Startup Therapy Podcast

Episode #106


Ryan Rutan: Welcome back to another episode of the startup therapy podcast. This is Ryan Rutan from startups dot com joined as ever by my friend partner and the founder and ceo of startups dot com will shredder. Well, today we're gonna talk about something that we get tied up in all the time. Right? We get questions about this both personally and for people wanting to understand how to navigate this process of putting together the advisory board or or having an advisor particularly around this concept of like the superstar adviser, like how many times a week do you get asked this question, Hey, will you be my advisor? And what is your response?

Wil Schroter: Typically I get asked nonstop and not because I'm like particularly great at anything, but because we're in the middle of this giant startup ecosystem. So people here this podcast, you know the same way for you or they read something etcetera and say, hey, I'd love to this guy to be my advisor because he has, you know, all this knowledge and I just say no every time. And it's it's not, you know, any disrespect to the people that ask, I'm flattered that people ask if you ask me, I'm going to say no, I can tell you

Ryan Rutan: right now. It's just this entire episode just about inbox control. Well, is that what we're

Wil Schroter: doing? But what I tell people and I think you know what we're going to talk about today is the whole, will you be my advisor and all the things you think will come with it is a bit of a sham and it's not a sham because the advisors is a sham. You know, I'd like to believe you and I are stand up guys and we provide good advice, etcetera. Maybe not. But but I believe that the expectations that come with bringing on advisers are way out of whack, way out of whack. Right? And so what I'd like to talk about today and like we can dig into is what do founders think they're getting into when they sign us as an advisor or anyone? And what's the reality of what they actually get? Because they're not even remotely close. I mean, if you think about all the people that have kind of come to you, what are some of the things that they expect of you that they're not going to get no matter how good their ideas or who they are? Alright, So before we get into this next topic, I just want to let you know what we talk about here is like 1% of the conversation, you know, really, this conversation is going on all day long online at groups dot startups dot com Where Ryan and I pretty much talk endlessly with founders about every one of these topics. So if by the end of this discussion, you like the topic and you want to dig into it a little bit more with Ryan and I just had two groups startups dot com and we'll pick it up from there.

Ryan Rutan: I think that's a good way of putting it. I think it's the, I think it's the things that are not going to get that are going to matter more to things I want to talk about. Let's talk about those things are not going to get. And before we dig into all of that, let's talk about what the cost of this is, right? Because there there is a, there is oftentimes a very significant cost. I've heard some outrageous things of late in terms of people trading big chunks of equity or tying people to long term engagements that just don't really seem to match the value that they're actually going to get to your point, what they think they're going to get when they, when they put it all, you know, in their heads. Um, I think it all makes a ton of sense, right? Like you're gonna give away some equity, these great things are gonna happen and we'll dig into what those great things they think are gonna happen that aren't now, of course you can get solid advice. You can get perspective, you can get lots of things from a good advisor. This isn't, don't take on advisors, This is be really careful about what your expectations are and therefore balance the cost against that, right? So before you go sliding chunks of equity across the table at somebody, Let's talk about a few of those things. The top one for me is probably around the introductions, right, I get this all the time. I get this all the time. Whether it's whether it includes advisory or not, but oftentimes people think that's the gateway to to my, my network, right. Is it bring him on as an advisor all of a sudden he'll open up this the shangri La like linkedin portal for us and we'll just walk through and talk to everybody we've ever wanted to talk to this happen to you too.

Wil Schroter: It does, it doesn't, it was

Ryan Rutan: cheating. I knew that it does.

Wil Schroter: Here's where it breaks for me. I've got a huge roll index. And so when people see that when they hear that same as you, they think, Okay, will's got 10,000 people in his rolodex. And I do, I mean I've just met so many people over over almost 30 years and so if you ask me, do I know Rudolph Botha from Sequoia, the managing partner of Sequoia. I do. He's in my network. I technically know him, But not that well. Right. Take mark Suster right? Marks, a great guy. Mark invested $10,000 of his personal money long before he ever became a venture partner and that was great. And Mark and I have had some great times together, but I don't actively talk to Mark, I don't have any reason to write. But here's my point you think because I've met these people, I've worked with these people. I know these people that my relationships are fresh, that those people are interested in taking an intro. There's all these assumptions that are made on what's in my role index and what the quality of that is. Right? And think about this Ryan, even if all of those people are fresh and and they're in my rolex and the people that I know what's the guarantee that they want to know you write

