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Promises and Platitudes – The Dangers of Low Quality Advisors

Having great mentors can make a huge difference for you, individually, as an entrepreneur. I’ve never had a mentor, but looking back I’m certain it would have been very helpful. Even today. Mentors are there to help you, and by extension (potentially) your startup. But even if your startup fails, or you’re not going where you want with your job, etc. a mentor is still there adding value.

The same should be true with advisors. Advisors are there first and foremost to work with you as the founder of a company. Your Board of Directors is different. They have other responsibilities beyond helping you (as tough as that may sound.) But advisors are yours – you should pick them, and consider them mentors and friends that have your best interests at heart.

But the reality with advisors is that they’re often low quality and not particularly helpful. There are “celebrity” advisors that attach their names to projects, but don’t really do much. These might help with some buzz and momentum, but it won’t be sustainable. There are also advisors that commit a small amount of time but then do nothing but make promises and platitudes.

If your advisor doesn’t really understand your business (or you as a person – strengths, weaknesses, etc.) then their contribution is likely to be filled with common platitudes about startups and running businesses. The same sorts of things you can read elsewhere…Having said that, being told something by someone can be more effective than reading it, but still, this isn’t really enough to add significant value.

A lot of advisors are brought in to make introductions. And this can be extremely valuable. But again, if the advisor isn’t really committed, then how meaningful are the introductions? If someone is doing advisory work for 50 startups … are they really contributing value?

Pick your advisors carefully. Build a relationship with them beforehand, get to know them as professionals and people. Be demanding. Advisors are busy people, and they’ll forget promises they’ve made quickly if you’re not constantly stoking the flames.

And don’t assume you automatically have to give up equity in your startup either. I’ve seen this in a few cases; meetings between potential advisors and entrepreneurs are setup, and the advisor basically says, “Give me X% of your startup and we can work together.” Um, no. That’s not how a relationship is built, and it’s an unprofessional way for advisors to work. If an advisor is proving his or her value, you’ve built a relationship over some time, things are going well, then you formalize the relationship. Giving options or equity to advisors makes perfect sense – but you’re not obligated to do so out of the gate.

Advisors are people. They have the same motivations, goals, psychological issues, fears, phobias, etc. that you have. And they’ve got big egos too. You attract the best advisors based on personality fit, value they actually bring (not promise to bring), and through your understanding of what makes each individual advisor tick. Figure out what will convince someone to be your advisor, and pitch that.

Be wary of promises and platitudes. Take your time building your advisory network (or board, or team). But once you’ve got an advisor, make sure you get as much value out of them as you can (being respectful of their time, and making sure they’re getting enough out of the relationship too!) You need to be proactive with advisors – they won’t come knocking on your door asking if you need help – so go through their LinkedIn networks, figure out who they know, figure out how they can help, ask, be persistent, and reward them as the relationship strengthens.

Competitive Research 101 for Startups

Whenever I get pitched by a startup, I always look to see if they’ve properly identified the competition. For starters, I can guarantee you that someone is already working on the same idea. It’s a universal truth. But more importantly than that, competitive research and analysis is one of those areas that is often horribly lacking from any pitch. There are a few reasons for this:

  1. Entrepreneurs don’t want to know. Nobody likes to find a bunch of competitors doing the same (or nearly the same) thing. So entrepreneurs put blinders on.
  2. Entrepreneurs are thinking too small. This is too often the case in Montreal, where entrepreneurs think of Quebec as a market. Even looking at your local market as an entry point is risky if you haven’t done your homework elsewhere.
  3. Entrepreneurs have big egos, which makes them believe what they’re doing is unique and awesome. Egos are needed, but not if they blind you completely.
  4. Entrepreneurs don’t bother looking. This comes down to not tackling your startup in a diligent, rigorous manner. Too often entrepreneurs get an idea, think they’ve hit a home run and start running wildly (in any and all directions.)

The existence of competition should not (necessarily) stop you from starting your company. It should color your thinking, create the appropriate context and help educate you on what’s going on in the market. And it’s one of the first places investors will look to help educate themselves on the market. Most investors aren’t experts in every market they invest in (they may not be experts in any of the markets!), and so a big part of their due diligence up front is to check out the competition.

This happened to me just a few days ago. I received a pitch, looked at it, and started doing some quick research. This is usually the first thing I do if the pitch gets passed my basic “sniff test” judgement (i.e. does it make any sense at all?) In this case I knew of at least one competitor. That’s going to happen a lot when pitching investors – they see a ton of deals – so they have cursory knowledge on a lot of companies. Then I went to Google and tried a couple of relevant search terms. In this particular case, one of the top 3 listings looked like a competitor. I checked them out and it seemed very similar. I saw a few other ancillary competitors as well. This took no more than 10-15 minutes.

