Founder Institute gives tips on finding an advisor

Advisor vs Mentor vs Coach

They all seem the same, given that their role is to help and guide you as a founder. But Chong dives into each one and differentiates them:

• Coach - "Someone who works on one or two areas of their specialty."
• Mentor - "Someone you get along with who usually has the experience that you look up to and who takes time out to assist you to help you grow."
• Advisor - "Tends to be a more formal role. It can start off a little more organically…sometimes it can be indefinite, but you usually want them to sign up for a particular time. They're designed to help you grow your business. And of course, there's the stuff the advisor gets.” And that’s compensation, in case you’re wondering!

You may start off with a general advisor, but as your company grows, you might end up considering getting another depending on which areas you want to improve on. Chong says, “So let's say I'm a business co-founder and I feel I need to have someone who is more of an expert in blockchain…I really would like an advisor on my team who's got 20 years worth of experience in that field. It's good to find that advisor so that they're able to make sure you can hopefully look around the corner.”

Securing that one advisor doesn’t necessarily mean it’s endgame for both of you. Companies grow and develop–and these come with newer challenges. And each new challenge may need a new advisor. Chong explains,

"The types of advisors you might engage with may change over the course of your startup's life cycle. So in the early days, you might need more help with product. As you get a bit larger, you need more help with positioning your business to be able to expand into international markets. And then as the business gets even more progressed, you're thinking, how do I build a really high-performing team around me? What are the gaps that I have or our team has that could benefit from an advisor?"

It’s essential to have people who are ahead of you or have a very niche skill that can help you and your startup jump forward. “We've all benefited from standing on the shoulders of others,” says Chong.

Learning isn’t a one-way street! As much as you learn from your advisor, they also get something from you, “What is that special problem that you are trying to solve with your solution? [Advisors] are probably juiced up by how you go about knocking on doors and winning the attention of your potential customers. They do learn from being with smaller, nimble companies that are trying to do something.”

Looking for the one

Now you might ask, ‘where do I even find an advisor?’ There are a couple of ways to go about this, but Chong suggests being part of your local startup community. He says,

“Whether it's well-known programs or being part of a co-working space that encourages mentors and potential advisors to come through the doors. Being part of a community is very important.”

Don’t underestimate the power of referrals. A friend of a friend (of a friend) can be your best ticket to finding the advisor you need. Relationships can form over a cup of coffee! Chong says, “I think with an advisor, you do want to get to know them. You want to see them over a couple of meetings, see if there's that chemistry, see if there's an interest. And then we can later talk about how you might bring that to a more formal arrangement.”

Not all advisors will be a good fit, especially at the beginning. Once you’ve secured an advisor, arrange regular calls to check in with another and give updates about your progress. Later on, analyze if your relationship is still beneficial for the company. It’s okay to graduate from one advisor to the next–that means you’re growing!

How do we compensate our advisors?

Adding skin to the game builds trust. But how much skin are we talking about here? Chong answers,

"In the early stages of a business' life, cash is critical. So you've got to watch your cash, and at the same time, know that equity can be very valuable. Now, Cake helps you manage your equity. It allows everyone that opportunity. [But] you do need to be careful and judicious. My general guidance is if you can provide equity to people, that is a good form of remuneration because it is tied to long-term alignment."

When it comes to advisors, I would suggest if you are able to come to an arrangement where you could give them equity and the equity vests over time, that is a really good way of making sure that there is an alignment because their payoff financially is when the business succeeds.”

But how much should the remuneration actually be? Chong suggests employing FI’s FAST method: Founder Advisor Standard Template. Chong explains, “It sets out some guidance around the percentage of equity you might want to give [your advisors] based on the stage of your company and their level of involvement. If your company is a really early-stage company and their level of involvement is low, the amount of equity they get will be different to if you are the same early-stage company and their level of involvement is very high. And in the same breath, if your company is more progressed, the actual percentage of equity they ought to get in our view ought to be a little less. That's because the value of your company should have increased significantly.”

The FAST method is suggestive percentages from FI companies across the world, providing a form of benchmarking. According to Chong, it’s not perfect, but it’s a step towards something more standardized, “No compensation plan or policy is a hundred percent correct, but you want it to be at least 80-90% correct in the right ballpark.”

Keep building the relationship

Advisors may come and go, but that doesn’t mean bridges have to be burned. Chong notes the significance of acknowledging your advisors, past and present, “Some of my advisors from a couple of years ago, we still try to stay in touch with them, because ultimately they're part of the extended family of cheerleaders–of people who you might need a reference or might be able to give you an introduction to, so and so.” After all, it’s about bringing people along the ride so that you learn from mistakes and become better people!

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