Ryan Rutan: Or even hear from us as the primary connection to your point. I haven't heard from you in 10 years and then you pop out of the woodwork with a request introduction to introduce you to somebody that you may or may not want to talk to. Right. Super cool. Right? I love it when that happens to me. I love it when somebody I haven't heard from immediately pops out of the ether and it's like, hey, could you do me a favor? Here's somebody I want you to talk to. It'll be a completely lopsided conversation where everything is them asking and you giving, would you like to sign up for that? Right? It's the least popular landing page in the history of history. Nobody puts their information into that and there's a reason right to to your point for every one of us, right? That that's connected into somebody like a Marxist, right? You start to get closer and closer to the top of the demand chain where people want your time want to to speak with you want something from you. The inbound requests get absolutely insane, right? Just take you and I as an example, right? We're not like top of the food chain in terms of introductions, Alright. We're easy to find. People can come and talk to us. They use this as a conduit for that. Even being kind of middle of the ladder as we are right for for this purpose. And you're looking for investor introductions or you know, partner induction, something like that. Even we are already inundated with these requests. So imagine what it looks like when you get to that level. Right? So even whether it's coming from you, me or or somebody off the street kind of doesn't matter. It's part of a really, really noisy channel. And so therefore you really have to balance your expectations right to the point of this entire episode. Yes, you can want that from an advisor. Yes, they have that network. Do they actually have the ability to put you into a meaningful conversation with that person? Odds are no right. Maybe maybe it does happen. Right. Introductions do get made. That's why they keep happening right? And they do become fruitful at some point. But you got to multiply the odds here and the probability of you being the one who gets through pretty damn low by the time you account for all of the various places. This can fall flat. So don't have this expectation of your advisors, right? If this is the reason you want an advisor, just get linkedin sales navigator and start working it for yourself. Right. It's the same damn thing. Let me put it this way

Wil Schroter: if what you're trying to do is raise capital And you're looking at me as a conduit to help you raise capital, which by the way, we also run a fundraising platform, fungible.com help people raise $600 million. Uh, we clearly, you know, have that capability at some level, but it doesn't matter. This is where the expectation, how these founders are thinking and doing this kind of calculus in his head, in the reality of what's going to happen with an advisor are so far apart. And you mentioned just a moment ago, the problem with that, the problem with being so far apart from what our expectations are and what an advisor can provide is that what we pay especially early on when we're really vulnerable to get that advisor is bananas. Like, you know, you mentioned folks giving out equity early on, folks are doing rev share deals and they're doing partnership deals and I'm gonna give them a big piece of my company because they're going to help accelerate this thing. Maybe right, maybe. But what we'll talk about today is all of the assumptions that we typically make as founders that are patently false. And by the way, if they're correct, there are a fraction of as correct as we think they are right? And that's the other problem, right? None of it's what we think it is. And so where this frustrates me when we talked to founders, is that very often they jump into this so quickly and they say Ryan and will, I've listened to their show. It's, you know, they've provided so much feedback. I would love to get that feedback, you know, all the time. I would love all the things that they can provide. But here's the thing if what you're really using us for is to get an introduction to some investors, why not just make it that? Why get married to us? Just in order to get some intros to a few investors or to go through a capital raising campaign? Right? Why not make the engagement purpose built for that versus this implicit. I wanna sign you as an advisor. And I think all of these things are going to come with it. I think specifically for the points that we'll talk about today, we way overshoot the mark. Our expectations are huge. And, and this is the one that kills me the most. When folks ask you Ryan to be an advisor, how much are they implying that you're going to do versus explicitly telling you, are you telling them that they're actually going to do?