I emailed the entrepreneur asking about competition. I listed a couple of references, including the one that looked like a direct match. I asked flat out, “What’s the difference between you and Competitor X?” He replied:

Not much. Fuck.

He followed that up with a more detailed comparison (after he spent some time looking at the competitor), but this essentially kills it for me. The fact that this entrepreneur hadn’t really looked at this competitor – which I had found in 10 minutes with very little understanding of his market – is really bad news. And before you think this is unique to this guy, it’s not. This happens all the time!

Competitive research is an important point of due diligence for investors. More importantly, you need to do it for your own edification. You need to demonstrate and actually have a level of expertise in your market that’s both broad and deep. Domain knowledge is a key advantage; and I bundle in competitive knowledge as a key component of that.

These days I use Crunchbase for competitive research. The profiles in there are often quite detailed and some of them have links to other competitors. With one competitor’s name you can typically find a bunch of others. AngelList is also extremely useful (although a lot of the information is probably hidden to entrepreneurs.) Try Quora as well. And Google almost always returns interesting results. Find a competitor’s name and type in, “[company name] competitors”.

Do your homework. Know your competitors and how you differentiate from them. This isn’t the crux of your pitch to investors, but it’s gotta be there. If a prospective investor (or customer, partner, etc.) can find a competitor in 10 minutes and you don’t really know who they are and how you stand against them, you’re in serious trouble.

Finding Your Startup’s One Thing

With five startups in Year One Labs (all at various stages of our process), you start to see some fairly clear patterns. One of the biggest hurdles at Year One Labs is moving from the Probe Phase to the MVP Phase. I’ve talked about this process in more detail a few times. The gist of it is that a startup at Year One Labs needs to provide enough validation that their idea is worth developing into a minimum viable product to get from the first phase to the second. The process typically starts with customer interviews, after defining the hypotheses and value proposition for the idea. Some of our companies created Lean Canvases as well.

The challenge is in how you define “enough validation.” In my previous post I talked about the difficulty of defining success. Without an agreed upon goal in mind for an experiment, there’s no way to prove or disprove that you’re heading in the right direction. So you need some kind of definition of success. But that’s incredibly hard to define up-front – most startups don’t know what it should be, and most don’t have the discipline to really put a line in the sand.

With or without a definition of success, what I’ve seen out of Year One Labs (and my own experience looking back, and in many discussions / advisory sessions with other startups) is that startups need to find the one thing that’s so obviously compelling that it justifies continuing. Without that one thing to hang your hat on (or more importantly hang your entire startup on), a startup flails around and struggles.

  • Early on, it’s best not to focus on a lot of different metrics. Better to pick one or two that you think are the most meaningful. A startup’s “one thing” might come out of that.
  • But it might come out of something else, like the startup’s brand or culture, or one specific feature that creates significant differentiation and more clarity on how the startup can move forward.

Startups need that “one thing.”

For Localmind it was people’s willingness to answer questions. That’s where it started, even at Localmind’s earliest stages when it was just a web application. The next “thing” came when Robert Scoble declared Localmind the best app at SXSW. That “one thing” skyrocketed Localmind in an amazing way. It’s important to remember that neither of these things alone come anywhere near to making Localmind a massive success. But they were enough to say, “OK, we’ve got something here. Let’s keep going.”

For Highscore House, their “one thing” was an incredibly successful survey that showed a very high level of interest in their value proposition. That was followed by the high conversion they got from early advertising, even when there was no product at all.

Some of these things were by design, through experimentation. Some were just luck. But even months after these trigger points (which helped move these companies from the Probe Phase to the MVP Phase), you can still see the impact they’re having on the startups. The early “one thing” hooks that made us all say, “We’ve found something to focus on,” continue to impact these startups in significant ways from their stories, to fundraising, branding, product development, and more.

Startups need to find their “one thing” to focus on. It provides (at least some) clarity on how to proceed and helps shape what’s to come.

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About Ben Yoskovitz
I recently joined GoInstant as VP Product. GoInstant changes how we use the web, making it shareable like never before.

I'm also a Founding Partner at Year One Labs, an early stage accelerator in Montreal. Previously I founded Standout Jobs (and sold it). I'm a hands-on startup guy, helping companies grow successfully from the idea forward. You can reach me at byosko at gmail dot com.

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