Startup Advisor Responsibilities - The Complete Guide (2022)
Startup advisors are the lifeblood of any startup ecosystem. They help startup founders solve their deepest challenges and scale their revenue.
But what are the specific responsibilities of a startup advisor? And what value do they provide to a startup? In this blog post, we explain in detail the different roles that startup advisors have to play and how they help founders grow their businesses successfully.
Table of Contents
What is a startup advisor?
How startup advisors can help founders like you.
What are a startup advisor's responsibilities?
How much do startup advisors cost?
What to look for in a startup advisor.
What questions to ask a startup advisor?
If you want to become a startup advisor.
Some last words
What is a startup advisor?
A startup advisor is a mentor, teacher, and friend to startup founders. They help them navigate the challenges of starting and scaling a business. Startup advisors come from diverse backgrounds - some are experienced entrepreneurs who have started and sold businesses, while others may be investors who have deep knowledge of a specific startup niche.
Regardless of their background, a startup's advisors have one main goal - to help founders and their companies scale and succeed.
How startup advisors can help founders like you.
Although there may be different ways an advisor can help founders like you, here are three of the most common ways they can help you with your startup:
Providing clarity on new / old topics
Giving introductions to people you need to know (technical and non-technical)
Helping you avoid pitfalls and costly mistakes
The following paragraphs provide more information on the points mentioned above.
Providing clarity on topics founders want to learn more about
Startups consult with startup advisors because they want to leverage the information and deep level of expertise that they have. Generally if you're a deep tech startup, you would consult with an advisor who has showcased great skill and results in that specific field of deep tech.
Advisors (or business mentors) focus on key areas of advice and help you avoid common mistakes by providing impartial feedback, which is especially valuable during the early stages of a startup.
Connecting you with known experts in the respective field
It may be that your advisor is well-known and has experts within his/her own network. If you're a marketplace founder and need to speak with another startup founder who's gotten their marketplace acquired in the past, your advisor may have someone within their network to connect you with. Industry knowledge can go a long way.
This may not always be the case however, and your advisor may not have deep networks to connect you with - but don't let that discourage you / undermine the value they can bring with their own level of expertise. In the beginning, the founding team may find this very useful.
Helping them avoid pitfalls in their startup journey
This is quite often overlooked. It's like spending 20 hours trying to learn and understand your website/analytics stack of MailChimp, Google Analytics and Google Ads, and then mistakenly forgetting to cap your daily ad spend.. these things will happen regardless of your level of competence.
Having a mentor (even outside startups in general) can help you understand what mistakes to avoid, as they bring their years of experience to help you overcome hurdles and sidetrack costly mistakes.
This is especially true if you are an early stage startup.
What are a startup advisor's responsibilities?
A startup advisor is responsible for providing guidance and advice to a startup's founders. They help your startup navigate the different stages of growth (pre and post product market fit) and provide guidance on specific topics.
For instance, if your startup advisor scaled his own co-founded startup to 10X its revenue, he might be able to give you guidance for the kind of customer acquisition channels to use in the early-to-mid stage of growth for your startup.
Additionally, he may share his level of expertise with you for the different kind of toolsets that you might need to carry out your scaling activities such as MailChimp for email marketing, Google Analytics/Hotjar for tracking and learning from your website's visitors, etc.
Outside of domain-level expertise, a startup advisor challenges your assumptions (in a constructive way) and help you push your boundaries. As a founder myself, I've found that the best kind of advisors help you figure out where to go, instead of leading you to a prepared response.
But, needless to say, sometimes what founders need is the quick response to how to do something fat, and so your advisors' approach may vary depending on what you need help with.
At each stage of a startup's life, its main purpose is to grow. That's quite literally the definition of a startup.
And so an advisor's primary role is to help you reach your growth milestones and help you knock off (solve) as many challenges as possible on that path. Running Sparrow myself, I find that an advisor's style of mentorship/advising may vary depending on their personality and how you receive guidance for your exact challenges.
How much do startup advisors cost?
The fees that startup advisors charge vary widely depending on their preference and the agreement you have with them. Do bear in mind that recruiting advisors is no easy task and advisors generally are good - but the good ones that give strategic advice and provide tactical help, are very hard to find.
There are generally two ways you can compensate a startup advisor:
Equity
Companies frequently provide advisors a 0.25 to 1 percent equity stake in their firm, depending on the size and stage of your business (as well as the advisor's breadth of experience). It provides a strong incentive for the advisor to constantly promote the company in order to grow their share.
It's important to note that sound advisory agreement documentation must be in place to ensure that all the details of your engagement are fully agreed upon by both parties. Leave nothing to chance/hope.
If you come across a local business in your city, you may find that they're more familiar with this equity model.
