- Mercedes Bent is a partner at Lightspeed Venture Partners and focuses on consumer, fintech, edtech investments.
- Experienced advisors can add credibility to a young company.
- Bent explains the 3 main types of advisors and stages, along with other important things to look for.
- See more stories on Insider’s business page.
Being a founder can be a lonely occupation. Every day you’re asked to make decisions that have enormous implications for the company you’re trying to build.
That’s why it really helps to have a trusted group of advisors you can call on when things get a little hairy.
I was recently walking along the San Francisco Bay on a trail with two founder friends, one who runs a pre-seed startup, the other a pre-Series A company. We were strategizing on how the pre-seed company could approach advisors.
She asked, “How should I reach out and persuade the CEO of Pinterest or Guild or Affirm to become an advisor?”
Our other founder friend had done this recently so she dove into explaining her approach, and then for good measure, we acted out her first advisor conversation in a role play where I played the advisor.
Acting aside, this is actually a common topic I discuss with my founders at Lightspeed. New entrepreneurs want to tap into the knowledgebase of more experienced peers, and it can feel nearly impossible to hire those people into your firm, especially in the early days.
Here are a few tips I share with my founders on the right strategies for finding advisors.
1. Don’t psych yourself out
Many successful CEO/founders actually enjoy sharing their hard-earned wisdom with the next generation of founders, so don’t think it’s a super hard ask. It allows them to think about the things they might have wanted to do with their companies, and takes them back to those exciting days when their startup’s success was anything but a sure thing.
The hardest part is often getting in front of one of them to ask. This usually takes a lot of networking and a helpful introduction from an investor or mutual business contact. At that point, it’s up to you to persuade them with your passion and get them wrapped up in your vision.
My friends and I spent our time roleplaying how to share a compelling story in a way that hits home for the recipient.
2. Think carefully about the type of advisor you need
Next, decide what type of advisor you need. Convincing Affirm’s Max Levchin or Bumble’s Whitney Wolfe Herd to advise you may not be the best strategy for your startup at its current stage of growth.
The kind of advisors you should seek out depend on the type of company you’re building and where it is in its evolution.
For example, if you’re starting an enterprise business, getting someone who can call a Fortune 500 company and introduce you to potential customers can give your company an instant boost. If it’s a social media startup, you may need an advisor who can work beside you in the trenches as you develop product features.
Similarly, founders at the pre-seed stage usually require different kinds of guidance than those who are pursuing Series A, B, or later funding.
There are 3 main types of advisors and stages: informal advisors, formal advisory boards, and an independent board director.
- Informal advisors are people you tap occasionally when you need them. You may not have an equity agreement or recurring meeting with them.
- Formal advisory boards or formal advisors are often compensated with small amounts of equity. They have specific expectations of how they’ll help and how often you’ll meet, but they’re not official members of your board. Independent board directors often come at a later stage in the company’s growth (often post Series B/C) and are formally on the board.
I advise pre-seed and seed founders to focus on finding the right informal advisors, along with a handful of formal advisors to help with getting a minimal viable product out the door. Advisors like the head of product at TikTok or director of commerce at Snap could be a great help in finding the right market fit.
Series A to B companies can use a formal advisory board to help with elevating their brand. Many startups at the Series A stage create advisory boards of maybe a half dozen CIOs, CHROs, or other C-suite executives within their industry. At this point they’ve already proven that their business is working, but need more credibility within the industry to really scale.
The goal is to create a resource of the best minds in your vertical, so you can keep on top of trends and best practices while also growing your brand.
- Independent board directors should be sought out by Series C+ startups. Ideally they want to hold out for a true CEO mentor, not just to fill a short-term need. This person can help prepare founders for late-stage conversations, like whether it’s the right time to seek an M&A or an IPO, or what it takes to be the CEO of a public company.
A lot of founders are tempted to establish their friends as independent board members, or use the position to reward someone who helped them early on. I usually advise them to reserve it for a big name that can help lend credibility to their company. Or, if they do grant this to a friend or early colleague, be sure to have a conversation with them about how they may need to roll off at some point in favor of a high-profile CEO.
3. Other important things to look for in an advisor
No matter what kind of advisors you seek, some general guidelines apply.
The first thing to remember is that an advisor should be someone who, for one reason or another, you can’t hire onto your team (otherwise, you would – right?). They may already be running their own company or even retired.
You want to establish the appropriate cadence with each advisor. If you’re seeking strategic advice from a longtime CEO, you may want to do a regular call with them once a month or every other month. If you’re busy iterating on product with an advisor, you’ll want to interact with them much more frequently.
Finally, you will often want to compensate your formal advisors. In the early stages that’s usually with equity, anywhere from 10 to 25 basis points per advisor, vested over two years. When you’re building out your independent board, you may compensate them with cash. Even if your relationship with them is relatively informal, compensating them shows your commitment to them, and vice versa.
Ultimately, the question is, what does my company need most right now, and who can help me reach the next level? Then fill your advisory board with people who can help you get there.
Mercedes Bent is a Partner at Lightspeed Venture Partners and focuses on consumer, fintech, edtech investments.