What's Below in Issue #63:
📰 - A look into Thunder's Advisor Strategy
📊 - Data behind advisor equity compensation
🎙️- Podcast w/ Vlada Lotkina
💵- Premium startup resources
🆓- Free startup resources
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Choosing the Best Advisors and Avoiding Charlatans
People are great at having opinions on every topic (myself included 😅), even when they know nothing about it. The same goes with advisors, many more people claim to be valuable than truly are. We will try to help you find those with real value and avoid the ones masquerading as “top startup experts.”
The goal of the Advisor
The goal is simple: To keep you from making mistakes by leveraging their experience, knowledge, and network.
However, everyone has different needs for their advisor. You might be a domain expert but need a network in the industry you are building, which an advisor can fill. You might be a great businessman but need someone with area expertise to fill in your gaps. You might need someone who can mentor you on building a successful SaaS startup since you have only built hardware startups before. There are many reasons you could want an advisor, but it all boils down to setting a clear goal and managing the expectations of both parties upfront.
Some advisors come with extra benefits such as reputation and influence. For example, if the advisor is well known in the space, then having them as an advisor can signal to others to take your startup seriously. It can help in the fundraising process and build business relationships. Others are influencers and bring lots of attention to companies they work with. Many founders try to find these types of advisors first. However, we recommend viewing this type of “advisor” as a marketing strategy and it often leads to the least successful engagements..
When thinking about the type of advisor you need, consider the following areas:
Have a strong idea of what you are missing and need in an advisor. In many ways, it is like looking for a cofounder, except they will be dropping in now and then, instead of building with you every day.
Finding the best advisors
A great rule is: if they ask to be an advisor, run away!
As an early-stage founder, tens of people will be offering their services and claiming to be “expert startup advisers.” However, most of them will be completely useless, a time suck, or worse a blackhole for precious equity. It is important to know what you need; it will help you reject the majority of the “experts” off the bat.
The key traits of a great advisor are:
Thunder Advisor Strategy
We have a specific strategy for vetting potential advisors that we would like to share with you. It centers around vetting advisors by testing them before bringing them on board.
Compensation
It is difficult for most founders to gauge how much equity to give advisors. However, it is generally between 0.1% - 0.6%, depending on how valuable you see the relationship. Some advisors will prefer cash and that will be a personal discussion between the CEO and advisor.
The biggest advantage of following the Thunder strategy is that the advisor has already proven their value and interest. This means there is often less of a need to build legal protections such as cliffs into the contract.
Relevant Articles for Finding Great Advisors
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How much to pay advisors
If you want data on how much equity founders pay advisors, this graphic from Carta is helpful to visualize the average. While the amount has dropped slightly over the past 3 years, it has remained quite consistent. It is important to remember that as your company matures, the equity reward shrinks.
-------------------------------------------------------------------------------------------------------------------------------------------------------------Fundraising Demystified Episode #31 is Live!
In this episode, Vlada Lotkina, founder of ClassTag, shares valuable tips for first-time founders and fundraisers on successfully raising funds in a difficult category - education.
She covers strategies for scaling ClassTag's user base to 5 million teachers and parents, convincing investors who initially said no, and selling the company smoothly after raising $12 million in venture capital.
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