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July 10, 2010

The Role of a Company Advisor, and How to Spot Bad Ones

Parallel to my public activity on the blog and in various social networks, piled on top of my real-world work with Paladin Advisors Group and the home life of raising twins, I have added a number of advisory roles to startups in the last two years. The first to come my way was BuzzGain (since sold to the Meltwater Group), and current positions include, in order of chronology, SocialToo, TeensInTech, MyLikes and QwoteBook. I've been approached for other roles, but for various reasons opted out. My activity with these companies, their founders, engineers and others, as well as seeing other activities from fellow advisors, has put me in a position to recognize the good and the bad, so I thought I would share.

First things first, an advisor to a company, especially a startup that is pre-revenue or in the early stages of revenue recognition, is not lucrative in any way. Most companies tag four or so advisors, offering 1-2% of the company, and in some cases much less, for their work, and no money changes hands. It's not an official position in the company, like an employee, and there is no fiduciary responsibility, as would be the case with board of director seats in a public company.

The role of an active and engaged advisor is to provide guidance and assistance to the company, using all their resources available, and to find opportunities for the company to find new partnerships, users or visibility where appropriate. This can mean sitting in conference calls with engineers where the service's roadmap is discussed, and offering feedback on direction or lobbing suggestions yourself. This can mean acting as an early adopter and finding holes in the product, sending them by e-mail and offering an alternative. It can mean introducing people at the company to people within your own network, who may be interested in the product themselves, or can bring the product more awareness. It can even mean sitting down with PowerPoint and cranking out a VC deck if fundraising is in the cards.

But in almost all cases, advisors don't write a single line of code, and the capabilities and direction of the company still comes from the CEO/founder and the engineers themselves who are turning ideas into reality. No matter of advice and enthusiasm can help when milestones are missed or priorities of the individuals impacting the company go astray.

What an advisor is absolutely not is an unabashed fanboy and overly enthusiastic booster of the product. Any time it is clear that an advisor has slipped from a partner of a company to an aggressive spammer who can't fail to mention the company or its products all over the Web, a line has been crossed. But it can be helpful for the person to have the company in mind when opportunities arise throughout the extended network, and to occasionally message on their behalf - with tact.

I initially worked with BuzzGain because I believed PR companies were doing a very poor job of targeting the blogosphere. That turned out to be true and I think still is. I teamed up with ReadBurner because I believe strongly in the act of highlighting popular shared items on the Web and enabling discovery. Unfortunately, that project didn't meet all my hopes and was closed at the end of last year. I worked with SocialToo because Jesse Stay had introduced some top tools to manage Twitter streams and followers, and to block spam. Twitter continues to evolve as does his product, and it is essential for me. I added my name to TeensInTech because I want to help the next generation of geeks to have a central place to communicate and share ideas. This project is still ongoing. I joined up to MyLikes because I detest unfocused advertising and want to see people benefit from trusted recommendations. And most recently, I am working with Qwotebook to help bring a permanent repository for the amazing things so many people are saying which are often floating into the ether.

I have seen some of my peers sign on as advisors to companies even if they privately don't like the product, simply because they think they might make money in the end. This is not an advisor you want. I have attended advisory board meetings only to have the same people not show up who didn't show up last time. They are not advisors you want. And I know you don't want advisors who are unwilling to risk their own "personal brand" to do work on your behalf.

Two months ago, one company approached me with an option to be on their advisory board. I said no. Not because I didn't like them or because I was too busy or because I didn't think they had a future. It was because I just wasn't familiar enough with their product and didn't want to be disingenuous. Since that time, I have started using their product and think it's great. And in that time, an announcement already went out with their new advisory board, without my name on it. Do I consider that a missed opportunity? Not really. Even if I miss out on some great engagement and a few dollars some day, it was not the right time, and my intentions would have been wrong.

Entrepreneurs are already stretched with their resources and their time. It is critical that when the time comes to find partners who are going to have blood and sweat equity with you, who can help build your product and find you new outlets, that you pick the right people who are entrepreneurial themselves, who are willing to take calls at odd hours, and who truly care about helping you achieve your vision. If you choose wrong, all you have done is given up equity to people who are along for the ride, and you may have to work even harder to chase them down. So do choose well.

I told you before, I am not a fanboy, not even to the companies I am working with where I do get deep insight into their plans. But I do care, and I will keep fighting on behalf of users from the inside, and then fighting for them when the time is right.

Disclosure: I am an unpaid advisor to SocialToo, TeensInTech, MyLikes and Qwotebook.