Startups are a team sport. All great founders and management teams are surrounded by advisors, investors and service providers that bring complimentary skills, perspectives, networks and prior experience that presumably help your startup move faster. But when it comes to fundraising, that “outer circle” around your company should play a secondary role.

Advisors can play an important role in prepping the team to fundraise, making intros to investors, and coaching behind the scenes. But all too often, I see companies show up with an advisor or an existing investor beside them. This feels like adult supervision to me.

Now, it’s true that before joining Real Ventures, I was advising a number of companies and I would show up to investor meetings. But I did so under the guise of being an interim CFO. i.e. I was part of the company (albeit part time). And I still took great pains to only participate when it came to talking about financials, business model, etc. Whenever possible, I would encourage founders to do investor meetings without me.

Investing at the early stage is all about team. How can an investor judge the team if they have an advisor alongside? I guess it’s OK if he or she is silent, but then why come? And if they do participate it had better be around a narrowly defined area that is a strong competence for that person. If investors are asking hard questions and an advisor is jumping in to “help” with answers that will kill your chances of getting funded.

It’s the same issue with existing investors. At Real, we like to be 1st money into a company, so we don’t usually run into existing investors. But back in my CFO days I would sometimes have an existing investor want to show up. I went out of my way to make sure that did not happen. Only when a new investor is far enough along that they are talking term sheet do they need to meet your existing investors. That way, they can coordinate, figure out how much money your existing investors are putting in, etc. If your investors show up to early meetings I think it makes new potential investors feel¬†awkward¬†and less inclined to really probe into your business.

So, definitely have advisors, but keep them home!

Category:
Angels, Raising Capital, Venture Capital
  • Pingback: How does an investor evaluate a startup’s team? | the drawingboard [dot] me()

  • http://viafoura.com Ali Ghafour

    Hmmm, I never thought of it this way. Def. makes sense when talking to other investors, but I would think having an advisor present in non-investor meetings (i.e. company intros) would actually make the company feel more comfortable.

  • http://twitter.com/JonasBrandon @JonasBrandon

    Solid post Mark. No pressure is definitely the right approach.