Published in UT San Diego, July 31, 2012
Brother, can you spare some advice?
A key requirement for a new company is to develop the infamous advisory board. There is a big difference between putting a famous name on a slide deck and getting someone who really adds value. Your advisory board is not three pals from the golf club or the gym or the mash-up.
The initial questions that I ask the budding entrepreneur are:
• What element do you lack in your company?
• What kind of person (not who) could fill that role?
• What is your expectation, and is it rational?
Your adviser is not a surrogate CEO. He or she is not going to do the work for you but the really good ones understand your business. They have a massive Rolodex that they are willing open for you because they care about the company and believe in you. If that is not the case, then you need to move on.
Advisers come in various colors — financial, deal-oriented, legal, business development, etc. You will need a variety, so don’t pick all blue button-downs.
But an adviser is not a mentor. We have written on that subject before. A mentor is your personal consigliere. An adviser has the keys to doors you need to open.
In this town, there are a small group of professional advisers who lend their name (such as it is) and who then want stock and/or money, and do not add much value. You can’t be an adviser to seven companies and have any real impact on any of them. I am a bit hard on this topic. If you are an adviser to one of my companies, I have an expectation that you will invest significant time as well as write a modest check in the seed round or Series A.
The attitude, “I get stock for waking up and taking your call” is unacceptable. If you don’t want to invest, then you are not there for me, baby.
“Forming a board of advisers is a waste of time if the company does not properly exploit it,” says Bill Eigner, a partner with the Procopio law firm. I agree with Bill and have some other rules.
First, I primarily give stock (usually 0.5 to 1.5 percent, vesting monthly over 24 months) with a clear understanding that if you triple off the left field wall, I will increase the amount.
If I have made a mistake (wrong fit, no value), I terminate the adviser after six months because I resent someone taking stock and doing nothing. I am generous with bonuses based on performance such as an introduction to a customer or investor. You cannot overestimate the value of a “warm introduction.”
Second, set up scheduled meetings — not ad hoc, catch on the fly at the airport on the way to the Caymans to meet with Oliver Stone. Have the issues ready for a clear presentation.
On a personal level, I have been blessed by most of my advisers. I love them dearly and know that I need them. I pick them carefully, and if I do not know them personally, I find someone who does. I also have had my share of slugs that take and give nothing back. Sometimes I can remove them, and sometimes I am trapped. So add advisers carefully. It is like deals — easy to get into, hard to get out.
Finally, if you get a rock star, offer him or her the moon. And that is exactly what we did in my current little software company. I will be stepping down as CEO at the end of the year so that an “adviser” can take over.
No ego ever.
Rule No. 393
Do you want to be rich or do you want to be king? If you pick the latter, you are ultimately doomed to failure.
Rory Moore, CEO of high-tech trade group CommNexus, dazzled us with some impressive statistics about EvoNexus, their downtown incubator. Launched in October 2009, the 33 EvoNexus companies have raised more than $92 million, created more than 400 jobs, six companies have graduated, and one company has been acquired.
Please email Barbara ([email protected]) if you are interested in applying for the entrepreneurship course that we will be teaching at UC San Diego in the fall quarter on Tuesday evening. A few slots are reserved for working professionals.
Neil Senturia and Barbara Bry, serial entrepreneurs who invest in early-stage technology companies, take turns in writing this weekly column about entrepreneurship in San Diego. Please email ideas to Barbara at [email protected]