Ryan Rutan: This seems to be a recurring theme with us lately and probably just exists everywhere within founder them. These one sided conversations, these one sided handshake deals that nobody else was involved in. We just assumed this would be the case. Right? Like uh, and, and actually, you know what I don't usually do and I'm sure you do something very similar. It's, I don't usually just say no. What I'll usually do is walk people down the path of why what this is going to actually be versus what they think is probably incorrect. Right? So as I was like, what are the, what are the big, big things? What's the biggest thing you want to get out of having me in this advisor? Right. And they may start off with something really nebulous like well we need to, we need to hit our growth metrics. Okay, cool. Let's break that down. Like what will I help with? Because I don't have a knob that I turn in my office that just makes growth metrics go up. Right. So I got to have something I can point at and attack with you that I feel, you know, very specifically suited for. And so that's where it starts to erode a bit when you start to talk about what are these actual big objectives that you want to, your point bring us on as an adviser and then tell us you want an investor introduction, right? Would be good to know that before because the chances are we can just make those introductions right. If we feel like they're viable or not. Right. And here's the thing whether we're an advisor or not won't impact that decision. That decision is based on the calculus of us going, when was the last time I talked to this person? Was it too soon? Was it too long ago? Are they going to pick up the phone? Are they going to answer you? Will this be a good conversation for them? Do they care? Right. Cause I'm burning social capital and I'm wasting their time and your time and my time. If I don't think that this is gonna work out. So this is the, this is the thing that we run through really fast. Right? So this is where it has to start. It has to start with where you actually trying to get done and then stating it aloud to the advisor so they know and they can say yes or no based on some objective data about whether they feel like they can help you with that or not. This is where it's always broken down for me. I've made this mistake a couple of times on the adviser's side where I've said yes, thinking cool company really like these guys want to help them write all the right reasons and then we dug into what they actually need help with. It wasn't anything to do with my core skill set or things I could actually thumb the scale and make happen right. There was a probability that I could tap into the things that they needed. But it was a long shot, right? And they gave up real equity in the end. They didn't, we just, we just know nullified the agreement. But that was what was on the table, right. They made a permanent decision around giving away future value in their company for a maybe on me helping them to increase the value of the company, which by the way they didn't share with me in terms of how it was going to happen.

Wil Schroter: I think one of the places that founders really get thrown off and I don't think they realize they're doing it is to your point, their intentions aren't well stated. They're not clear. I think the other part of it is they actually just want you to say yes right. They just want the validation of you saying yes. The implication that you're good enough, you know that the idea is good enough and that, you know, if I say yes and I want to be your advisor that I'm validating your path. And by the way, I get it. I mean, who doesn't want more validation through this process. But that's an expensive way to get it. You can do the same validation by just saying, will you help me and not every request for help has to be paid to your point with lifetime Equity. It's just, I would argue

Ryan Rutan: that most of them should not right. That should be lifetime help right of ongoing value. Right? Um, just rarely the case.

Wil Schroter: And I think what happens is as, as founders, we tend to think that we need to have this shotgun wedding immediately and we have to get, you know, everything papered up and it has to become official before we've really dated at all. Right. Right. Right.

Ryan Rutan: Let's see if they can actually provide any of the values, right. Or if they're just the man standing behind the curtains making the Wizard of Oz talk right. Like that happens

Wil Schroter: Here is a really popular one. I see. And this is, this is where advisers, I believe kind of take advantage of founders a little bit and I don't know if they're always doing it in a malicious way, but it happens. It looks something like this. I've been in your industry. I have a deep rolodex of contacts who are all your customers. Right. And I want to be able to provide introductions to those customers. But hey, that's value. If, if all those introductions, you know, turn into a huge company. You know, it's a startup company from those. I want to make sure I didn't just give those up for nothing. And to be fair, that's a fair asked. Right? That's not unreasonable. But that's not the problem. The problem is what if they don't work. What if you make the introductions and nothing comes of it. Well, I'm that person I'm saying, well, all I can do is make the introductions. I can't you know, it's up to you to sell it. Okay. Cool. And again, everybody's right and everybody's on the right page. However, if I make all those introductions and nothing comes of it, why do I still have a quarter point of equity at that point? There wasn't the value that we were all expecting,

