You're Not Getting Enough Out of Your Advisors: The Case for Paying for Performance
By Pete Ryan
3 minute read
In the startup world, advisors play a critical role in guiding startups through the treacherous waters of growth and scaling. Many founders opt to compensate their advisors with equity, hoping to leverage their expertise without straining their cash reserves. However, at Hifive, we've learned through experience that there are better strategies than simply offering equity to engage and truly benefit from your advisors. Here's why:
Equity Isn't Always Enough
For many advisors, equity in a startup is seen as little more than a lottery ticket. The harsh reality of the startup ecosystem is that most new ventures fail. An advisor often needs to spread their bets across at least ten different companies, with the hope that one succeeds significantly enough to make the entire endeavor worthwhile.
The problem is, even if one of these companies does hit it big, the actual value of the advisor's equity — say, 10,000 shares — could end up being far less than anticipated. The outcome is uncertain, and the perceived value of their equity does little to motivate immediate, focused effort from your advisors.
Advice Is Cheap, Introductions Are Priceless
While most advisors are willing to provide advice, the truth is that advice is abundant and, often, cheap. What truly moves the needle for a startup are introductions for sales, hiring, and fundraising.
These introductions can fast-track a startup's growth, slicing through barriers that might otherwise take months or years to overcome.
Yet, securing such introductions requires advisors to invest more than just their knowledge — it requires them to leverage their personal and professional networks, a step many are hesitant to take without adequate motivation.
Advisors Are Spread Thin
Advisors typically have their own careers, businesses, or other advisory commitments, meaning they're spread very thin and focused on their immediate priorities.
They live in the "here and now," dealing with their own challenges and obligations, including paying bills. Without a tangible incentive to prioritize your startup's needs, it's unrealistic to expect them to go above and beyond, especially when it comes to making those crucial introductions.
Why Paying Your Advisors Makes Sense
At Hifive, we've discovered that money talks. Paying your advisors not only acknowledges the value of their time and expertise but also aligns their interests with your startup's success. When an advisor is compensated, they're far more likely to be proactive in offering the high-value contributions you really need, like introductions.
Given that introductions can act as a "cheat code" for achieving rapid results — especially in sales — it's perplexing that more startups don't invest in this area.
Companies readily spend significant amounts on events, sales development representatives, and advertising, yet overlook the power of a well-placed introduction.
In a landscape where connections and network influence can make or break a startup, investing in your advisors by compensating them for their introductions and active engagement makes sound business sense.
Advisors can be the lifeline for a startup, providing the wisdom, experience, and connections necessary to navigate the early stages of business growth. However, to truly leverage this resource, founders need to look beyond traditional equity-based compensation models.
By financially incentivizing your advisors, you not only ensure their commitment and focus but also unlock the full potential of their networks and expertise. It's a strategic investment that pays dividends in the form of accelerated growth and success.
Leverage a platform
In today's competitive landscape, connections are key. That's why we launched the Premium Connector marketplace—a game-changer for businesses aiming to scale. Our platform connects you with top-tier professionals and influencers in your target market, turning leads into opportunities through paid partnerships. It's not just a directory; it's your gateway to growth.
But why stop there? Hifive also offers tools to build your own network of paid connectors. This means you can create and manage your network, ensuring long-term success. Whether you're a startup or an established enterprise, Hifive is your bridge to business expansion. Connect, build, and thrive with Hifive.
Posted February 11, 2024
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