12. Advising Early-Stage Startups (Glenn Gottfried)

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Glenn Gottfried joins Nick on The Full Ratchet to discuss early-stage advising including:

  • Glenn Gottfried Advising & Partnering with StartupsWhen you first engage, where are startups at in the fundraising process?
  • Let’s start with “The Where”…  Where do you find startups with strong-potential?
  • Once you’ve identified a startup, what happens next in the initial engagement process?
  • What is your approach when you have your initial meeting(s) with a startup?
  • What is the key benefit for the investor and the startup of your role as advisor?
  • Why do startups select you as an advisor as opposed to engaging with you as they would with any other investor?
  • From a strategic standpoint, what would you recommend to angel and early-stage venture investors?

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Key Takeaways:

  1. The first takeaway is on advising early-stage startups… If you don’t have the necessary chops and expertise, you are doing yourself and the company a disservice.  As an investor consider your expertise, knowledge and network before engaging as an advisor and rigorously evaluate yourself and ask if you are going to add value to the situation.  And for the entrepreneur, if an investor is interested in becoming an advisor, they should be able to clearly articulate the value they are bringing to the table.  Do they have experience with exits, is there deep sales and channel expertise in the vertical, are they a CTO and/or an expert in software development, can they connect you with customers, etc.?  There are a number of strengths that should be considered.  And even better, at times, investors can demonstrate their value add by taking some action even before a formal agreement is struck.  This is a rare and unique scenario, but about 8 months ago I began working with a health & wellness fitness startup out of Boston.  Originally, I was a huge fan of the idea and the more I participated, the more opportunities I saw to help.  For example, they did not have a presence in Chicago and I thought they were missing out on a big market.  So, without much effort, I was able to help generate a user-base here that has outgrown the original locations.  They also did not have a software expert on the founding team.  While I would never call myself an expert, in my younger years I learned to code in a number of languages, recently my brother and I invested in a software development company, and b/c I work in the startup industry, I happen to know a number of developers.  So, I was able to wireframe a solution for them and connect with developers to find the right fit for their budget and schedule.  Now I’m not suggesting that every investor take this active of a role.  But if you have a value-add, are a strong believer in the startup, and they are at an early enough stage where you can help in a meaningful way on either product or traction, then what better way to demonstrate your enthusiasm than taking some sort of action.
  2. The second takeaway is on the advice that founders get from a range of sources.  Entrepreneurs will get a number of polar opposite viewpoints from investors, advisors, or accelerator mentors.  Glenn’s position is that the entrepreneur should go assess and evaluate these positions, rather than immediately adopt one or get stuck between multiple.  We all have our unique experience base and biases so ultimately it is up to the entrepreneur to process all these inputs and make what they think is the decision in the best interest of the company.
  3. The last thing I wanted to recap is related to distinguishing between employees and advisors.  Now while, advisors will have a range of involvement and contribution, they should be thought of as facilitators, not role-players.  While I helped jumpstart traction in a market for a startup, that was a one-time event, not an ongoing activity.  So the board and the founder of an early-stage company must be very thoughtful about the stage the company is at and if the requirements are best filled by doers or facilitators.

 

Tip of the Week:  A Bridge to Nowhere

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Listener Feedback

Pete Maglio

The takeaways to end this episode are fantastic! Thanks @TheFullRatchet & @BenEinstein! pca.st/Fey4 #smartHardware #startups