Ryan Rutan: Right? Yeah. You just entered into performance based marketing and there was no performance, but you still paid for it. Right. Right. You wouldn't do that anywhere else. Right? So yeah, you've got to really be clear on these expectations, right? Given these inputs here's what we need to have happen. And given that here's what it would be worth to us and everybody forgets that. I think to your point it was a really really good one. Um And when we could have easily glossed over is how much of this is actually about the validation, right? Because that to me can just absolutely obscure the rest of these details, right? If the person said yes, that's all we care about. They said yes. They said yes, cool. Do you actually wanna hang out with them? Well, I don't know. But they said yes, right. It was like you get your first friend in a new in a new school in middle school, right? Like you don't really care who they are, how they dress whatever. Just like somebody said yes. Somebody sat at my lunch table. It feels great. Yeah. And so I feel like we've got to be super, super careful about this because that is great, right? And the validation feels good, but it will not feel good if that person owns a quarter point half point full point, whatever you've given up in a couple of years and it turns out their input to the company. Was that one moment of validation? That's all they gave you right now. Who knows? Maybe if we had a crystal ball, we go back in time and say, Gosh Ryan would have quit if he hadn't gotten that little bit of validation upfront from Mark Suster.

Wil Schroter: You know, by the way, I just want to mention if what we're talking about today sounds like the kind of discussion you wish you were having more often you actually can, you know, we're online all day every day, working through exactly these types of topics with founders, just like you. So any question you would have or maybe some problem you just want to work through. We're here and we love this stuff and we're easy to find, you know, head over to groups dot startups dot com and let's just start talking. I think the other side of it is and let's let's come come back to this because we glossed over and I want to make sure we dig into it a little bit, is that yes, I can make the intros but do the intros care about you okay. And so so so here's the assumption and I and what I'm gonna say is we tend to make this bet at often the worst possible time. For example it's your one of our startup and we're just putting everything together and we're dying for this validation. So that's that's its own thing. But at the same time we're thinking in our minds if this person of this advisor can make these key intros that will be game changing for us our product is going to take off but we're missing a few components. Our product is probably 1235 years away from being valuable to who were trying to sell it to. We have an M. V. P. That we just finished six months ago and we want to bring it into a Fortune 500 company because this person knows the CTO. That's a terrible time to spend that social capital on behalf of the adviser. It's a terrible time for us to burn that advisers uh you know the the equity we're using for the advisor because we're not ready. And so we have to think about when we're trying to engage these folks. Is this the right time for them? And is it the right time for us to pull that trigger you know maybe the right time to be able to pull that trigger with those C. T. O. S. Is two years from now just because we want it now doesn't make it the best time but we're going to pay for it all the same. The cost is the same. The outcome is very very different,

Ryan Rutan: very different. Um you're also likely to pay more for it at that stage because you're super early, your values lower right? So you're giving up equity at a point where it's worth far less. Therefore you're gonna have to use more of it to get what you think you want. And so I think that you know being patient in these cases at least buys down your cost and like you said will increase the likelihood of that advice and that network and whatever else you think they're bringing the table being leveraged against something of value, right? If your products super early stage you don't want their entire network to know about it right? Everybody thinks their problem is always exposing the entire world to their idea. Yes but probably not for the reasons you think right, it may not be ready for the entire world to see, luckily nobody's figured that out marketing. It's not possible. You can't show the entire world at once. So

Wil Schroter: that's good because we're talking about timing like when is the right time to kind of take advantage of those assets. The other thing is people often come to me and they just started something there six months in there a year in again they're very vulnerable and we'll keep coming back to that and they say will and Ryan have listened to the show, they have all these insights to all these aspects of the business that I don't know about their super valuable and maybe we are, but I'm not going to give us that much credit for a minute for the purpose of this explanation. We're only valuable because right at this very minute you don't know ship, right? And so everything we talk about sounds like gold, by the way, you're going to figure out most of this stuff on your own. Anyway, we just happen to know a bunch of stuff that you don't know. I had this great kind of adage given to me a long time ago and it said that if you were sitting across from Albert Einstein and he was explaining to the theory of relativity and halfway through the explanation, a lightning bolt hit him and he actually became twice as smart, you still would have no idea what he's talking about. Which implies that when people know more than you do, they just seem like geniuses, you don't know how much of a genius they are, right? Because they're talking about ship, you don't know about. We end up getting really enamored by talking to advisers who know all of this stuff. But the problem is especially early on, we don't have the capability to know who's full of ships, who knows what they're talking about, who has more than a rudimentary explanation of what we're talking about. When my father in law was in his 60's asked me about Cryptocurrency, which I don't know anything about. By the way, I can explain to him the basics of what Blockchain is and when crypto is, that's it. As far as he's concerned, I'm an expert. I'm a crypto genius, right? Because he doesn't know any better. Right? That's where people get hung up early on, everyone's a genius advisor. What we need to do is just hang back a minute, right? And say, okay, I appreciate the early advice. Let me roll through this a little bit, let you know, let me get you know, my skis under me and then let me figure out whether or not you're the expert worth giving a whole bunch of equity to.

