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Managing Start-up Advisors

Slideshow about Managing Start-up Advisors by Eric Tachibana

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Managing Start-up Advisors

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  1. Managing your Start-up advisory board Compensation, composition, and deliverables

  2. 0 1 Choose the right team Do not engage advisors because you personally like them, because they inspire you, or to impress. Engage advisors because your business has a capability gap to fill, and you cannot afford to hire a full-time, qualified resource, or because the gap is temporary and it doesn’t make sense to hire a permanent resource

  3. 0 1 Choose the right team Start-ups often lack similar capabilities: An industry-specific, well-connected rain maker who can drive biz dev A highly-experienced product development specialist who can drive unique, differentiating R&D An industry-specific operations / biz mgmt / manufacturing SME who can ensure realistic execution A strategy and/or financing guru who can pull executives out of firefighting

  4. 0 1 Choose the right team So an advisory board with those four members is often a good mix. But whatever the case, before you reach out to potential advisors, know what skills gaps you are trying to remediate against and recruit for those skills. I wouldn’t ever go beyond 5 advisors at any one time.

  5. 0 1 Choose the right team Finally, while you want partners you can work with effectively, yes-men are not too useful. Find advisors who can constructively challenge.

  6. 0 2 Know what you expect For anyone to be successful at any job, there needs to be a detailed, clear job description (JD) with specific deliverables attached to SMART goals, that is agreed to by all stakeholders. An advisor is no different. Be clear with expectations.

  7. 0 2 Know what you expect Advisors may go above and beyond the JD at their discretion (and usually will), but should not be required to. And try not to expect capabilities they are not specialized for So, it is the management teams responsibility to be explicit and all-inclusive in the JD. All stakeholders (esp. Founders) need to sign off on the JD.

  8. 0 2 Know what you expect Here’s an example of what I mean…

  9. 0 3 Agree on commitment It is important that you have a realistic and fair understanding of the commitment that the advisor is agreeing to and that the advisor is incentivized to deliver. Since you will be asking the advisor to work for free in exchange for equity or options, compensation is just a valuation and return on investment discussion (I strongly recommend against paying monetary comp)

  10. 0 3 Agree on commitment Here is an example of how you might ground the negotiation in simple math…

  11. 0 4 Do a prenup • Like any good marriage, your relationship with advisors should start with a plan for how you’ll part ways if it is not working out. • Because everyone thinks more rationally and fairly at the start. • What happens if advisor misses targets? • What happens if company changes its strategy and advisor is less relevant? • What happens if advisor wants to leave early due life events? • Specify notice period and processes for breaking the contract early

  12. 0 4 Do a prenup Some of this can be addressed through a vesting schedule, where advisors get shares based on milestones such as… 1/3 of the shares (rounded down to the nearest whole number) will be issued after six months of fulfilling the role of an advisor. All remaining shares shall vest on a pro rata basis monthly over a 1.5 year period with a 3-month cliff period. You might also consider granting options rather than preferred or common shares.

  13. 0 5 Dot I’s & cross t’s • Specify whether you cover expenses incurred by advisor in fulfilment of their duties. They should not bear that burden as they are already carrying valuation risk • Make sure to deal with liability (i.e.: Advisor may not enter into contracts on behalf of company) • Cover NDA, non-poaching, conflicts of interest, and IP as you would in any employment contract

  14. 0 6 Keep them engaged If you do not engage your advisors, they cannot help you. If you decide that you need advisors, it is the executive team’s responsibility to provide regular status updates and any other material required for the advisor to succeed at their job. Also, get them involved in company events whenever you can. Market them in your collateral.

  15. Choose the right team Know what you expect Agree on commitment Do a Prenup Dot the i’s and cross the t’s Keep them engaged

  16. SHARE THIS DECK & FOLLOW ME (please-oh-please-oh-please-oh-please) stay up to date with my future slideshare posts Please note that all content & opinions expressed in this deck are my own and don’t necessarily represent the position of my current, or any previous, employers http://www.slideshare.net/selenasol/presentations https://twitter.com/eric_tachibana http://www.linkedin.com/pub/eric-tachibana/0/33/b53

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