Advisors are typically full-time operators or founders who advise startups on the side. They have expertise in a specific domain, be it marketing, sales or product. But unlike a mentor, an advisor is compensated for their advice — typically with equity.
Napala Pratini, cofounder of Habitual, a digital therapy app targeting obesity, has recruited several advisors while building her startup. In our Startup Life newsletter, she gave us her top tips for how to find advisors, what to look for and how to pay them.
Decide what kind of advisor you need — and for what
There are three categories of advisors in my book:
- There’s the brand-name advisor, who is an impressive name that you put on a pitch deck or website as a trust marker.
- There’s the connector, who you pay to essentially open up their network to you and make introductions — whether it’s for sales, partnerships or hiring.
- And the third is the WhatsApp advisor, a person who's there as a sounding board, especially for first-time founders.
It’s important to first analyse what you require this advisor for, whether it's to launch a new product or hire your first executives, and the extent of the commitment you require from them. A face on a pitch deck or someone you email for connections on a once-a-month basis is different to WhatsApping an advisor a few times a week for help.
Find advisors in companies you admire
Think about who you look up to in your industry — whether it’s for their branding or a specific product they’ve launched — and reach out to them.
Ensure this company is not a competitor in terms of product or geography, but is in a tangential space. We reached out via LinkedIn to the head of marketing at a US company called Tempest, which does alcohol addiction recovery programmes, to ask if she’d be interested in being our advisor. Tempest’s marketing is really inspirational and was something we aspired to emulate, but in a different category. If you narrow down your search based on companies who are doing stuff you want to do, that will guide you in what you want to get out of the advisor.
Have a first meeting
When reaching out to people for the first time (whether via a warm introduction or a cold email or LinkedIn message) you don’t have to straight up ask them to be your advisor. Ask the person if you can steal 15-30 minutes of their time, either in person or online, to discuss X issue, and be specific about what you’re asking for. If they agree to the meeting and it goes well, you can ask them if they’d be interested in being an advisor on a more regular basis.
Having a first "date" will help you ascertain whether you’d like working with them, whether their skill set matches their LinkedIn and, ultimately, whether they could help you with a specific problem or area of the business.
Set up an advisory agreement
Once you’ve got an advisor on board, lay out the terms of the agreement in a document. Include the time period during which the advisor will be helping you — whether it’s for a fixed term for a specific project, or on a rolling basis — and set out expectations for how much work will be involved. For example, “one day a month to make a couple of calls and send emails to help the company land partnerships”. Include a cancellation clause too: with our advisor relationships, either side can cancel with 14 days' notice.
The advisory agreement should also lay out the terms for compensation. Typically, advisors are paid with equity. According to research from Carta, a platform helping businesses manage their equity, advisors should get 0.225% for advising a pre-seed company, 0.129% for a seed company and 0.068% for a Series A company, based on current rates. We offer our advisors share options with a vesting schedule and a cliff of three months. The cliff gives you enough time to figure out whether the advisor relationship is working before they get options.
Maintain open communication
A relationship with an advisor is like every other: it requires work. Keep regular contact and give updates — we speak to our advisors once or twice a week — so that you stay aligned. And if at some point your business needs change — and you need a different kind of help from your advisor — communicate with them directly. Ask if what you need from them now aligns with what they are able to provide.
On the subject of... Hiring advisors
❌ Avoiding crap advisors. A founder-turned-coach explains how he found the best advisors while avoiding the dodgy ones — who a) aren’t helpful, or b) ask for steep equity grants in return.
🔎 Startup advisors 101. This guide covers everything from where to find startup advisors to how to compensate them.
💰 Hiring an executive coach? It can be more expensive than you think, writes founder coach Julius Bachmann.
📋 Advisor equity. Carta, as mentioned above, has laid out the current equity rates for advisors and why they have changed.
🤝🏾 Get the most out of your startup advisors. A former VC at US-based First Round gives his top tips for making the relationship work.