Ryan Rutan: That's right. You know, At the early stages, you essentially, an advisor is just somebody who's walking around flicking on light switches for you, Right. And that's about as much effort as it takes. You're just illuminating things that they didn't know existed or they didn't have the right answer to my favorite place to see founders get this from is other founders at a very similar stage. Right? Well, we see this all the time in our founder groups where you've got somebody who's already heard that piece of advice and so therefore they can share it, right? It's not something that was highly tailored to the solution, it's not something that was, you know, really, really, really contextually specific to that startup company. It just happens to be a good piece of general advice you probably hadn't heard yet right? Like the first time you encountered long division, wow, it's magic until you know what it is. And then it's like, okay, that's another part of mathematics. That's what this is like, right, once you have some of these facts and of course, some of it does need to be contextualized to your business, that is your job, right? You should and will always know your business better than anybody who spends an hour or two in it per month or per quarter or whatever. This cadences and therefore we can't put too much pressure on the advisors because we're just letting ourselves down at that point, right to your point, we've got to know that there's just a delta between knowledge or there's a knowledge gap and the value of that knowledge gap is very short lived. And again, I'm gonna say far better to get this from other founders who have just heard this advice and applied it to their own businesses who are very similar stage to you. So go to your network of founder friends. If you don't have one, build one, borrow one, join us with founder groups and come in and participate and get some of this value from there. Yeah, they'll just tell you, right, they're not gonna be like, well, let's see, I do have an answer for you. Ryan. Um, it's going to cost you a quarter point and then I will tell you, right, no, they're just gonna be like, oh yeah, I heard it's this, right or somebody told me a few weeks ago it was this and they're like, oh, were they your advisor now, they're just helpful. There's a

Wil Schroter: lot of sources of truth. And to be fair, I'll give you another example years ago when I really wanted to become a carpenter, I had this guy at my house and he was, he was building up my daughter's closet and it was amazing, like it was just amazing trim work and I was so enthralled by this, this was at the beginning of my whole journey. And so I started asking all these questions, I was annoying as can be. And I started saying, I was like, how do you get this so perfect because he was doing trim carpentry and he said, well, and I'll never forget, he goes cut it and I put it up there and if it doesn't work, I'll cut it again, I was like, and then

Ryan Rutan: he's like, nope,

Wil Schroter: that's it. And I was like, okay, right now at this very moment you're the best trim carpenter in the world, like you are the oracle of advice and that is the only way trim carpentry can be done and then I did this bizarre thing, I googled it on youtube and it turns out a lot of people have this advice and it's much much better. Like here's 100 other ways that you can do this much much better in a repeatable way and you shouldn't listen to him. Which brings me to my next point. The problem with hearing advice from someone on a topic you've never understood before is you can't qualify it right? You're in no position to know if it's actually good advice. Give another example.

Ryan Rutan: That's it may it may ring out like good advice it followed. It may

Wil Schroter: actually be you're about to start in that agency, right? I've been through, I started a huge one. Right? Wonderful yummy. But if you were to dig in a little bit and say hey will when's the last time you ran an ad agency? When's the last time you were responsible for the P. And L. Of that agency? That was 2000

Ryan Rutan: and one

Wil Schroter: 20 years ago, you

Ryan Rutan: know? Well

Wil Schroter: how we're, yeah yeah. We're still running print ads and I'm sure people still do. But not the not the same way the internet was a new thing, right? When the last time I was in it. And so the assumption is that this person is from my industry in there by all of their knowledge is still relevant. It often isn't it often is not only not relevant but the way they got there in the industry doesn't work anymore, right? And so you don't have the option of just saying Yoda tell me all, you know that all your ways of the force in my industry because it doesn't apply anymore. And I think people get, get hung up on the fact that they assume that this person was a guru in my industry or guru, you know, in this one area and therefore they must still be relevant. And I think it's a big myth.

