Most of the new founders I’ve ever met roll their eyes when I suggest that they form an advisory board. One of the main reasons people found their own companies is to have supreme magisterial control over their empire. They certainly don’t want the obligation of reporting to and taking advice from some outsiders. They certainly don’t want the extra work and commitment that would be required for an effective use of a board. However, this weekend I decided that from now on, when a founder rolls their eyes at my suggestion, I’m pretty sure I’ll say “Bully for you! Best of luck with your venture! I’m sorry I’m not interested in helping you and I’m certainly not going to consider funding you.” I mean it. From now on, my clients are gonna form an advisory board of some type and we’re going to use them. I’m not suggesting that you let some other people run your company…I’m not talking about a Board of Directors with fiduciary responsibilities to the shareholders of your company. Occasionally, those shareholder-responsibilities can run counter to founder-responsibilities. I’m simply talking about a group of 3-5 people that are willing to spend 3 hours with you 4 times a year and provide feedback and advice and connections and an occasional smack with a 2×4 upside your head (of course, that is a different kind of board). Here are some quick thoughts about creating an effective and legit advisory board:
TechonomicMan Advisory Board Rule #1: Do NOT simply collect advisors. It’s not impressive that you list 17 names on a slide in a powerpoint titled “ADVISORS”. Some faculty member that once told you ” you have a great idea, there” is not an advisor…it’s a person being polite. An advisory board is also not a group of people scattered all over the world that never gets together in person or, at a poor 2nd best, via video call. Making a phone call to an advisor who is expert in some area of your business 3 or 4 times a year on that subject is not an effective use of their time. By keeping advisors in one-on-one conversations only, forces them to miss valuable context and prevents deeper discussion that would be gained from having that person in a room with several others. And you may miss the very best of their experience by not allowing them to feed off the ideas of others. Bring the group together regularly for maximum effect.
TechonomicMan Advisory Board Rule #2: Do NOT call an advisory board meeting only when there is a crisis. If you are down to 2 weeks of cash for payroll and haven’t spoken to someone you’d consider an “advisor” for nine months…you are not only a bad entrepreneur, you are a jerk. A smart entrepreneur doesn’t “use” an advisory board, she “engages” it. Treat the people you consider to be professional advisors in a, you know, professional way. It isn’t hard: A) Put meetings on a calendar 1-2 months in advance; B) Send update material to your advisors 1 week in advance; C) Have a high level agenda for the 3-hour meeting to touch on major aspects of your business (eg. sales/marketing and pipeline; product development; organization and staffing; financials and capital). This professional approach not only makes you a better founder, but it is more likely to get the best out of your advisors.
TechonomicMan Advisory Board Rule #3: Speaking of getting the best out of your advisors, yes you should provide some form of remuneration to the advisors. If they are not already shareholders, they should be provided with at least a token amount of equity. Nothing dramatic, just a few hundred to a few thousand dollars worth is appropriate, depending on your situation. If you do bring them together in person once or twice a year (and meet online the other times), and there is travel or overnight stay involved to make the visit possible, offer a small amount of expense reimbursement. This is probably $100 if you are bootstrapping and pre- or very early revenue. It is probably closer to full expense reimbursement if you are up and running and more of a going concern. Talk to your attorney or accountant for the best way to establish these policies.
You’re making dozens of tiny and several large decisions every week as the founder/CEO of your company. And, I’m guessing that as a founder of tech company, you have a hard time staying focused on the mission at hand. This combination of accumulated decision-making and a hyperactive and creative mind, make you a perfect candidate for an advisory board. A well run, healthy advisory board not only provides a way to help you gut-check some of the more important specific decisions in your company, but it will also help you recalibrate your company strategy and mission a few times during the year. “Measure twice, cut once” is the old woodworkers adage regarding boards. For the tech entrepreneur, I hereby declare the mantra to be “the cut of your company can be measured by the effectiveness of your advisory board”. Or something like that.
Why I Loathe Tumblr.
No caption necessary.
I loathe Tumblr.
