Showing posts with label advisor. Show all posts
Showing posts with label advisor. Show all posts

Wednesday, January 9, 2008

Being A Startup Advisor... Early Stage Niche

Since I receive a few inquiries every month to be an advisor for some startup company, I wanted to lay out my reasons for why I enjoy this, what areas I like to help out in and what I look for in companies.

My first technology company that I co-founded was ViewPlus, a video-on-demand company. It was with my friends Jimmy and Peter, who I blog about once in a while. We had the fortunate experience of starting a company based on a concept and putting our sweat and fears into it during the first boom time. It was initially supported by our personal savings, our families and many many credit cards. We pitched and begged hundreds of investors to get our initial seed capital of $600,000 from angels and then $33 million from a private equity fund.

During that time, we agreed since we experienced the numerous joys and pains of startup life that we would always be willing to help out other entrepreneurs. We stayed with this commitment and appreciated it. It was fulfilling to provide even a little bit of knowledge that was helpful to others that were just beginning the tortures of entrepreneurship that we lived through.

Since then I've built up two other companies from the ground up (HeyAnita Korea, GoingOn Networks) and worked at another early stage technology company, Innotive. I've written the business plans and financials for the three companies I co-founded (ViewPlus, HeyAnita Korea, GoingOn Networks) and helped raise over $49 million from angel investors and venture capital firms. Three of these companies are still operating and hopefully at least one of them will have a successful exit. I haven't hit a home run yet so would compare myself to Paul Molitor (no Wade Boggs or Ichiro) :)

I've experienced the stresses of initially self-funding a startup ("many many credit cards") to raising probably too much capital ($7 million series A for HeyAnita Korea) to raising too little ($450,000 seed capital for GoingOn that was stretched out). I've recruited some excellent people and also made some poor hiring decisions. I've gone through the endless discussions on business models, product development and sales strategies, and loved it all. I went through near bankruptcy of one company to successfully raising $7.5 million in additional capital that led it to profitability.

So I enjoy helping other entrepreneurs in the early stages of company formation. From concept on a napkin to a product in beta, so that I can listen to their passion and participate in the conversations on how to make their product or service better. I like helping people think about their market strategies, assessing their competition and reviewing their business model. I also get excited in the negotiations of their financing deals or partnership agreements, and helping out in the fundraising process.

Some startups ask for fundraising contacts, which I gladly provide if they are interesting enough, but I'm not a rolodex of investor contacts. This is not my strength and some people have mistakenly asked me to be their adviser for this purpose.

For the role of an advisor, since I'm only investing my time and knowledge, I don't care if it is a company that is only an idea or without capital. Also I don't have much of a reputation, so early stage companies wouldn't tarnish my track record :)

My criteria is that I believe in the company's vision and product. I might not personally use it, but I have to recognize the market and customers/users they are targeting. Also the founders have to be trustworthy, passionate and are people that listen well. The last characteristic is not only that the founders or founding team is willing to listen to me, but more importantly each other and people around them (i.e. partners, customers, investors).

I really do appreciate my time with other entrepreneurs and hope to continue advising startups throughout my life.

Here are some blog posts to related to this:

"Advisorship" (Ross Mayfield's great post on advisors and running your Board of Advisors)

"Building An Advisory Board For Your Startup" (My old rant on advisory boards)

"Building the Perfect Team" (My old article from AlwaysOn and reposted at OhmyNews)

Sunday, June 11, 2006

Buytaert, Cleary and Feld Join GoingOn As Advisors

It's always a great feeling as an entrepreneur to receive confirmation of your vision and company from customers, partners, industry leaders, and really smart people. So over the past couple weeks our team has received such confirmation and I'm very stoked to announce that Dries Buytaert, Bill Cleary, and Brad Feld have joined GoingOn Networks as advisors.

Since our team has significant experience in building new companies, I would say that we're selective in who we ask as advisors, especially since most of us had at least one bad experience with advisors who simply lent their name and did nothing else. Also for our three new advisory board members, we know they do not readily lend their time and name, so we are truly honored to have them join our team.

To give you some more insight into our excitement, here are a few words about each person:

Dries Buytaert is the founder of Drupal, a leading open source CMS platform that the GoingOn platform was built upon. We look forward to working with Dries and will have some cool plans to announce on our involvement with the Drupal community in the near future.

Bill Cleary was co-founder the CKS Group, which went public and eventually merged with USWeb, and current founder of Cleary & Partners. He was instrumental in launching several major web brands from the first boom including Yahoo!, eBay, and Amazon.com. He believes in our vision and how we can transform the corporate marketing landscape and the way people do business through GoingOn.

Brad Feld is Managing Director at Mobius Venture Capital and the most active venture capitalist in the blogosphere. His insights into our space and advice on our operations are things we truly value from him. We're very lucky to have Brad and the rest of our advisors helping us build GoingOn into a great platform and company!

Friday, February 24, 2006

Advisor Capitalists?... 1% or More? Hells No!

So I came across Tom Evslin's post in response to Stowe Boyd's "Advisory Capital: A New Basis For Strategic Involvement" post.

Being cynical at times... well, a lot of the time, I see Stowe's post as part of his pitch to drum up business in advising startups and position himself in a better light. After reading his post, I really don't see much of a difference between an "advisor capitalists" and a regular advisor.

