I recently encountered a situation that prompted me to reflect on the role of advisors in early-stage startups. A founder approached us seeking advice on engaging academic professionals as advisors to bolster their startup’s credibility and market awareness. Upon further discussion, it became evident that this approach was influenced by advice from another founder and wasn’t a necessity for the startup’s current trajectory. The founder had already secured a good amount of seed funding, and the credibility advice, while potentially valid, was mainly guidance from a different context and time.
This experience led me to consider the effective use of advisors in early-stage startups. Establishing productive relationships with advisors involves time, mutual understanding, and a well-defined engagement agreement that ensures both parties contribute meaningfully.
Advisors can play a crucial role as accelerators and facilitators for early-stage startups. However, many founder-advisor relationships lack clear definitions, well-scoped deliverables, and effective management. Below, I’ll discuss how founders can maximize the benefits of advisors, especially when bringing the first one on board.
Advisors often emerge from your network or that of your investors, individuals capable of providing value to your product or go-to-market strategy. Finding experienced founders who can apply their insights, whether as startup generalists, skill specialists, or credibility beacons, is essential. Ideally, an advisor should fulfill 2-3 of these roles, offering a strategic partnership while addressing specific near-term startup needs. An advisor’s bandwidth is often overlooked during initial conversations, making it crucial to define the engagement clearly.
Clarity in the scope of work is paramount. How will the work be managed? What metrics will indicate performance? Even when compensating advisors with equity, deliverables should be as rigorously defined as in cash-based contracts.
Before committing to an advisor relationship, consider whether a standard cash-based contract might suffice. Unless there’s a strategic alignment, a cash arrangement is often preferred and more straightforward to terminate. If an advisory role makes sense, the agreement should mirror the type of engagement. While the Founders’ Agreement Standard Template (FAST) is a useful starting point, it should be complemented by a detailed statement of work and a performance measurement framework, similar to what you would establish for any contractor.
Once you’ve decided to proceed, consider the following:
Advisor needs evolve over time, and it’s crucial to adapt. Contracts should be transactional and precise, making it easier to address performance issues promptly. If an advisor isn’t meeting expectations, parting ways should be straightforward, provided expectations were communicated clearly. Advisor agreements may naturally conclude, and renewal isn’t always necessary. With equity at stake, advisors often continue to provide value as the business grows.
In summary, effective advisor relationships require careful consideration, clear definitions, and ongoing evaluation. By approaching these partnerships strategically, founders can leverage advisors to navigate the complexities of early-stage startup growth.