But not for the 1.1 billion reasons that you think. Sure, I’m a little professionally jealous that I’ve never had a client sell themselves for $1.1 billion. But it’s not like I had a chance to invest in them and passed. Heck, I had hardly ever heard of Tumblr until about 18 months ago when they raised $85 million on an $800 million valuation and had no customers. I admit to scoffing then…probably even blogged about valuation bubbles. But I didn’t loathe them then…like I do now.
I loathe Tumblr because they made me feel stupid.
Granted, it isn’t the stupidest I’ve ever felt. I mean, there was that time when I volunteered to clean our oven…Step 1) spread newspaper over the oven burners; Step 2) thoroughly spray the inside of the oven with the spray-stuff; Step 3) turn oven to “high” to activate the spray-stuff; 4) See smoke coming from the oven and rush the forgotten (and now smoldering) newspapers across the kitchen to the sink and douse the flames. Tumblr doesn’t make me feel THAT stupid.
No, Tumblr makes me feel stupid because I now realize that all the business advice I’ve ever suggested… is wrong. Not sure how my clients feel about this, but I’ll apologize now for the following stupid pieces of business advice I’ve probably given you over the years:
Bad Advice Step 1) “Start a company that delivers a product or service that solves some problem that a large set of customers has.” It’s good that Tumblr didn’t take that advice. If they had taken that advice, they never would have come up with such an incredibly useful social media platform that allows me to gaze at pictures that people share with each other, even the borderline pornographic ones. Of course, there were several dozen other platforms out there already allowing this to occur and I would have been wrong to keep blabbering on to them about “I think you need a better customer value proposition”. So identifying a customer problem and then building technology to solve it was bad advice. I should have suggested developing technology to solve no known problem.
Bad Advice Step 2) “Obtain customers.” Pretty naive. I definitely would have told founder David Karp that since he didn’t at first follow my Step 1 advice above–solve a customer problem first, build the technology second–that he should now find a customer base where his nifty, scrolly technology might be useful. Look for a revenue model that would allow you to build a business. Instead, he simply went out and let users, (by the way, users are the exact-opposite of customers), pile on the site and jack up hosting and serving and support costs. Business model, schmizness schmodel.
Bad Advice Step 3) “Don’t raise more money than you need.” Duh. Nearly as stupid as leaving the newspapers inside the oven when trying to clean it! Tumblr raised somewhere in the neighborhood of $125 million on ever-higher valuations. Increasing valuations, mind you, for a company that basically burned increasing amounts of cash for every new user at the site. Apparently the old joke about the CEO who lost a nickel on every dollar of sales but who would “make it up on volume”…wasn’t so funny after all.
Bad Advice Step 4) “Yahoo’s offer is just the tip of the iceberg…I’ll bet AOL will pay $1.3 billion” Ok, I probably wouldn’t have given that last piece of advice. Of course, I also wouldn’t have advised Yahoo to pay $1.1 billion. They basically paid $10 for each of the 108 million Tumblr tumblebloggers on the site. But that includes my Tumblr blog, even though I haven’t visited my Tumblr blog in many months. I think that clearly proves they overpaid by about $10 at least. The good news from the acquisition is that I hope, soon, my Yahoo! home page will have the ability to scroll a news feed for crying out loud.
So, I loathe Tumblr because they’ve proven I have little in the way of good advisory powers. How am I ever again going to be able cast a skeptical eye at a prospective client’s customer growth curve? How am I ever again going to dare suggest a “bottoms up” approach to revenue projections? And how can I ever again offer up my conservative capital-raising sensibilities in answer to the question “how much money should I raise?” (See related post “How Much Money Should I Raise…$29,542?)
No, Tumblr has ruined not only my outward reputation but also my inward self-confidence. Tumblr (and Instagram while we’re at it) have shown the entrepreneurial community the way the new economy works and clearly showed that this old-school incubator manager only ever really got one thing right…that Color Labs never should have taken that $41 million in 2011! Wait a minute…it can’t be…that car that just pulled up in front of Color’s office…isn’t that a Google car full of Google-Glass-wearing Google guys??
Oh, the loathing!
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