The best startup advice is free

The best advisors don’t charge for being advisors. Instead, they want to invest in your company.

The best advisors realize that everyone needs to be at equal risk and reward. They are entrepreneurs who want to show real commitment by becoming part of the cap table with their own cash. In their own minds, this justifies the time commitment. From the entrepreneur’s point of view, it ensures the needed mindshare. If you only get attracted by the army of consultants, “with experience you need to help you strategically”, it is a signal that something is not correct with your company.

This is what I have seen at Lifeline Ventures with the companies we work with. The better the company and the advisor, the  more likely the advisor is to propose an investment. The worse the advisor and the company, the more likely the proposal is for cash compensation and free-of-charge options. In my opinion, cash and free options are fair for real work, responsibility and quantified deliverables – but not for advice. The best advice is free.

We have also seen that the best CEOs we hire to our companies come with cash. They typically invest from EUR 100,000 to EUR 300,000 at the latest round’s valuation, for two reasons:  they want to put themselves at risk, and want to have an opportunity to earn from the value creation. They believe in the company they join, it is not just another job. Again, based on what I have seen, the better the CEO, the more likely there is a significant investment attached.

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Posted on April 30, 2012, in Startup management, Yrittäjyys and tagged . Bookmark the permalink. 2 Comments.

  1. Great opinion. I hate people who only look for free lunch.

  2. Brilliant and timely post. You articulated exactly what we have been facing in recent weeks. Have had to turn away an army of “advisors” who want a chunk of our organisation so I can have coffee with them and they can tell me the challenge that lays before me (like it doesn’t keep me up most nights already). An investor who has seen tens or dozens of companies like mine is the person I want to be taking my cues from. Thanks for this.

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