Ryan Rutan: If you want some proof on this, um just Google 1940s basketball and find out who the best player was and then try to find some archival footage of him playing basketball and see if you want that guy to advise you on his jump shot

Wil Schroter: different world, you know, right? I also think that people assume that we've got this endless geyser of mind blowing advice, right? Like

Ryan Rutan: We can talk forever. That part is true. We can talk endlessly, we can do this, we've proven well over 107 episodes that we can just keep on talking almost endlessly.

Wil Schroter: But it's true. We might be wrong heaven forbid, right? I mean we're not obviously, but we we might be

Ryan Rutan: I'm gonna make sure that gets deleted from the podcast. There's no way we've ever been wrong

Wil Schroter: with anything, right? Yeah. And look, I think that what happens is I think we kind of get Hoodwinked mainly because I just want to use the word Hoodwinked, like I think what happens is someone comes in, they give us 23 pieces of mind blowing advice. And our assumption becomes damn, that must be flowing forever, right? And if if Ryan and Will said that there must be so many other goodies that they have behind that. Maybe not. Maybe that is our stick. Maybe that's our thing. We have three things we learned and the moment we hand over equity to get the rest of them, we find that there's no more gas in the tank. You know what I mean?

Ryan Rutan: Or that it no longer applies or that you know, it's it's not relevant or it's not relevant to our situation. I mean, imagine imagine this scenario US Department of Defense hires David Copperfield as new super weapon. Right? We saw him make a quarter disappear which can pull a rabbit out of a hat and then he made the entire statue of Liberty disappear. So we're gonna use him now to disappear. All of our like where this is going, It's going to be amazing, right? Not all type. Sounds great. Right? It sounds like a great idea. Um Here's the thing. It's not gonna work, right? Those are illusions right now. Not that an adviser would intentionally, you know, serve you up an illusion to fool you into take them as adviser. But you create these illusions in your own head. Right? Going back to the advice, the introductions, whatever it is that you've created in your mind that you think they can do, they may or may not be capable of. Right. And so we have to be careful how far we extend these tricks that are played on us. But, you know, whether we're doing it to ourselves or you know, they're giving us a piece of advice and we're saying, well, if they knew that they must know everything else, right? And there's just this like, endless compendium of knowledge that exists in this person's head that they can they can Sprinkle on us as needed. Not true, Right. It just doesn't exist, right? They're never going to be as tied into your business as you are. They're probably not following the same path anymore. When I am giving people advice, which I try to do as rarely as possible, I try to give people perspective, not advice. It's almost always at this point, caveat it by the last time I did this, or, you know, when I was still relevant to that industry or when I was still doing this, here's what it looked like, right? That that's the preface for nearly everything I say, because I'm no longer doing the same kinds of things that they're doing on a daily basis. Our business is very different scale size scope. All of that has changed and they're back in tiny startup land where they're trying to, you know, make those first few steps, what I get to do on the marketing front is very different than what they get to do from a resource standpoint budget standpoint knowledge standpoint, all of that, right? It's not the same thing. And so they can't look at me and go, well, I like what you're doing. I want those results, I want to do that too. Well, yeah, that's great. Is just having the advice. Even assuming the advice is good. Is that all you need? Of course not. Right, okay, well here's all you have to do, here's your million dollar annual budget land. They're like, Okay, what can we do with 1500?

Wil Schroter: Well, I think the other side is if you're going to give good advice, a great advisor, the way they give good advice is it looks like this. I'm not sure if this is the answer, but I'm sure this is the question. Here are the questions you should be asking, right? I don't know what your cat is going to be right. I don't know exactly when your M V P is going to become profitable, but I can tell you what questions you should be asking, right? You should be looking specifically at this part of your landing page in saying what is the conversion rate and when it hits somewhere in this area, that's when you should probably move forward with more budget. Right? There are certain things that you can do as an advisor to point people on the right path. Well you can't do as an advisor and I see a lot and I think this is where people get again diluted, is to say I have all the answers, This is how everything will play out, Dude, it's how it played out for you, right? It doesn't mean it's going to play out for anyone else. If there was a

Ryan Rutan: playbook to this, it wouldn't be a startup anymore. Right? It would be a small media. Exactly. It's not the

