup?
- Key business advisors are truly committed to helping a business succeed. There is a big difference between making an introduction and putting your reputation on the line. Key business advisors will go that extra mile.
- Deep experience in the challenges a startup faces are critical. But that kind of talent tends to be readily available. What separates a key business advisor is the depth of their insight into your particular space.
- Key business advisors are passionate about the company direction and about the founding team and key management. Both are required – it’s a long, bumpy path.
- These relationships are longitudinal. A key business advisor can offer perspective over years of interaction as a startup grows. Don’t make someone a key business advisor unless you believe they will offer value over years. At the same time – it’s not permanent and the needs of a company and advisor will change over time.
How to Interact with Your Key Business Advisors
- First off – mutually discuss and recognize the difference in the relationship. This is a big difference here from a ‘member of the advisory board’ – it’s deeper and broader.
- Interaction time can vary pretty wildly depending on current issues, stage, other things going on for the advisor, etc – but a general rule of thumb is a solid conversation on key issues at least twice a month, with things getting much deeper when needed. They are consulted on key business decisions.
- Compensation is rarely cash and is very likely equity. Advisors don’t expect to get rich off of those options – but it’s a truly important signal of commitment and an alignment of incentives.
- Investment – your advisor should be willing to invest alongside others in fund-raising rounds. Again – this is mostly a symbolic gesture – but be wary of advisors who refuse to put their money where their mouth is (unless they truly don’t have the means.)
- Identify the needs of your advisor – and make sure they are getting what they need as well (see below).
- There is a difference between key business advisors and your Board of Directors – although there is much overlap. A formal Board is more about legal governance and control than it is about business advice. Don’t confuse the two.
What the Advisor Gets
It should be pretty clear how the company benefits from these key business advisor relationships. But the wiifm for the advisor? Here are the motivations I have seen at play – mostly in the case of a company founder taking an advisory role (VCs have different motivations).
- Giving Back – The more experienced and successful and entrepreneur becomes – the more their motivation shift to the altruistic. They want to see others like them succeed. They want to help make that happen. For advisors with this motivation – hug them close, make them feel loved, and recognize them profusely.
- Portfolio of Equity – Company founders lock up an enormous amount of their personal capital (financial and otherwise) in what amounts to only a few buckets per lifetime. Contrast this to a VC who gets to make a few bets per year – adding up to dozens or hundreds over a lifetime. By becoming a key business advisor you can diversify your talent over a few companies.
- Pattern Matching – Starting a company gives you deep insight into what works and what doesn’t. But since you can only start a few companies this gives you a limited number of data points from which to draw. Investors get to experience many more data points – honing this pattern matching skill. By advising a few companies you can radically increase the number of data points you have to draw on.
- Gaining Perspective – Being a company founder can be a myopic experience. You are working on the same thing every day – you are super close to it – and sometimes don’t see the forest for the trees. One of the key values that an advisor brings to a startup is this outside perspective. But it works in reverse as well. When a new technique works, or a piece of data emerges – it will often have repercussions on the advisors business as well.
The wiifm for me? I feel a truly powerful need to knock it out of the park in my own ventures. My key motivation for advising right now is to help me toward that goal. Pattern matching is #1, followed closely by Gaining Perspective. On the flip side – I am happy to Give Back and Build a Portfolio – and those motivations will become more important over time as I grow into advisory roles.
I’ve got a couple conversations ongoing that may lead to advisory roles – and I am truly excited about getting this off the ground for me personally!