Startup Advisory Service

While entrepreneurs have good business ideas but many do not have experience of all aspects of business implementation. That is one of the main reasons why startups fail. While launching a new business idea, there are many aspects which the entrepreneur needs to analyze like Market size, Regulations, Business registration, Organization structure, Key resources hiring & compensation structure, Technology strategy, Sales strategy, Key partnerships, Pricing strategy, Marketing Strategy, External funding etc. While a well-funded company can hire full-time management-level employees to work on various aspects, most startups and Small enterprises the entrepreneur has to manage a lot of things all by himself. This not only reduces the speed of the growth of the company but also leaves the entrepreneurs vulnerable to the risk of failure.

Advisors can offer valuable advice when a company is in a formative place. Most startups (especially pre-seed, idea-stage ones) don’t have the cash on hand to adequately compensate advisors, so equity emerges as the natural solution: give the people who help you grow a certain percentage of the company to reward them in the long-term. Founders if they are generating revenue should carefully weigh the benefit of paying for advisory services vs parting with the equity.

Types of advisors

Entrepreneurs should pick advisors like they would pick a co-founder. Know what you’re getting into by identifying the type of advisor you want:

• The name advisor : Your main benefit from this type of advisor is through association. They are well-known name who can provide connections to their network or boost your startup profile.

• The practical advisor : Think of this advisor as your sounding board. They can help with specific work—from hiring and go-to-market strategy to partnerships and more. You can turn to them for help to talk through an idea, big or small.

The key to any advisory relationship is figuring out the right fit. Early stage companies should not just look for someone who can advise temporarily but for someone who can “teach and maybe groom someone that’s junior. So they can speed up that learning curve and then the company can begin to execute at a much faster clip.”

Benefit of advisors

· Unbiased Feedback: Advisors can provide unbiased feedback about your business and you get a chance to overcome the weaknesses.

· Management Advice : Advisors can help convert your business idea to business implementation. They can help with different business related services that can help you in different areas of the business.

· Strategic Planning : Startup advisors can help in creating or refining roadmap to building a successful business.

· Expertise : Advisors bring expertise in different areas of business which can help founders to use them as sounding boards for various issues facing the organization or selecting an option.

· Network : Advisors bring network of connects which can help to build partnerships to grow the business faster.

The advisor agreement

The goals of an advisor relationship can be pretty unclear. Help you and your advisor get aligned by putting together a signed agreement that lays out:

· The advisor’s domain of expertise

· What they’re going to help you with

· What percentage of equity (if any) they’ll get, or other compensation.

Whatever decision you come to with your advisor, make sure to document the agreement. Especially if equity is involved or promised.

Types of advisor equity

Advisors typically get shares of common stock, just like employees, which are subject to vesting during the working relationship. Usually they either get:

· Restricted stock agreements (RSAs) – which are usually issued (sometimes at a small cost) when a company hasn’t raised much money or anything at all.

· Or non-qualified stock options (NSOs) – which is the right to buy shares at a predetermined “strike” or “exercise” price.

Equity can have vesting schedule like employees and also a cliff which gives the parties time to sort out if the relationship will deliver value and work out.