Flat Fees
Much easier than giving up equity, especially if you are the founding team and do not want to give away a piece of your company for 3 hours of advice on a topic..
More recently there has been a growing opportunity for startups to consult with advisors and business mentors instantly, from anywhere across the world. This is contrary to the traditional and long-winded process of applying to accelerators to gain access to mentors, which may also include giving up equity.
Platforms such as Sparrow allow you to find an advisor for exactly what you need to scale your revenue. The advisors themselves have scaled their own companies or gotten acquired and this depth of hands-on experience allows them to understand things from your perspective as a founder.
Hourly sessions start at $75 USD/hour. Some notable advisors are:
The founders of Repost, that got acquired by SoundCloud - Jeff & Joey
The founder of Carrd - AJ
The founder of Starter Story - Patrick
The founder of CrowdTamers, who scaled 13 startups to $2M in annual revenue - Trevor
What to look for in a startup advisor.
A good startup advisor should be someone you can rely on. It's critical for both founders and advisors to be able to express themselves freely. If not, then the future of the company and its relationships will be at risk.
From day one, you should strive to create a culture of trust; and the startup advisor will play an important role in this.
A startup advisor is an important acquisition for any startup, especially an early stage one. However, you must conduct a self-audit first. A SWOT analysis, if you're old school. Examine your company and planning in detail, and identify the current weak spots; as well as those that might be a year ahead of you.
What questions to ask a startup advisor?
I’ve listed the questions that I recommend asking, but please bear in mind that it all depends on what exactly you’re looking for, what stage of startup / product journey you’re in and what your team’s current level of expertise is:
Their experience, background and track record: You need to understand how exactly their past relates to what exactly they’ll be helping you accomplish. There’s too many charlatans pretending to know things and ultimately providing garbage / generic advice to founders, which really only wastes their time. Don’t be scared of asking honest and tough questions here because this will weed out the losers from the real mentors. Careful!
Their incentive and how exactly they intend to help: I personally admire mentors who are open about why they want to help founders. Maybe it’s equity (i.e., shares of your company) or maybe they want to get paid by the hour for their time, or they just want to help because it makes them feel smart. Either way, you need to understand their personal and selfish reasons for helping you. And then, you need to be clear-cut about HOW they’ll be helping. Will they make intros to experts in your industry? Do they have subject matter expertise with hardware that’ll help you build out your product to MVP? Be clear-cut.
Quantified commitment and contract: You need to understand how often they’ll be helping you, how exactly they’ll be helping (last point) and the means of communication between yourselves. Are they agreeing to sit down with you and your team for 2 hours a week for x months? Or is this more of a pay-by-the-hour kind of relationship where you only bring him in when you need him on specific things? And is communication going to be over texting, email, Zoom - learn the facts, be clear-cut about YOUR expectations and get it all in writing (if appropriate).
If you want to become a startup advisor.
Think through these three points to start with.
Why you? What skills do you have that can help a founder become better? Have you sold any companies in the past? Have you built one yourself? Is there a specific vertical / industry that you have extremely heavy experience in that’ll give a startup an edge?Ask yourself these because without a foundation here, you can’t just “apply” to be an advisor to random companies.
How can you help? What do you want in return? There’s a joke in our Valley about VCs asking how they can help founders. But jokes aside, how exactly can you help a founder get really good at what they’re building or going to market.And what exactly do you want in return? Equity? Or do you just do it because you feel smart when you do. Figure these out before taking a meeting with a founder.
What’s your end goal and how much time do you want to commit? Some might say this question lies further out but I think this is something you need to be 100% solid on before even joining an advisory board. Founders rely on you. They will take up hours of your time. Not having the conviction and signing up for helping a startup “just to look good” can mean disaster both for yourself and the company you’re trying to help. So think this through.
Some last words
When building your company, you'll need a shoulder to lean on, especially in the early phases of your company's existence who can compensate for your shortcomings. You've heard it said, "It's not what you know, but who you know." It's all well and good to have knowledge and skills; however, if you can't open the doors or get access to the networks necessary for your company's success, you're starting off by having one hand tied behind your back.
By the way, Sparrow arranges a 30-min free discovery call so that you are able to find the best advisor before committing to pay for your sessions with them. Book one today!
The goal is for you and your startup advisor to form a rapport as time goes on; and that you may bounce ideas and strategic thoughts off them. Depending on your relationship and the type of advisor / mentor / coach you engage, they can also assist relieve tension and strain built up around specific problems.
A solid startup advisor should be someone you can trust. It's critical for both founders and advisors to be able to speak openly and honestly. If it isn't done, the future of the business as well as relationships will be jeopardized. From day one, you should strive for a culture of trust; and the startup advisor will be an important component of that process.
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I am eager to know if you found this article interesting. Is there any text you want me to add? Anything I missed? Happy to learn more - feel free to contact me.