It’s Hard for Start-Up Owners to Find Good Advice
At the moment we’re deciding whether to raise a large capital round and go for growth or keep things tight and focused. Both approaches have merit, and I respect all who have offered their guidance. But people are passionate about their opinions, and that can prove confusing. When I started my business four years ago, I was hungry for advice. I’d never worked in technology and had no experience raising capital or building a product. I cast my net as far as I could and sought help from people who seemed to know what they were doing.
Finding support was easy. Everyone I approached liked my idea; many wanted to be involved. I created an advisory board and handed out shares as if they were candy. I surrounded myself with impressive names, and they all had friends they wanted me to meet. Before I knew it, I had 50 shareholders, and we were all on a sugar high. Everyone had ideas and opinions, and they all wanted to meet with me. Many gave me books to read and research to do. I sipped coffee after coffee and read deep into the night. I wanted to appear grateful for the support, so I reported back on how I’d benefited from the advice and emailed notes on what I’d learned from each book. All of the advice appeared valid, but much was contradictory. I didn’t want to give offense by ignoring well-intentioned suggestions, and I burned up time holding meetings and keeping up with my reading list. I couldn’t make decisions and had no time to focus on getting work done. But I was confident that my roster of advisers would pay off by impressing potential investors when I went to raise my first round of capital. Surely they would boost my credibility. Not exactly. During pitches, every time the adviser section of my deck came up, I got the same response: “I’m impressed you got X and Y involved. Have they invested?” Well, no, they had not, which led to a follow-up question: “If experts in the field hadn’t committed to investing despite knowing all of the company’s details, why should we?” Once I realized that these big name advisers who hadn’t invested were having a negative impact on my ability to raise capital, I removed all references to noninvestors from my presentation. Now I’m four years in, and I still crave advice. I think being a sole founder increases my need for reassurance that I’m on the right track. I always find that having a wide range of discussions, as we often do during fund-raising, helps me refine my strategy. But I’ve also found that too much advice can be a distraction and that advisers who want equity but aren’t willing to back the company are not always the best people to have involved. Now the company is moving on to the next phase of growth. We’ve been a start-up valued at less than $10 million with good prospects but with a small team and with very little revenue. As we start to become a serious business with significant revenue, I’m beginning to move in a different world, one where I need new advice. I’m also at the next phase in my own growth. I used to see myself as inexperienced and in need of help. Now I make my own judgments rather than deferring to people I see as experts. I still ask people I respect for their opinions and ideas, but I’ve developed a strong sense of whom to trust. I’ve learned a big difference exists between people who enjoy giving advice and those who really care about me and the business. There’s also a big difference between people who think they know how to build a company like ours and those who have actually done it. I can think of four people who have helped me at Posse and without whom we would have failed. But the new phase we are entering requires a new group of advisers. Here is some of what I’m looking for: Previous success in similar fields. Some of the people I enlisted to my early advisory board sounded impressive. They’d held high-level positions at big corporate companies. When we suffered some early start-up bumps, though, they were unprepared. Their knowledge of how a start-up should grow was based on watching “The Social Network.” When we didn’t hit it big straight out the gate, they became concerned. I learned to look for people who had built a similar company from the ground up. Focus on the granular. Many people who want to give me advice start with a discussion about the potential size of the exit and how quickly we’ll be able to get there. This always creates distractions such as attending to the setting up of complicated corporate structures to minimize future tax or setting up big sales deals ahead of building a product. I’ve found that the best advisers are the ones who drill me on what we have to achieve in the next three months. They’re interested in the granular metrics of the business, how we can improve them and how we can create replicable processes. Good start-ups are rarely short of willing advisers. Maybe these people are looking for involvement in something that looks like fun; maybe they seek a slice of a big exit. But I’ve developed a keen radar for time wasters. I spend as much time as possible getting to know someone before inviting them to become involved. I do thorough reference checks and never give away shares in the company without a vesting period. When I do find someone who’s right, I recognize that the relationship has value. Such people are usually in high demand; they’re giving up other opportunities to take a risk and help me. Time is their most valuable asset, so I make sure I’m prepared for meetings and I check in regularly to make sure that they’re happy with our progress and that they enjoy being involved.