Do I Need a Startup Advisor?

Businesswoman and businessman meeting in an office.

If you are in the early stages of your startup, one thing you may be wondering is if you need a startup advisor. While you may not need a startup advisor, there are many reasons you should consider finding a startup advisor or advisors for your startup. 

Read on to learn more about startup advisors and the role they can play for your startup.

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What Is a Startup Advisor?
Do I Need a Startup Advisor?
What Does a Startup Advisor Do?
The Pros and Cons of Startup Advisors
Qualities to Look For in a Startup Advisor
How to Find a Startup Advisor
How Much Does a Startup Advisor Cost?
How to Create an Advisor Agreement


What Is a Startup Advisor?

What exactly is a startup advisor? While there are many different types of both formal and informal advisors to startups, a startup advisor is typically an industry, market, or startup expert who acts as a trusted source of feedback to mentor and advise startup teams. 

Startup founders and teams can’t be experts at everything. In many cases, startup advisors can provide the knowledge and expertise that the startup team may lack and help them overcome the many pitfalls of launching and growing a startup

Startup advisors are often previous startup founders who built and successfully exited startups themselves. Many startup advisors have spent years building startup companies and advising other entrepreneurs that are building startup companies of their own. They are experts in their field, helping startups in areas in which the starting team lacks the knowledge and experience needed to scale and grow. 

Startup advisors can be found for almost any area of expertise. Common areas of expertise sought from startup advisors relate to business planning, product design, technology, business development, talent acquisition, fundraising, marketing, and growth.

It is entirely up to you how involved your advisor becomes in your business. Some startup advisors will only want to offer high-level advice, while others may be willing to get more involved in the day-to-day affairs and the details.

Do I Need a Startup Advisor?

So, do you really need a startup advisor? While a startup advisor may not be absolutely necessary, finding the right startup advisor(s) can be an enormous resource for your startup and startup team. An advisor may make the difference between the success and failure of your startup.

You can’t be an expert at everything. Experienced startup advisors offer invaluable guidance and advice, sharing their knowledge and experience to help startups and startup teams avoid the common mistakes and pitfalls that face startup companies.

If you are someone who is eager to learn and willing to accept advice, the right startup advisor also often acts as a mentor, going above and beyond to guide your startup to success.

The more plausible question isn’t if you need a startup advisor but when do you need a startup advisor (and the answer to this question will widely vary from startup to startup). Some startup founders are eager to solicit advice from the moment they have a startup idea. Others prefer to wait until they encounter a specific situation or challenge where they feel they need help. 

What Does a Startup Advisor Do?

Startup advisors provide advice. This is their most important role. They draw on their knowledge and experience to provide feedback and recommendations on how to launch, scale, and grow a successful startup. 

Startup advisors are also often looked to in order to connect startups to the startup community and their networks. Whether you are looking for talent, for investors, or for strategic partners, a good startup advisor can often point you in the right direction and help make introductions to the right people.

Keep in mind that there are as many different types of startup advisors just like there are many different types of startups. Most startup advisors have one or more areas of expertise that may include an industry, a market, product design, systems, scaling, or technology.

Here are some of the areas that startup advisors are relied upon to guide startup founders and their teams:

Business Planning

Startup advisors are often great resources to provide feedback and advice on business planning. Startup advisors usually have deep experience in an industry or growing a startup and can provide invaluable guidance in planning your venture for today and for future growth.

“Business planning” doesn’t just mean “writing a business plan.” Business planning means planning and making all of the strategic decisions that arise for your startup. Business planning is crucial for startups. Startup advisors can help you assess the strategic aspects of your plan and provide guidance and advice on elements you may be overlooking.

If strategy and planning is not your strong suit, you may want to seek out a startup advisor with experience in this area. Here’s how startup advisors may be able to help you with your strategic planning:

  • Acting as a sounding board
  • Reviewing and assessing business plans
  • Researching the market
  • Identifying market opportunities
  • Crafting value propositions

Feasibility and Pivoting

Another area where startup advisors can help you is in assessing the feasibility of your startup. Until you attain product-market fit, all you have is an idea. Startup advisors can help you shape your ideas to find a viable opportunity. In some cases, this may mean helping to identify target markets and messaging. In others, it may mean advising you to pivot to creating a more feasible or desirable product or service.

Startup advisors can also help you identify weaknesses in your startup idea or business model and can often provide guidance and advice on overcoming these weaknesses — or at least reducing your risks. 

A startup advisor skilled at assessing ideas and helping startups find product-market fit may be able to help you:

  • Assess your team and talent
  • Determine if the market wants or needs your product or service
  • Understand if your target market is big enough or too big
  • Identify weaknesses in your business model
  • Brainstorm alternatives
  • Protect against risks

Product Design

Startup advisors can also add valuable insight to your product and service design. They provide an outside perspective and may be able to identify problems or potential problems and alternative solutions.

Startup advisors with experience in your industry or in similar industries often have in-depth knowledge of product, service, and process design and can identify flaws and weaknesses new startup founders would tend to miss.