Wil Schroter: same thing. Exactly. And so the other side of this is when folks say, I want this person to come on board because I think that they're gonna instill all this credibility, they've got great advice, but they're also well known in the market, right? They've got this incredible brand. And when I say this person is attached to the project, Hollywood style, everyone's gonna just gonna like, you know, jump out of their seats and want to give me not true. And I think we should break this down a little bit because I think this is such a broken assumption and it comes from a place where I don't know that I've ever seen an advisor who got brought on for that reason ever actually say that that's going to happen right? Like I've met a lot of really well known advisers, they get onto these boards, you know, they get onto an investment, whatever it is. And if anyone were to say, hey, is your name gonna help us raise funding or is your name gonna help us sell products or is your name gonna help us get pr they'd be like, probably not, right. It won't hurt, but it's not going to do what you think it's going to do.

Ryan Rutan: But that's the only reason we brought you on, Sir ma'am,

Wil Schroter: right? Like,

Ryan Rutan: should, we should have talked about that first, right? Going back to these one sided discussions, they're super dangerous guys, Regardless of whether it's an employee issue, an investor issue, an advisor, issue a partner issue whatever you cannot have these one sided discussions where you're making up the other party's response and then using that as a vector for your future, right? It's not good for you don't do it.

Wil Schroter: Also, if you're thinking, hey, if this person is an advisor or I'm trying to leverage their name in order to raise capital, I'm saying this because it's such a popular one, right? If I had my advisor slide, if I have these four people attached to it, people are gonna think that I'm legit. It doesn't hurt. There's no downside to it, right? But to be honest, everyone has that slide at this point, everyone has a slide of people who are loosely connected to the business in some way who you somehow wrangled to say that you're an advisor and good for you, by the way, again. No, downside. But it's not the holy sh it tim Ferriss is associated with your deal? You know, shut up and take my money, that's, that's not what happens, right? There are some one offs where maybe if that person is a lead investor or maybe if that person has done some extraordinary act to kind of help drive the business forward maybe. And even then it's a hard maybe beyond that, the assumption that we're gonna be able to draft off their credibility. A great example is uh, this person's going to tweet about us and once they start tweeting about us, the internet is gonna go nuts. Not really true. Here's why they'll tweet once, maybe twice. How many times are they gonna possibly tweet about us? Right Until they're gonna lose their own audience.

Ryan Rutan: Not only are their advisers, they are are obsess ear's right. They just they can't get enough of us, right? They have nothing but free time to give willingly and who do they give it willing to just us, just us, Right? So it's gonna be them and us all the time or about a half an hour a month. Depending on whether you want to be on the realistic side of the unrealistic side of this coin. Yeah, a couple of things that I want to circle back on one. There's no downside to this. I'm gonna caveat that gently right? There's no downside to having them in the presentation, there's no downside to bring these folks on as long as you're not predicating your entire strategy on this. I think that one of the things that we see happen is that people get overconfident because so and so validated us, therefore everyone else will validate us, you know, not necessarily true. Here's, here's what ends up happening. They'll validate it for what it's actually worth. Here's the thing as a startup founder bringing on an advisor for the first time, you just don't know what that actually represents. That's why we're talking about it today share investors. Everyone else looking at the situation probably knows the reality of the situation, right? You bring on superstar adviser, they know exactly how much time input and effort that person is going to put into your company and what impact they will have. So yes, they will use that as validation. They will also apply that rubric to it and say, yeah, they're going to give you like .5% of the time For .5% of your company. So given up a fair chunk of equity forever for a little bit of their time right now. And so I think that there can be a cost and a downside to that. And I think that that just goes back to having that knowledge and understanding right. It goes back to the point that you made around advice when you don't know a little bit of knowledge goes a long way. It makes somebody seem like a super genius, right? Investors are all on the other side of that coin where they're going well, but we know what they're actually going to do for you, right, they're not going to step in at, you know, and be like, hey look, you seem to be having trouble with this investor pitch, Let me fly in and handle it for you, right? Not gonna happen, right? They're not going to jump up on a stage at C E S and pitch your product doesn't happen right? Yes. It gives a little bit of credibility. It's a nice little sticker. Think about it like having one of the brand stamps, you know, on your landing page, right? That's about how much value it has people looking to go, somebody else validated this Cool. I know them and they like these guys, right? They were on CNN, right? That doesn't mean CNN is in love with you means they ran one damn article about you. Right. Same thing for your advisors. That's about how much time you get out of them. It's an article worth right? Not an entire history of your company. So yes, you're right. It's not a bad thing to have them in. There should only be positive depending on how you as the founder, perceiving if this becomes like the cornerstone of your entire philosophy on how you're going to pitch the company. This probably ends poorly unless you're literally starting a company called Ashton kutcher and he's your superstar adviser, right, then that probably works out pretty well and it definitely won't work without

