Mar 31, 2022
Is the Start-up Advisor Model Broken?
Author: Andrew Hughes — Head of Founder Relations
In the world today there is a millennia-worth of collectively hard-won data leaking from almost every company, especially start-ups. Let me put it another way, if these leaks were the results of hacking of yottabytes of digitally stored data there would be a collective outcry and yet it passes by almost silently. I’m talking about the vast collective human experience offered by advisors.
Experiences from those that have gone before, with some winning or some losing but all learning hard-won lessons, should be put to better long-term use benefiting founders, especially in these challenging and highly competitive times. The circular experience from entrepreneurs needs to be leveraged but is more often used briefly or misunderstood or even tossed aside, especially when value is mentioned.
All too often I hear from Advisors that they are frustrated at the lack of value recognition, it’s all one-way traffic or a thinly disguised salesman role, or the CEO simply “knows best”, and they are fed up and are turning their backs. This vast and valuable circular resource is discarded.
Is the start-up Advisor model broken?
I have proudly co-founded multiple start-ups, and two globally recognised industry associations, so fully understand the value of those that advised me at each crazy turn over the long and arduous journey to exit or merger. They gave direction when needed and even when I thought it was not, or so I mistakenly thought. They opened doors to their connections and more importantly, perhaps, to new ideas. They were steadfast when the going got tough, really tough, and they were there when we won too, quietly letting us founders take the light. And in each case, right from the start, we had a binding agreement on compensation, and rightly so. Everyone had skin in the game.
Today, I have advised and mentored over 500 founders from all over the world through accelerator programs in London, Madrid and Lisbon, or directly through investment networks or simply by being asked and it’s a hugely valuable process for all, for the most part. The idea of ‘paying it forward’ is noble and right but not forever, nor forever free.
It is totally right that accelerator programs should have mentors and Advisors give themselves for free, everyone wins here and don’t change that. But, breaking out past the programs is a whole new world and too many co-founders believe it is their right to have all that experience and time on tap yet unrewarded. Why? Too many players in the value-chain perpetuate this, breaking the value breaks the willingness of some to compensate the Advisor and the Advisor, in turn, loses faith and any upside. Time is money, experience is value and a name is credibility. Advisors deliver on so many levels and yet can be the only player on the team uncompensated.
Thankfully, there are green shoots of hope for rebalancing. Beta Marketplaces are emerging where Advisors and co-founders can meet and agree on terms at the outset. And importantly, I’ve had several encouraging discussions with some right-minded VCs and exasperated Advisors who absolutely want the long-term Advisor relationship embedded and compensated in their portfolio and launching similar platform initiatives.
Of course, I will happily continue to give a ton of time for free, but let’s all ensure the circular economics of experience includes all by mending what’s broken.
The founders, the employees and especially the investors all have upsides so why not Advisors?
If you are an Investor realising the importance of switching to a Venture Capital model built on Circular Economic principles, get in touch with us to learn more about how Kavedon Kapital can help.
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