A startup advisor skilled at product design will also help steer you toward finding your ideal target market, building an MVP, and helping you find product-market fit.

If you are designing a new product or service or anticipate that you will need help with a product, service, or process design, ask any potential startup advisor if they have the knowledge and skills to help: 

  • Focus on solving a real problem
  • Identifying and assessing a target market 
  • Assessing product and service design
  • Assisting with customer-focused development
  • Identifying and prioritizing core features
  • Developing a product or service roadmap
  • Codifying and routinizing processes and procedures.
  • Building an MVP

Hiring and Managing Talent

Another area where startup advisors can be particularly helpful is in identifying, hiring, and managing talent. A good startup advisor will have experience finding the right talent to help you grow your business and provide advice on managing the talent you hire. 

If identifying, hiring, and managing the right talent at the right time is an area you foresee needing extra help with, ask any potential startup advisor if they have the knowledge and skills to assist: 

  • Identifying candidates for key roles
  • Crafting job descriptions and requirements for roles and employees
  • Determining a talent pipeline and search channels
  • Appraising candidates and conducting interviews
  • Defining key performance indicators (KPIs)
  • Assessing competence and job performance

Finding Investors

Startup advisors may also be able to help you find potential investors. Not only have many startup advisors been through the process of raising capital, they know where to look and may even have potential investors in their own networks that they might be willing to introduce you to.

Startup advisors can also help ensure that you find the right investors. Finding the right investors is more than just finding an investor and negotiating the terms of the deal. Angel investors and venture capitalists bring along their own pros, cons, and quirks as well. An experienced startup advisor can help you navigate the startup investment landscape and find the right investors for you and your startup.

If you plan on raising funds, ask your potential advisors how they can help:

  • Evaluate your startup
  • Connect you to the startup community
  • Identify potential investors
  • Make introductions
  • Build relationships
  • Select the right investors

Pitching

Another area where startup advisors can provide help is in crafting your pitch. In order to secure an investment, you will likely need to design a carefully crafted pitch deck and a strong pitch. 

An experienced startup advisor understands what investors are looking for in a pitch, and so they know how to craft a pitch deck to highlight what investors want to hear and see. They can help you tell your story in a way that catches investors’ attention, commands their interest, and makes them want to invest. 

Startup advisors can also help you negotiate an investment offer. Experienced startup advisors have been through this process, and they understand how to value a startup, negotiate the terms, and protect your startup’s interests.

Ask your startup advisor how they might be able to help with:

  • Valuing your startup
  • Reviewing your pitch deck
  • Optimizing your pitch
  • Interacting with investors
  • Negotiating the terms of potential deals
  • Protecting the interests of your startup

Scaling

Once your product or service hits the market, startup advisors can also provide guidance and advice on scaling and growing your startup. Many startup advisors specialize in varying aspects of scaling a startup, such as identifying market opportunities, marketing, and automating your processes. 

If scaling and growing your startup is an area where your startup team does not have significant experience, ask your potential startup advisor if they have the knowledge and experience to provide direction: 

  • Assessing the market
  • Identifying opportunities for growth
  • Focusing on the customer
  • Creating a marketing strategy
  • Securing investments for growth
  • Identifying and solve problems
  • Automating your processes
  • Planning your scaling strategy

The Pros and Cons of Startup Advisors

Still not sure whether you need a startup advisor? Let's review the pros and cons of finding and recruiting a startup advisor.

Pros

There are a number of pros to recruiting a startup advisor or advisors. Good startup advisors bring the knowledge and experience that the startup team lacks along with a much-needed outside perspective. Here are the pros:

  • You have a professional sounding board
  • Extra help seeing the bigger picture
  • An outside perspective
  • Knowledge and experience your startup needs
  • Fresh ideas and advice
  • Provide legitimacy and validation to a startup
  • Help with networking, making introductions, and building relationships
  • Help finding talent and investors

Cons

As with anything, recruiting a startup advisor or advisors also has several cons. Not all startup advisors may benefit your specific team. In addition, startup advisors come at a cost. Here are some of the potential cons:

  • You need to pay fees or give up equity
  • It takes time to find the right startup advisor
  • May not produce the results you desire
  • Advisors may give limited time and attention
  • May outgrow needs for your advisor’s knowledge and expertise

Qualities to Look for in a Startup Advisor

Not all startup advisors are created equally. And even the best startup advisors are not a fit for every startup. So what should you look for to get the most out of your startup advisor? 

First, you need to look for an advisor who has the knowledge and experience you need. If you need help with marketing, look for a startup advisor who has knowledge and experience in marketing. If you need help with scaling your startup, look for an advisor with knowledge and experience scaling and growing startups and young companies.

But there is more than just one specific subset of expertise that makes a great startup advisor. In addition to being knowledgeable about the areas you need help, here are some additional things to consider when considering advisors:

Great Communication Skills

No matter which areas of expertise you are seeking a startup advisor to fill, you should look for an advisor with excellent communication skills. If you have an advisor that is not a great communicator, or you are uncomfortable communicating with your advisor, you are likely to miss out on the benefits and solutions for which you turned to an advisor in the first place.