If I was building an advisory board, why would I give someone like Stowe 1% or more and others the typical .2%-.5% worth of equity (initial equity structure)? This can create a disincentive for the other advisors to put in their sweat since there would be such a large gap between an "advisor capitalist" and themselves in terms of equity but probably not in terms of time and effort. I'm speaking from my own experiences with advisors. As I posted before, some advisors you get to sit and be pretty on your board while others you have to play an active role in building your startup.

Even in my current role as an advisor to a mobile social networking play, I received the typical amount of equity (.2%-.5%). I communicate at least once a week with this startup, active in introductions, and active in their strategic development. Should I ask for more equity? No. From my own experience with advisory boards, I don't think such activity warrants more equity. Stowe goes as far to state:

I believe we will see this boosted 5X, 10X, or more, to attract and retain powerful ACs.

Again I see this as positioning, and I also see this as crazy. Why would I give any advisor 2.5%-5%+ of my initial equity? Maybe if a contract was created where this advisor devotes 20+ hours per week. Even then would I sign up someone like Stowe who doesn't have significant capital raising experience? Who cannot advise me on deal structure and provide their personal insights into the capital raising process? Hells no!

Fred Wilson discusses the importance of cash at risk in the relationship between entrepreneurs and VCs or angels that Stowe misses, but more important is the fact that most of these early-stage companies will need a significant amount of cash to succeed. Forget the del.icio.us and Measure Map acquisitions by Yahoo! and Google out there, the vast majority of startups need more than $20,000 or a few hundred thousand to become sustainable companies. Since this is the reality for most companies, so the only situation where I would even consider giving an advisor more than .5% is if they had signficiant experience raising capital and building out companies. For strategy sessions with an "industry thought leader," I would rather read their blog or buy a book than give up 1% or more.

Wednesday, February 15, 2006

Building An Advisory Board For Your Startup

Ross Mayfield has great post on "Advisorship" which I'll piggyback off of and discuss some approaches to building the best board possible for a startup. An excerpt from his post:

In this post, I'll describe the origins of Advisorship, what it takes to run an effective Board of Advisors and the benefits, how to handle conflicts of interest and best practices for disclosure.

Building a Board of Advisors is one of the first tactics any startup should employ. Initially, this construct was used by startups with a high degree of technical complexity with Technical Advisory Boards largely with experts from academia and research. Companies increasingly employed Business Advisory Boards to help them with business development and strategy beyond the activies of the Board of Directors. During the bubble, Technical Advisory Boards also played a role in driving sales and partnership.
(full post)

Not everyone is a Ross Mayfield or another well-connected entrepreneur to gather the leading thinkers and practitioners within his or her space. Especially if you're at the concept stage, it takes resourcefulness and persistence to build a solid advisory board.

I agree with Ross that this is one of the first action items for most startups because advisors adds credibility, practical advice, and can help in your fundraising and partnership efforts. I see advisors in three buckets:

Celebrity Advisors
These people are well known public figures can help add a lot of visibility and good public relations for your startup. Of course unless it's a music related startup, Flavor Flav might not be the best person versus Bill Bradley or Oprah Winfrey. Since most public figures would not easily lend their name to a new venture, it states that they trust to you.

Credibility Advisors
These are well respected academics or professionals directly or indirectly related to the market you are targeting. Not every entrepreneur has a network that reaches former senators, sports stars, or world leaders. This is a bucket most entrepreneurs should be able to fill through their professional or personal network. Start with people that know you well and expand to people that know good friends of yours who would vouch for you.

Eight years ago during my first startup, ViewPlus (a video-on-demand service), we initially went for the low hanging fruit (easy access not low professional status) to build credibility since we had none. We pitched my former professor at Columbia University, Michael Crow, who happened to be the Executive Vice Provost (number three man on campus), advised in the founding of In-Q-Tel (CIA's VC arm), and started the university's innovation system of managing their intellectual property. Luckily he liked me from my graduate school days and understood our product and vision, so he agreed to help us out. Another target was one of my co-founder's father, which wasn't as easy as it seems. He was the former head of South Korea's NASA and former CEO of a large computer company. He said "yes" after some begging, "Please, please, Mr. Chang... Peter will start being a good son."

So once we got the first couple advisors to join it was a little easier to pitch and ask others. A spotty snowball effect. We did experience more rejections than commitments, which you get use to in the startup world.

Practical Advisors
Last bucket are people who can be high level executives/experts/thought leaders or just middle managers/small business owners, and are the people that will provide your team the most day-to-day operational advice and insights.

If you don't have a good network within your targeted space, I would recommend attending industry conferences. While conferences can be hit or miss, they are a place to meet industry leaders and pitch them face-to-face. Even in today's world of online social networking, facetime is still important in gaining the trust of people outside of your personal network. I remember attending a few cable TV and satellite industry conferences for ViewPlus, and I would scan through the speaker list for potential advisors. Next I would attend the session they were speaking at and if I liked their presentation and thinking, then I would hunt them down and pitch them.

Nowadays, online professional relationships can occur through sites such as Linkedin, OpenBC, or Go Big Network. I would just be cautious and have several conversations with the person to gauge their thinking, ability to solve problems with you, and their tolerance level for ignorance or the hundreds of questions a new or young entrepreneur would have.

Lastly, asking people to become advisors for your startup is a great time to practice your pitch to investors. The smart ones will ask similar questions investors will ask you, so use this time well.