Photo by 1871/Gregory Rothstein
If you missed the event or just want a quick recap, read on for highlights from the discussion.
We launched the fourth program in our Entrepreneurial Education Series, “Attract World-Class Advisors, Board Members, and Investors,” on November 17th with our partner 1871.
The event brought together world-class entrepreneurs and investors Jim Gray (CEO, G-Bar Limited Partnership; Co-Founder, OptionsXpress), Amanda Lannert (CEO, Jellyvision), Badal Shah (Co-Founder and CEO, TurboAppeal), Michael Small (CEO, gogo), and Kevin Willer (Partner, Chicago Ventures) to share their insights on attracting and managing advisors, investors and board members with panel moderator Pete Wilkins (Managing Director, Hyde Park Angels).
Key Takeaways
Whether you’re dealing with advisors, investors, or board members, a few principles remain the same. Honesty, understanding, and chemistry are vital to the success of the relationship, just like in all relationships. Moreover, the relationships don’t work unless you come into each one with clear goals for your business. The world’s best advisor can’t help you if you don’t know what you need help, and no amount of capital makes up for misalignment between an investor and you. Both themes came up again and again during the panel, starting with advisor relationships.
Advisors
Finding advisors is not just about finding people with impressive backgrounds who you like. They have to add value to your business. Amanda Lannert made it simple by breaking out four categories of advisors: those who provide “strategic advice, access to capital, access to customers, and access to talent.”
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As an entrepreneur, you have to be laser-focused on seeking out the help you need, as opposed to listening to a jumble of different thoughts. Advice overload creates what Michael Small defined as “paralysis by advice,” and stressed that while “advisors are tremendously valuable, your decisions [are yours].” In other words, you should know what advice you need and find people who can truly give it to you, but still retain your own vision for the company.
Retaining your vision and making your own decisions doesn’t mean disregarding advice or tuning counterarguments out. That’s not productive for you or the advisor. As Jim Gray put it, “it’s not that they have to agree with everything I say, but I want to feel like I’m being heard. If they don’t want to be mentored, don’t get an advisor.”
Investors
One of the advantages of bringing on advisors early is that they may become investors, especially if you’ve maintain close relationships built in mutual understanding. However, there are risk to taking capital. In fact, nearly all of the panelists cautioned against taking on institutional capital unless absolutely necessary.
In particular, Kevin Willer highlighted, “If you don’t take capital, you hold onto your entire business. Bootstrap your companies if you can. Own them all.” Control and equity aren’t the only main factors you give up when you take capital. Amanda Lannert emphasized that “it’s very difficult to raise capital and get customers at the same time.” When you fundraise, you have to give up valuable time and energy you may need to grow your customer base, so you have to weigh the costs and benefits against one another.
However, if you need a first-mover advantage to succeed or an injection of capital just to keep up with sky-high demand, raising capital may be worth it. After all, said Badal Shah, “one percent of a couple hundred million is more than one hundred percent of zero.” Your investment decisions must hinge on what’s best for the company. If raising capital still makes sense for you, having advisors in place is a solid strategy for bringing on value-add investors who ultimately become value-add board members.
Board Members
Taking on investment means you need to prepare for a board of directors because as Pete Wilkins explained, “once you receive capital, most of your capital partners will want to be on your board.” Not all of your capital partners can or should be on your board; big boards lead to indecision and unwieldy meetings. Instead, you need to make sure that like your advisors, the investors you bring onto your board are value-add.
Nevertheless, just because they’ve invested capital and have deep expertise doesn’t mean you should simply cater to them. In fact, Amanda Lannert defined “one of the biggest mistakes entrepreneurs make [as] over-managing the board and placating the board.” While it’s important to remember that the board has a say in the direction of the company and ultimately determines who the CEO is, the company is still yours. You need to own your board meetings and manage your board effectively in order to ensure you’re acting in the best interests of the company.
Amanda provided key steps for building good boards and managing meetings well. It breaks down into four key areas:
- Keep your board small, three to five members is ideal
- Leverage your advisors for help in managing your board members
- Focus board member attention on strategy
- In board meetings, own the agenda from start to finish
Michael Small and Pete Wilkins added to this list with their own key recommendations. Michael stressed that when “management and the board don’t understand their respective roles,” chaos ensues, so as the Founder and CEO, you need to reiterate your core responsibilities versus theirs. Pete Wilkins added that, “you can gain consensus [among your board members] by setting board expectations in board meetings.”
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About Hyde Park Angels
Hyde Park Angels is transforming early-stage investing by taking a people first approach. The organization is the largest and most active angel group in the Midwest. With a membership of over 100 successful entrepreneurs, executives, and venture capitalists, the group provides critical strategic expertise to entrepreneurs and the entrepreneurial community. Nearly 40% of our members have founded a company, 88% are CEO’s, top executives or corporate board members, and 100% invest in startups. By leveraging the members’ deep and broad knowledge of multiple industries and financial capital, Hyde Park Angels has driven multiple exits and invested millions of dollars in over 50 portfolio companies that have created thousands of jobs in the Midwest since 2006.
About the Author
Alida Miranda-Wolff
Alida Miranda-Wolff is Associate Manager at Hyde Park Angels. Her role includes creating and executing marketing and communications strategies, planning and managing events, fostering and maintaining community and industry partnerships, and managing membership. Prior to joining Hyde Park Angels, Alida served as a manager, data analyst, and publication specialist at a multibillion dollar industrial supply corporation. She has led one of the most successful Kickstarter campaigns in Chicago history and worked with half a dozen startups in various marketing, content creation, and project management roles. Alida believes in creating valuable, spreadable multimedia content, and has done so as a freelance writer for several print and online publications.
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