Most founders cannot explain why they don't employ advisors. I am not sure there is a rational explanation. It is just not part of their arsenal. Or, as Elena Verna put it, "Working with advisors is a superpower." My personal bias has been the friction of engaging with advisors due to lack of experience at scale. You just don't do it often enough to master it, like hiring. And yet, having a hungry team member coupled with an advisor who's been there and done that is possibly the most powerful setup.
If you are a founder, try asking yourself why you or your key people don't work with advisors. See what your mind tells you. I was hoping I could find out the reasons for not working with advisors from Davit. But all I got from him was that "it is just silly." Behind that seemingly shallow explanation is a profound statement that there is no good reason. That statement is based on a long track record of working with advisors and an even longer track record of not working with advisors.
Davit co-founded Krisp.ai - an s16 portfolio company. I love Krisp for its simplicity and for the best noise cancellation; it can even remove the voices of nearby people. Krisp is also the best note-taking and summarization tool of the many I tried. It works across all conferencing tools and does not require any extensions or to be awkwardly present on your calls. The most magical feature is the real-time accent correction. Krisp is used by over 2000 companies worldwide. Davit gave me a super down-to-earth interview, covering the journey from recruiting their first advisor, who never advised before, to working with superstars like Elena Verna. Davit Baghdasaryan, thank you for a great conversation.
After having a bunch of conversations about advising, it is time to start compiling insights. Let's talk about one of the most sensitive topics - the accountability in advising relationships.
How can you ensure an advisor has skin in the game? Advisors are the only team members without DIRECT accountability. WHY? Because they don't make the final decisions. "The main difference between an advisor and a leader with full accountability is that, as an advisor, I cannot make the final decision" - Elena Verna. Unlike permanent employees, when advisors fail, it doesn't reflect on their resumes. So, how can you deal with it?
You can ask advisors to invest or pay a significant part of the fee with equity. If you do the math right, these options turn out to be almost identical. What I'd stress here is that you should strive to always have an equity component even if your company is growing, you have plenty of cash and prefer not to dilute. The skin in the game is a powerful force to rely on - don't save on it.
And accountability is a two-way street. So, what about the accountability of founders? "Payment is also a way to hold founders accountable and keep the pressure on to execute. The cash component motivates them to make every hour count" - Sherali. Taking the other side now, advisors should charge a cash component, even if the personal situation allows to bet on equity only. This is especially true for younger startups that are more sensitive to cash expenses.
Combining the two, the optimal setup for mutual accountability is having both an equity and cash component when it comes to advisor compensation. The exact ratio can vary depending on the company's maturity and an advisor's life situation but strive to optimize the long-term alignment rather than the short-term PnL or dilution.
There are also non-financial ways to optimize the relationship for the best outcomes. I will talk about that in the next post.
There's still time to apply for the associate position at s16vc! I'll buy you an iPhone or something similar for a successful recommendation(post share counts) that results in the hire(we'll ask the candidates how they learned about the job).
s16vc is an early-stage $64m fund. We aim to become one of the top-5 European Founders for Founders funds in the next 5 years. In the past 2.5 years, we invested in 50 companies, already have 2 unicorns, and 4 more within 1 round of becoming a unicorn. We raised money from 150 founders and operators to build out our vision.
s16vc vision:
- We are a community of like-minded, open-hearted, playful, and imperfect entrepreneurs.
– We empower mission-driven founders to make the world more awesome through the power of technology and love.
– Our fund is a platform & a process to build the flywheel of founders supporting other founders.
Apply only if:
– You've consistently exceeded expectations from school to your last job.
– You can discuss various economic indicators off the top of your head and connect world events to early-stage startup valuations.
– You can build beautiful cohorts from a massive data set of half a million rows of broken data.
– You can spot a mistake in cap table calculations from a mile away.
– You can produce a data-rich memo that reads like a fairy tale.
– You can estimate the market size for a non-existent category in 3 different ways.
– You enjoy having all documents properly categorized and all data diligently organized in the CRM.
– You are too lazy to repeatedly perform the same manual tasks over and over again, seeking ways to automate them.
–You speak near-native English and are passionate about self-development.
We offer 0 formal corporate perks. Instead, we work crazy hours, often on weekends and late at night. You'll feel right at home if:
– You want the freedom to work when and where you want (must be available in the CET time zone).
– You optimize your life for the upside instead of protecting the downside.
– You want to earn a lot of money through a competitive salary and outsized carry. We don't pay cash bonuses.
– You want to be part of a flat pirate team of product founders (and one amazing ex-Goldman Sachs guy) that is building a fund and a platform that can invest and help founders at a huge scale.
– You prioritize a bullshit-free work environment above everything else
Message me to apply. Be very mindful of the requirements above.
I’m super happy to announce that s16vc is expanding our team. We have brought together more than 80 founders & operators as our investors to help early stage founders in their journey. In a little more than a year, we have been fortunate enough to invest in more than 30 incredible companies in enterprise software, consumer, food tech, health tech, video/audio communications, and other industries all over Europe and the US. We have also helped our founders raise their next rounds with some of the top funds in the world.
We think long-term. We build the fund as a product. We strive to exceed expectations and to innovate. We are values-driven, we are constantly learning and we have a lot of fun.
Please send this to anyone who may be interested in joining us in our journey.