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When startups don’t have the right advisors, they waste time, money, energy and human resources — but that’s not all. According to Svetlana Kamyshanskaya, a startup advisor with extensive connections in Silicon Valley and founder of Primum Law Group, making decisions while relying on the opinion of the wrong advisor can have a detrimental impact on a startup.
A whole “domino effect” can ensue: Mistakes in forming the advisory board can make the business look less viable, making it increasingly difficult to raise further funding because VCs see the team as a No. 1 risk. This degenerative spiral can put the entire enterprise at risk.
“Having advisors when starting a new business venture is crucial to the success of the startup,” confirmed Dr. Dung Trinh, MD, cofounder of MdDAO. “The role of the advisor is to be an extension of the value of the founders and to supplement the knowledge base of the advisor to the entire business value proposal.”
The benefits of having the right advisors
Even after crafting a solid business plan and securing initial funding, entrepreneurs can run into obstacles. Savvy executives realize they don’t have perfect precognition, which is why they retain advisors.
“Startups already have a high probability of failure,” said Jay Jung, managing partner of Embarc Advisors. “Going down this path without the help of trusted advisors, a founder will burn a lot of calories reinventing the wheel on several common issues. Leveraging the experience of an advisor can help avoid some of the major pitfalls. More importantly, advisors can help solve many of the issues that are expected and unforeseen.”
“Everyone has blind spots, and we don’t know what we don’t know,” Kamyshanskaya observed. “Founders have to be open-minded in terms of hearing that there is something they need help with. An advisor is a good way to cover those knowledge gaps.”
According to Otiniel Ribeiro, cofounder of roadside-service app Roadr, an advisory team functions well when individual experts compensate for each others’ shortcomings. “Perfection is a team sport because, as humans, we’re inherently born imperfect, so it’s the sum of our imperfections that makes it perfect,” he said.
Many other benefits also accrue to hiring advisors. For instance, advisors often have insight into the competitive landscape, open doors to partnerships and help burnish the organization’s credibility. They can also function as gatekeepers to investors.
“Startups need to make significant progress at an early stage to secure funding and grow,” said Charles Qi, founder and CEO of StockPick. “This is challenging as they often operate with limited financial resources, human capital and time. Having the right advisors in place can help startup founders onboard the right talent, focus efforts on the most crucial tasks, and establish valuable relationships with investors and business partners.”
Kamyshanskaya explained how this process works. “I have a few advisors that I recommend for my founders who I really trust and who deliver results, but those people don’t rush to start raising capital right away,” she said. “They want to see if the startup is ready, so they look at the pitch deck and help the founders understand what angle should be taken before they start pitching. They prepare them for the process. Only after the founders are ready do they make introductions.”
Even if a company’s advisors don’t make introductions to investors themselves, Kamyshanskaya says that investors consider who is on the team when weighing whether to invest. “The better advisors you have, the more trustworthy you are for investors,” she explained. “Investors understand that, with a good team of advisors, you likely will make fewer mistakes; therefore, you’ll have a chance to reach the company’s potential faster.”
Advisors and boards of advisors are also less expensive and more effective than instituting a board of directors, while offering many of the same benefits.
How to find the right advisors
Working with advisors can be as easy and informal as setting up informational interviews. “When I started my firm, I sought advice from senior lawyers who had longstanding practices,” Kamyshanskaya said. “I got as much one-on-one time as possible, inviting them to lunch and picking their brains.”
Recruiting a good advisor for the long term requires more effort. Good advisors vet possible projects carefully, only agreeing to take on those that have a good chance of success and that match the advisor’s personal preferences. Finding them, however, requires research.
“If you want to start a particular kind of business, look around and see who already did something similar and go ask,” Kamyshanskaya said. “For startups, try to have a broad spectrum of advisors. You want a whole group of professionals who have expertise in different fields.”
Kamyshanskaya advises checking on social media and paying particular attention to recommendations on LinkedIn. She also points out that advisors can help entrepreneurs build their teams by recommending other advisors.
“If I have someone in my circle who can help the company to grow, I make introductions,” Kamyshanskaya explained. “That’s probably the best way to build a team of advisors, because when people have existing relationships, it brings more accountability and predictability to the work effort.”
Signs of a good advisor
Smart entrepreneurs should look for specific characteristics in their advisors.
“Everything depends on relationships,” Kamyshanskaya said. “The first and most important consideration would be the connection between the founders and the advisors they hire. They need to feel the connection and be excited about the product they are working on. Even if the advisor is a very well known person, but they don’t click with the founders and have good communication, then it’s not going to work.”
The second characteristic good advisors have, Kamyshanskaya said, is expertise. Executives must make sure that the advisor they hire is recognized as an authority in their field.
“Experience in the industry is the third criteria,” Kamyshanskaya said. “The adviser has to understand the company and the product.”
Almir Brljak, COO of virtual-reality game developer and publisher Sinn Studio, gave similar advice. “Your surroundings are everything in startups; you must ensure that everyone involved with your company understands your mission and believes in it fully. A team’s commitment will be the difference between the startup surviving or closing down.”
Kamyshanskaya also recommends choosing specialists over generalists. “In most cases, an advisor’s services are more productive if they have deep experience in a specific industry. Their advice is more valuable than that of another who has jumped from one one industry to another.”
By doing research and looking for these three key characteristics, founders of startups can secure the right advisors, thereby ensuring their company’s success.