A great network of advisors can accelerate the trajectory of your startup. They not only open doors, they provide unique insights, lend credibility, speed up success and act as a sounding board to address business challenges quickly.
But, the benefits of an advisor relationship don’t just happen — you have to develop the relationships to set yourself up for success. As a GTM thought leader and investor in over 100 companies through Forum Ventures, I’ve noticed a trend with the most valuable advisor relationships: they follow the six step process outlined below.
Step 1: Identify your strengths and gaps
Start with an analysis of the gaps through the lens of potential investors and potential customers, answering the question like, “What impresses me about the founder’s (that’s you!) and my team? What concerns do I have? What support will I need? When will I need it?”
Here is a great guide of questions to think through the strengths and weaknesses of your business.
Selecting the ‘right tool for the right problem’ approach, use the analysis of your business to identify if you need a consultant / coach, a new hire, or an advisor:
- Consultants or coaches: They’re great for tactical hands on support and training. Many times consultants and coaches can fill the role of an advisor. However, keep in mind that these roles are paid, so incentives might not be aligned.
- Employees or contractors: Bring on new members to your team for ongoing hands-on execution for in-the-business problems.
- Advisors: They’re fantastic for long-term strategic challenges, domain expertise and networks
Advisors are usually tactical or strategic with the support they offer a company. It’s important to understand what kind of support you’re looking for from your advisor:
- If you’re looking for go-to-market help on a new product, which is a tactical need, look for a practitioner advisor. This person ideally has worked with your stage of company and one to two stages past with a similar GTM strategy. For these types of advisors, it is typical to design an arrangement where there is a committed amount of time they are spending with the startup
- If you need guidance about which markets to go into and the direction the market is heading, look for a strategic leader in your industry. For example, you may not have knowledge of your specific market on your founding team (this will be a concern for VCs). In this case you’ll want to look for an advisor who was a founding CEO in your industry who will be hands-on in guiding and connecting you with thought leaders in the industry. For these advisors, you’re usually calling on them to discuss key issues in the business and understand the direction the market is heading. These advisor relationships are less structured as the advisor usually has less time to spend with your company.
Step 2: Vet the advisor
In my experience, I’ve seen that advisors are usually willing to give 1-3 hours upfront, for free, to assess if there’s a mutual fit. While you are getting to know an advisor, it is important to not only vet the advisor's expertise, but also whether there is a culture fit.
To identify fit, ask yourself:
- Is this someone I trust and feel comfortable being transparent with?
- Do they understand and are they excited about my/our vision?
- Do they have experience at the stage of my company and 1-2 stages past our current stage?
- Are they going to be a tactical (hands-on) or strategic (one-off / monthly) advisor?
- Outside of their personal brand, what value are they willing to add as an advisor? If you want access to their network, is this something they are willing to offer?
If there are extenuating circumstances creating temporary fit concerns (such as a lack of availability), keep the relationship warm, but do not swarm.
To achieve this, use tactics such as:
- Including them in your monthly newsletter or stakeholder update
- Engaging with them on social media
- Attending / listening to talks they give and send a brief follow up of appreciation on learnings
- Reading/ commenting / sharing content they write
You can also use these tactics to build a relationship with a potential advisor as well. If you’re worried that you’re becoming overbearing, err on the conservative side, back off and re-engage later if there is still interest and fit.
Finally, once you’ve identified a potential advisor, do your diligence. Talk to another company that they have worked with as you would any employee.
Step 3: Create Alignment
If you’ve found a potential advisor who appears to be a good fit, ask them if there is mutual interest and availability. If there is, set up a meeting/call to align expectations for the relationship; a process guided by four golden rules:
- Be transparent and exhaustive (but reasonable) with your asks
- Be Coachable!
- Outline the goals / expectations for the relationship in writing. It can be helpful to discuss the below.
- Frequency of meetings
- Structure for meetings (optimal prep, calls vs. in person, etc.)
