Forming a couple of good mentor relationships can help bridge the gap between startup failure and success, especially for first-time entrepreneurs. But how do you actually get the right people to be your mentors? I previously explained that it usually requires some equity, but here is some more step by step practical advice.
- Identify people that would make good mentors, i.e. with the right domain experience. This is a brainstorming session, so think big. List out all the right people you can think of and that you find through your market research.
- Look through their LinkedIn/Crunchbase/etc and see if they do angel investing/formal advising/sit on boards. If they do, they will be much more likely to be your mentor and more importantly much more likely to be part of a good mentor relationship because they've had experience doing it before. You could go even further in this step by talking to their portfolio companies.
- Prioritize your list from #1 given what you learned in #2.
- Look for a warm intro to them (LinkedIn connection, friend in one of their portfolio companies, etc.). If you can't find a warm intro, know that some people (including myself and hacker angels) are totally fine with cold intros. It really depends on the person, but warm is always better so I'd really try and find a warm intro first.
- Send an email introducing yourself. This is the key part because you're making a first impression. Ultimately, if it works out there will be an equity exchange of some kind. No one wants to take equity in a company that isn't going anywhere, and companies go somewhere because the founders take it there.
Yes, you're asking for advice, but you're really the one who is going to do almost everything. So you really need to convey from the get-go that you are the kind of person who can make things happen.
Now I'm sure different people like to see different things, but this is what generally works for me (and I suspect others as well). First sentence say something like "Hi, my name is Kyle XY. I'm a first time entrepreneur starting a company doing Z and could use some advice."
Then write one paragraph about your history and how you came to be doing what you're doing, e.g. "I went to this school, and then started this in college and then did this and that and I had this idea and I've done X,Y,Z for it."
Then write one paragraph about the company status, e.g. "I have a prototype, and there are 2 founders and 1 advisor and we're at this and this stage."
Then a final paragraph asking for particular advice, e.g. "We're not sure what to do about this and think you would have a good perspective on it--what do you think?"
- Let's recap. You just wrote a four paragraph email, i.e. relatively short but not too short, to a person who actually does advising, asking for specific advice. Note that you did not ask them to become a formal advisor right now. Why? Simply because they don't know enough about you (and you them), so why would they (or you) jump into such a serious relationship?
You need to feel it out first, and starting a casual thread is the way to do that. It gives you the option of asking for real advice and seeing if the advice you get back is useful. It gives the other side the option and push to engage in a specific way and see how you react to their advice as well as how you communicate with them.
- Over the next weeks/couple months, try to keep the thread going. Don't write back every day, i.e. when it dies down wait a couple weeks and then ask another question, then a few more weeks and another. The assumption here is that you have real questions to ask, i.e. you really do need advice--that is obviously essential or it will not work. Read my previous post for more on that.
- Assuming everything is looking good from both sides, i.e. your company is really benefiting from the mentor's advice and they seem engaged, then after a month or two, ask them if they would like to be more of a formal advisor.
- If they say yes, then offer them an equity package on the one hand and their expected responsibilities on the other, and lay out the offer in the email. As I've said previously this needs to be a) enough advice to be useful on your end and b) enough equity to be useful on their end.
On your end, that usually means (at least initially) something like we're going to continue emailing like we've been doing (every few weeks) or we'd like to have a monthly Skype call for a few hours and would expect review of the issues beforehand.
On their end, the equity should be enough where it is motivating to stay engaged. In practice, I think this is 2%+. That is significantly higher than normal advisor relationships, and this shouldn't be one of those. This is a deep relationship. It's analogous (and at least I think of it in the same terms) to an angel investment. If you get less than about 2% (depending on company) that can be diluted down pretty easily to almost nothing on subsequent rounds of financing. Remember they're not getting preferred stock for this--usually options.
In particular, the equity grant should be vesting. I think two years, monthly makes a lot of sense. I think monthly because that's the cycle time of the advice and two years because at that point a lot of things change in a startup company. You can always re-up. The vesting of course allows either side to cut-off the relationship with minimal harm.
- Expect a bit of back and forth about the offer. Some points that may be of concern are your financing plans, triggers (what happens if you get quickly acquired, for example), etc. Wrt financing, the presumption is you would offer them a place in your round.
And you're done! Well, just beginning...
P.S. I have rapportive installed and so see your LinkedIn picture when you email me. So check that out. I also like to look at peoples' blog/twitter etc., so just keep that in mind as well. I suspect others do the same.