A Problem Solver

Startup advisors also need to be excellent at problem-solving. At its core, entrepreneurship is about problem-solving. Unexpected problems arise all the time in startups, and solutions-oriented advisors can help you navigate problems and find ways to address or overcome them.

Deep Experience and Knowledge of Industry

You may want to look for a startup advisor with deep experience and knowledge of your industry. Advisors with experience in your industry are able to give you applicable advice and insights from their own knowledge and experience.

Experience With Startups

In addition to knowledge and expertise in your industry, you should also look for a startup advisor that has experience with and a passion for startups. Advisors with real-life startup experience understand the challenges of launching and growing a startup and can provide you with insights, advice, and connections to a network that can help you succeed. 

Connected

You should look for a startup advisor that is well connected in your industry and/or in the startup community. This makes them helpful in connecting you to the local startup ecosystem and their networks. Startup advisors oftentimes make introductions and help build relationships with other entrepreneurs and advisors as well as with potential talent, investors, and business partnerships.

How to Find a Startup Advisor

For many startups, finding a startup advisor may not be an easy task. First, you have to find someone with the knowledge and skills you need, and then, you have to convince them to work with you.

There are several places that startups may find advisors, depending on the type of startup, the founder’s entrepreneurial network, whether they plan on raising capital, and how much a startup is willing to pay (or how much equity they are willing to give up).

Let’s start with high-growth startups — those built and positioned for tremendous growth. In many cases, when they grow to the stage when they are ready to add advisors, high-growth startups will add investor-advisors. Investor-advisors may include incubators, accelerators, angel investors, and/or venture capitalists who invest in their startup. 

Not only do many of these investor-advisors understand the industry and startup landscape they are investing in, they are even more so invested because they have skin in the game.

For all other startups, and these are the vast majority of startups, they are more likely to find advisors through their own network, their local entrepreneurial resources, or by hiring a specialist or a freelance startup advisor to seek the guidance or advice they need. 

Many startup founders rely on their own networks for their initial advice. Early-stage startups normally do not have the funds to pay a startup advisor and ofttimes rely on people they know and their networks for mentoring and advice. 

In the US, there are also a number of resources that may be available to help you find advice and guidance for your startup. Many cities have thriving startup ecosystems with countless opportunities to network and find help and advice. Additionally, organizations such as SCORE and the Small Business Development Center (SBDC) often provide free or low-cost mentoring and assistance.

There are also countless opportunities to network and find a startup specialist online. Social networks like LinkedIn and Facebook have many startup-focused groups ranging from general to niche. Try starting with some of the larger groups like On Startups, A Startup Specialist Group, Founders’ Space, or the Startup Business Network.

For startups that can afford to pay a startup advisor or are willing to give up some equity in their startup, there are numerous companies where you can hire a professional startup advisor or look for a freelance startup advisor within your network or on popular freelancing sites such as Upwork or Freelancer.

How Much Does a Startup Advisor Cost?

Startup advisors range from informal advisors such as friends and family who may volunteer their time to formal advisors who will likely require fees and/or equity for acting as professional startup advisors.

The fees for startup advisors vary greatly and may range from $30 to $50 an hour for a freelance startup advisor to paying an investor-advisor up to $1,000 per meeting to compensate for their time.

In terms of equity, how much equity a startup advisor may require depends on several factors, such as the stage of your startup and the role and services expected of them. Startups frequently compensate advisors anywhere from 0.15% to 1% of the equity in the startup. The larger the role and the earlier the stage of the startup, the more a startup advisor is going to require.

How to Create an Advisor Agreement

When it is time to add formal advisors to your startup, you will need to create an advisor agreement. Advisor agreements are formal agreements between a startup and its advisor(s) that solidify the terms of startup-advisor relationships. Advisor agreements outline the contribution and services you expect from an advisor, their compensation or equity and vesting schedule, the time span of the agreement, and any other terms and conditions. 

An advisor agreement should clearly specify the role of the advisor, what types of advice you need, how much the advisor will be paid, and when the agreement will begin and end, including when and how either party may terminate the agreement if the advisory relationship doesn’t work out. 

An advisor agreement should also specify how the advisor will be compensated, often either with a salary, with equity, or a mix of the two. The amount of compensation or equity an advisor receives will vary depending on the advisor's expected contributions and services as well as the stage of the company. Many startups allocate up to 5% of their total equity to compensate advisors and mentors for their advice in launching and growing their companies, compensating advisors anywhere from 0.15% to 1.0% of equity or options in the startup.

If you have a startup attorney, they can help you draft an advisor agreement in abidance with the laws of your state, or you can customize a template such as the FAST (Founder Advisor Standard Template) created by the Founders Institute

Consider hiring a startup lawyer to help draft or review your advisor agreement. Read our guide on how to find a startup lawyer for information on finding the right attorney for your startup.