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For founders, building the right team is critical to long-term success. But the right team isn't always what we expect, and the wrong choice can prove detrimental to a startup at best and ruinous at worst. In his 2021 Harvard Business Review article “Why Startups Fail,” Tom Eisenmann, Howard H. Stevenson Professor of Business Administration, notes that “a broad group of stakeholders, including employees, strategic partners, and investors, can all play a role in a company's demise.” To put it more bluntly, a “dream team” can end up being a wolf in sheep's clothing.
A crucial component of this group should be a wealth of relevant experience, along with high levels of self-awareness, emotional intelligence and real-world experience. Strong advisors will also integrate well into the culture and leadership dynamics of a startup – aligning it with the founders' visions – and provide an unbiased and knowledgeable perspective when providing guidance on key decisions.
For founders, the need for strong early-stage advisors is more pronounced today than it was five years ago. A quick look at Forbes 30 Under 30 Venture Capital 2024 makes it clear that many founders today are funded at particularly early stages of their careers, without a wealth of previous ownership cycles to draw on. And the stakes are high: According to Carta, the average seed check from early-stage venture capital firms in 2023 was $3.1 million, requiring founders to take on greater financial responsibility earlier. At the same time, products are becoming more specialized and complex, requiring higher levels of expertise. All of this can increase the progress-based burn rate while shortening the time horizon for success.
Because of all these dynamics, it is even more important for company founders to identify and hire advisory boards early on – and to make the right decision in the process.
Here are the key ways to attract, hire and retain the best.
1. Understand the puzzle and identify missing pieces
Every company is unique and has its own strengths and weaknesses. A 20-year-old founder may have a high level of intelligence but lack the experience of starting multiple companies and the years of specialized development necessary. An industry veteran, on the other hand, may be less familiar with the next generation of consumer behavior. As a founder, it is important to assess the landscape of your company in the early stages – identify strengths (the same qualities that likely attracted others to invest in you), recognize the gaps, and hire advisors with particularly relevant expertise to fill them.
2. Develop a consultant-specific compensation system
A founder may be inclined not to formalize an advisory team until the company is large enough or advanced enough, and instead create an informal team early on of trusted colleagues who offer their services and support for free. While this may save time and money in the short term or reduce company dilution, it actually adds less value at a critical stage of early development. A better move is to create a compensation system for advisors from the start so that the team feels truly invested in the company and can be held accountable in return. This may include a percentage stock award and an associated timeline (typically one to two years). The amount to award depends on two factors: the value the advisor adds (time and expertise) and the stage of the company (the earlier, the higher the award).
Related topics: Why every entrepreneur needs an advisory board
3. Create a mutually agreed list of goals
The more clarity you, as a founder, provide to a consultant, the better they will be able to add value. So, before you sign an agreement, you and a potential candidate (or several) should establish a set of goals and expectations. The latter may include an estimated number of hours per month, required percentage of attendance at meetings, and general availability for consulting and reference calls. Setting goals is more like a general job description or position overview. It also identifies critical areas where a candidate wants to add value, along with a plan for how they will do so accordingly.
4. Introduce the members of the advisory team to each other and communicate regularly
Once your team is identified and hired, it's important to have a meeting where members can get to know each other. The more everyone feels part of it, the more committed they will be to work. In addition, it's important to remember that the whole is greater than its parts: a brain trust with multiple members usually results in members coming up with better solutions than if they were working independently.
Additionally, ensure regular communication cycles (with updates) that provide realistic assessments of the current status of the company's efforts. Sugarcoating a challenging experience will only prevent a consulting team from adding critical value.
Related: 5 Tips for Finding a Great Consultant for Your Startup
5. Continuously evaluate your team and do not hesitate to make changes
As founders, we can form an emotional connection with advisors; after all, they are mentors, advocates and stewards who have helped us raise and nurture our “baby.” But as that baby grows, needs naturally change. A company can grow, change product categories, or pivot to a new partnership line of business. Some advisors may be able to grow with you, others may not, so they must be judged rigorously. The right team is not always simply the one that is available.
When we look at today's founders from a 21st century perspective, we are reminded that no single founder or group of founders can do it all. But that doesn't change the market demand and expectations that come with it. Since it's almost always all or nothing, a well-rounded advisory team is often a fundamental ingredient for lasting success, provided it is assembled correctly.
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