If there was one thing you could do to increase your startup's chances of success by 3x, would you do it?
You might have noticed that some startups seem to be everywhere while others, probably at the same stage and with the same amount of talent/manpower/funding, seem to languish. One big difference I see between startups that build a framework for success and those that get isolated is the ability to nurture talent. Many startups believe that the way to get that expertise is by hiring a senior consultant.. Yet others believe that they can figure it out through trial and error. Both approaches are expensive, one in terms of cash and the other in time.
My solution? Build an advisory board.
Just to be clear, I'm not suggesting that startups should get more advice. Startups are more than overwhelmed with well-meaning advisors, which often does more harm than good.
Nor am I suggesting more consultants. Consultants bring in expertise to do a specific task and exit when the task is complete. In some cases, they may bring expertise that is required but is not a core part of the company.
Your advisory board or advisor lies somewhere between a full-time operating executive and a coach. Advisors possess relevant skills that your company simply does not have at that time to develop organically. This may be industry-specific (e.g. food, power, technology) or function-specific (branding, sales, operations). In addition, the advisor's mandate is to build specific skills or prevent the company from making costly mistakes. They may weigh in on difficult decisions; make connections to bring in customers or even new talent. They teach the founder and the company how to navigate the uncertain waters of entrepreneurship.
In return for sharing their expertise and time, advisors are compensated with a mixture of stock, cash and goodwill. Don't skip this step: no matter how senior the advisor, her or she will expect and appreciate some compensation, whether it is tacit or tangible. Not only is this acknowledgement a healthy dynamic, it also ensures that advisors and mentors internalize the company's challenges and put in the right number of hours. It's a business relationship and should be treated as such, even when the outcome may not be measurable in the short term.
I can hear many people thinking, "This sounds like a nice-to-have. Surely my investors can give me all the guidance I need ?"
Reality check 1: VCs may not have the time or expertise to devote to your operational problems. A brand-name VC recently lamented that they are simply stretched too thin to speak to their portfolio CEOs about all the questions that they have. Assuming you've raised institutional money and are expecting your VC to apply his or her magic framework, you'll still have to build your advisory board.
Reality check 2:Startups that are advised or mentored by another successful founder are three times as likely to have a great exit, according to the Endeavor Network. Endeavour defined great exit as one that valued the company at $100 million, a high bar, so I'm sure the lessons hold good for exits of all sizes. Mark Zuckerberg is a well-known example of a super-successful entrepreneur who had the humility to benefit from great mentors like Steve Jobs and Peter Thiel.
A word of caution - a great advisory board is not a crutch. Mark Suster has a great counterpoint that's worth internalizing. Like most of the great things in life, a wonderful advisory board needs thought and structure.