- Your / your advisors preferred communication style(s)
- Ideal outcomes from your advisor and general business outcomes
- Confirm alignment around goals / expectations
Once you’ve aligned goals/expectations in an informal written agreement, you’ll need to put them into an formal advisor agreement. The clearer the expectations for both parties, the more likely you’ll have a fruitful relationship.
Step 4: Negotiate terms
Advisory terms usually revolve around two things: compensation & time commitment. The FAST agreement by Founder Institute is a great guideline for equity based compensation and advisor time commitment.
Typical Advisor agreements usually include:
- the frequency of meetings
- amount of time and role of the advisor.
- Vesting cycles should also be outlined in your advisor agreement. The most common we see is a 2-year vesting cycle with a 6 month cliff. However, if you have worked with the advisor before and have a prior relationship you may forgo the cliff.
Other details such as how you can use the advisor's name and the types of introductions the advisor will offer should be agreed upon outside of a legal agreement.
When compensating an advisory for their time, we typically see advisors receiving between 0.1% - 1% equity (in Options or RSUs) for ongoing advisory relationships, with the formula being a mix of:
- Company stage (earlier typically means giving more equity).
- The value the advisor provides: Types of Intros, Advice, Network, Fundraising support, etc
- Amount of time the advisor commits - In your contract you can include statements such as “any month where no service is performed, no equity will be vested.”
- Value the Advisors name lends to the company’s credibility (AKA Stamp of Approval). These types of advisors typically do not have time to commit to building the business are considered passive advisors, as result have lower equity stakes in the company.
There’s no set formula, and each advisory agreement will be different, so be sure to outline the structure of the relationship in your advisory agreement.
Note: Be cognizant of potential negative signaling from advisors investing (or not investing) in your business. Having an advisor, who is also an investor, but who did not invest could be a negative signal when fundraising. You don’t want a relationship that is supposed to be beneficial turned against you.
Step 5: Maximize outcomes
With advisory meetings, we find 1:1’s produce the best results. You only have so much time with advisors, and group meetings can lead to lengthy discussions, robbing you of precious time.
There are a few exceptions to the 1:1 rule:
- When you receive conflicting advice from different advisors
- Knowledge sharing across the team
When this happens, you have a couple of options:
- Share the conflicting advice you are receiving with both advisors and pull the advice apart to figure out the best path forward. Since advisors have different experience and expertise, there is not one path forward. As a founder you may need to test multiple hypotheses to determine the best course of action.
- Ask the involved advisors if they’d be willing to get on a call so you can understand the advice in context. In these cases, lead the call. Don’t expect your advisors to meet the team on their own without you.
Knowledge Sharing Across the Team
This happens when an advisor’s expertise overlaps with an internal team member’s responsibilities - for example bringing your VP Sales into a meeting with your advisor to discuss sales strategy. In these cases, get consent from your advisor ahead of time so there are no surprises and everyone’s time is respected.
Maximizing meeting outcomes stems from good preparation:
- Send agendas ahead of time
- Have clear goals stated for each meeting (even if that’s simply to talk something over)
- Identify potential follow up action items during the meeting
- Follow up after the meeting with action items and deadlines
Make your asks simple for your advisors to follow up on:
- If you are requesting subject matter expertise or introductions, send an email to your advisor with context to forward to their contacts for a double opt-in. Here is a template we use at Forum Ventures for intro requests.
Step 6: Find the Two-Way Street
Beyond business advice, focus on building a strong relationship with your advisors – it feels better and pays dividends down the road. If you’re not sure what value to offer, ask your advisor what they are working on and learn about their work. For example, you could provide introductions to other companies if your advisor is also an active investor or help them with talent referrals from your network if their company is hiring.
There are a lot of great resources for learning about advisor relationships. Below are a few additional articles we recommend:
You can find more from Whitney, Managing Partner @ Forum Ventures on Twitter @thesalesmethod, or follow the Forum Ventures on Twitter @forumventures.
At Forum Ventures, we back exceptional founders who are building the future of work. As the leading B2B SaaS accelerator, our 4-month program focuses on go to market, sales, marketing, and fundraising, providing the tools you need to get your startup to scale.