Wil Schroter: the product. If their promotion of you or their help goes even a little bit sideways, that's probably the last time you're going to hear from them. If they make to people in their Rolodex and all four people said not interested, do you really think they're going to dig deeper in their Rolodex and keep going right, This goes back to you time it, right if they tweet about it and a bunch of people you know tweet back saying that this product sucks. Do you honestly think they're gonna tweet again

Ryan Rutan: right?

Wil Schroter: Like the amount of ammunition we have with these advisers and is incredibly limited, right? But it's basically a fair weather situation now in our minds. That's not the case. Well no, they own part of the company that you know they're going to dig in. No they're not because they own such a tiny fraction, they don't give a sh it they care more about whether or not they're going to burn their rolex. Burn their relationships burn, They're following, you know, you name it right? The tiny fraction that we gave them, they can forget about in two seconds. So let's also not overlook the fact that they're not that bought in. Maybe they gave us a tiny token check of $10 or $25,000, they're not that bought in if our company crumbles and it doesn't make a lick of difference to them, they're not that bought in and I think you know, we have to consider that commitment when we're thinking about, you know, how valuable is that advisor relationship? 100

Ryan Rutan: percent. Yeah. I mean you couldn't be more correct on that front. That equity just doesn't really represents a ton to us. Right? So I want to be careful here. We're not minimizing that equity contribution, that's 100% of the future value of your company. Right? Well you said that a couple months ago on the podcast

Wil Schroter: and I'm

Ryan Rutan: repeating that isn't Yeah, you do. You that will be forever, that's forever money for them. It just doesn't represent that much of the time that they gave it away Because again, they're on the other side of this equation, they know what their inputs are going to be right and they're to your point, they're not going to give up 100% of their reputation or even 25% of reputation. Ten% .25 of your company. Why would they write? That's the reason you wanted them in the first place. That's why they were valuable to you. And now you're saying yes, please put all of that at risk for a tiny sliver of my company. That at this point isn't worth the paper our agreement was written on. Right? So who's going to do that? Would you want that person as your advisor if they did it would

Wil Schroter: be my question. Right. Well look, I honestly believe that like having Advisor is a great thing. I'm sure you would agree with the same. I don't think the problem is with advisers this isn't an anti advisor episode. This is an anti terrible expectations episode. This is saying that maybe what you just need is advice. Maybe what you need is an intro, right? Maybe what you need is just a little bit of a promo to help you with what you're trying to do. Maybe you just need a transaction. What happens is and what we're trying to to really, really kind of lay on here is it doesn't mean you need to get married to every person that says they'll help you. The validation is great but you don't need to give up equity to get it right. We can get validation in so many ways. We can get help in so many ways. What we need to do is stand back list exactly what we're trying to get done. More importantly make sure the person on the other end of this conversation has heard it and agrees is committed to doing that and what we need to do is say look, if someone agrees to all these things, if they perform all these duties then let's consider maybe bring them on as a permanent member. But until they do and until we've really gone through this whole process, let's just hang back. Alright so that was fun. But let's actually keep this conversation going. You've heard what we think about this, but you know, Ryan and I would really like to hear what you think. And we're online, like all day long, pretty much talking about every startup topic you could think of from fundraising, the customer acquisition to just really have to get all of this crazy startup stuff out of your head. And there's tons of other founders just like you they're weighing in on these topics, so you'll get a chance to just hang out and meet some really smart founders were also super, super easy to find. You head over to groups dot startups dot com and let Ryan and I hear what's on your mind, Let's get to know each other a little bit and let's just start having more of these conversations.

Copyright © 2022 Startups.com LLC. All rights reserved.