How I Attracted Top Notch Advisors Without Paying Them
They actually paid me.
My phone rang in August 2013. It was Andreas, one of my advisors. He told me about a newspaper article he had read. It was about a company called Ströer and their efforts to build a nationwide sales force for regional marketing products. It sounded rather similar to what we were building at my start-up RegioHelden. The difference was just that Ströer was a sizeable company with over 500 sales reps. We, on the other hand, had less than 50 at the time.
Andreas knew the founder and CEO of Ströer and introduced me to him on the same day. Over the course of the next 18 months, we had several meetings and started working together. Ultimately, Ströer bought the majority of RegioHelden in a 25-million USD deal. Not bad at all for a five-year old company, and for me as a 27-year old founder.
So, thanks a million, Andreas 🙏😉
But that’s not even all. Over the years leading to the deal, Andreas had introduced me to a VC investor who joined our Series B, helped in valuable workshop sessions concerning sales strategy, and supported us in recruiting key employees.
The lesson I learned: In start-up life one connection can make a huge difference.
“In start-up life one connection can make a huge difference.”
What I paid Andreas for his contributions, which were probably worth millions? 💸 Absolutely nothing.
Let me explain…
Before joining us as a member of the board, Andreas was the CEO of one of our biggest competitors. It was a 2.000+ employee, publicly-traded company. So he knew the industry as well as our business model inside and out, and was well connected to all the relevant people in our field.
A mentor of mine had met Andreas at a conference in Munich. They were seated next to one another at lunch (sometimes you simply need a little luck). So my mentor invited Andreas to our office and I showed him around. Despite being 1/50 of the size of his previous company, Andreas was impressed by some of our processes and pragmatic start-up-like solutions. We got along well on a personal level and I sensed an opportunity… 😏
How To Find Top Notch Advisors?
“Who are the 10 people in the world, that can bring your company forward the most?”
The above question is very powerful question to ask and to answer. If you put together your top 10 list and work on it regularly you will probably end up with 2–3 individuals who can propel your company significantly. With all the experience he had collected before, Andreas was definitely on my list.
How to approach busy people with short attention spans?
- Your personal network: The best ways to approach potential advisors is through your personal network. Check out common connections on LinkedIn and try to find someone who can make an introduction. Try to think about what the potential advisor could be interested in and what you could offer them. Definitely include that in the intro message.
- Industry events: If you can’t reach out through common friends try to approach potential advisors personally at events. People like Andreas are regularly invited to speak at conferences. Find out where they are and try to approach them (nicely!).
- Cold-contact them: If nothing else helps cold-contacting is the last resort. Try to be very specific on why exactly you’re contacting the person and what you have to offer. If you don’t receive an answer I suggest following up twice, in case they were busy and didn’t get the message (it gets a bit annoying after that).
What To Offer And How To Structure The Deal?
Andreas was impressed by some of the things we did but he was also a very busy guy who had just set-up his own investment fund and was working on big M&A projects internationally. So the question was:
“How can I convince such an experienced and busy guy to join us as an advisor?!”
Potential advisors can be interested in different things:
- Getting paid an hourly rate (I only did that very rarely and mostly after selling my company, when investing was not an option anymore.)
- Investing in the company (Much better especially in the early stages. That’s what I did most of the times.)
- Getting (virtual) advisor shares (They invest their time, not their money. Can be a good option.)
- Staying “up-to-date” in the industry (Very powerful because it’s easy to achieve.)
- Working with young people, having something to do and intrinsically “giving back” (Especially if they are older/retired)
- Personal PR/reputation (By having a seat on the board for example.)
Usually it’s a mix of reasons. And it’s definitely not only about the money. So think about what else you could offer your potential advisor. In our case, Andreas was interested in investing but also in learning about our “new approaches” and working with a promising startup in the industry which he had personally been involved in for 10 years as the CEO of our competitor
My deal with Andreas was structured like this:
- He invested a five-figure (Euro) amount at a discount of around 60% compared to the last valuation. That’s a big discount but it didn’t really matter much in the cap table because the ticket size was relatively small. It was also very welcomed by the VCs who saw a lot of value in Andreas’ involvement. (Another option I have used with other advisors could have been to assign (virtual) advisor shares, without a cash investment.)
- In return for the discount, we appointed Andreas to be on the advisory board. He would make himself available to us for up to 8 days per year for workshops and coaching sessions (for example on sales strategy, organisation design and operations) and for 4 days per year for board meetings.
It was a great solution for both parties. I got access to the knowledge and contacts of one of the top people in the industry. Also Andreas’ involvement was a good signal to the market and increased our reputation.
Andreas bought shares which were worth more than double his cash investment. He also got the opportunity to share his knowledge with a fast-growing start-up that could implement and test out his ideas very quickly. Also, when we sold the company his five-figure investment nicely turned into six-figures. So Andreas got paid after-all (just not by me…) 😉
Working Together Day-to-Day
For us it was important to keep all of our advisors up-to-date on a regular basis. That meant not only sending them the standard investor’s reports but informally chatting with them about current projects, opportunities and especially challenges. I tried to have chats like these at least once a month in addition to the regular meetings.
I realised that whenever I had phone calls or meetings with advisors, they would think about us in the following weeks and sometimes came back to us with new ideas or people to meet.
“Keep your advisors up-to-date by informally chatting with them about current projects, opportunities and especially challenges.”
It also helped me a lot to be completely transparent and open about challenges and things that didn’t work. In the beginning, it might be a bit awkward to talk to an investor about the really bad stuff but it always paid off for me. Nobody expects your company to be perfect anyway, especially someone who has done it before.
I hope you enjoyed the article. If you did please don’t forget to clap 👏🙏😊 And if you want to let me invest in your company at a 60% discount in an advisory deal — hit me up 💰😉✌️