How to get advisors on board!?

tacofries

Hi everyone,

Basically I started a company fairly recently and we are now at the stage where we would really like to get a number of advisors on board just to add a bit more experience to the team and help strenghten our prospects of receiving investment from the Competitive Start-up Fund.

I have two people in mind who would suit our company perfectly however these men are running multimillion euro companies. I have met them both on an informal basis and they are top class guys so I would love to have them on the team. My question for you is how do I go about getting these people on board? What is my best method of approach?

Obviously I want to avoid giving away any of the company if at all possible and all I am looking for is the odd cup of coffee and the ability to lift up the phone and speak to them if an issue ever arises or if I'm looking for some advice.

Thanks for any and all help,

jimmii

Think you'll be lucky to get them to put much in if they have no equity in the business. Would you not be willing to give up 5% or so? If they have experience of scaling up a business that you don't have it could be worth a whole lot more to you than that.

They might be willing to act as a mentor but if their advice is valuable to you then I would be looking to be able to offer them something in return.

Have you approached them yet?

tacofries

jimmii wrote: »

Would you not be willing to give up 5% or so? If they have experience of scaling up a business that you don't have it could be worth a whole lot more to you than that.

Have you approached them yet?

You see Jimmii we will be giving 10% to the CSF(competitive start-up fund) and then next year we will be selling off approx 15-20% to a private investor. Ideally I would like this private investor to be one of the advisors that I have in mind so I do want to give them a share in the business eventually. I just feel that the business has too much potential in order to give away a stake for free, especially when I am not looking for much help, just the odd bit of advice.

I have met one of them for some help with a business plan for a competition I was in and he was really savy and knowledgeable (plus a really nice guy).

I also know the other advisor to say hi to but I have never talked about the business to him. I actually work in one of his companies though so I feel I could get a meeting with him pretty easily.

jimmii

May as well start with a meeting see what happens! You are only giving the equity away for free if you value their expertise at zero which doesn't seem to be the case. Having people with an established record may well mean getting funding is easier in the future too. Some people seem to like being a mentor so you might find its something that may appeal to them with little more in it for them. Just have to ask and see if they have the time! Hopefully they do!

If you are looking for investors soon enough at15-20% could you have each buy in at 10%? Having two people able to give good advice as shareholders seems like it could be very useful!

Axwell

Having applied for the CSF before the strength of your own team is going to be more important than who the list of advisers you can muster up is. Its great to have some advisers on board but EI will be well aware that when there is no equity for those people involved that they are just there in the capacity of the odd bit of advice or buffing up your application. I would consider core team the core team and potential job creation the biggest boxes to tick with them so make sure you cover those and that your core team has the skillset to cover the key areas of the business.

Also the 10% equity EI take as part of the CSF is part of the legal process on their side to be able to give the money and not something to get too tied up over at this early stage. 10% of 0 is 0 and thats where you are at the start unless you have existing revenue/sales when going for the CSF. If the company succeeds and outgrows CSF then you will become a HPSU and/or be looking at private investors and could easily pay off the 10% to EI if and when the time comes.

Out of the two guys you are talking about you said you work for one of the guys companies. How does it affect your current contract that you are in the process of setting up a startup while working in his company? Something to consider as its not very clear in your post what the position you are in is.

Best approach initially is as you said meet them for a coffee and see if they are willing to be a mentor/adviser and would be ok with you putting them down as non executive adviser of the company. Be open with them though about it and the CSF application, and what you are looking for them in terms of advise or help. One has already given you help and advice before and will probably be ok to do it again as long as you are upfront.

Best of luck with the application.

tacofries

Axwell wrote: »

If the company succeeds and outgrows CSF then you will become a HPSU and/or be looking at private investors and could easily pay off the 10% to EI if and when the time comes.

Out of the two guys you are talking about you said you work for one of the guys companies. How does it affect your current contract that you are in the process of setting up a startup while working in his company? Something to consider as its not very clear in your post what the position you are in is.

Hi Axwell,

Just to make sure I get this right, do you mean to say that if the company goes well then I would have the option of paying EI their money back in return for the 10% stake?

Regards the man I work for, I am only a part time staff in a business which is totally unrelated to what my company is so there is no worry there at all!

In relation to the team, there is just 2 of us. Neither of us has experience with manufacturing abroad or sales in retail. To combat this however we have taken part in a number of competitions which included a lot of business mentoring and have done very well in them. We are also currently on phase 1 of the New Frontiers Programme and I am confident that we will make it onto phase 2. Do you think we should still try and extend the team? The problem is we do not have any money whatsoever for wages and aren't willing to give a stake in the business away as I do believe we can make this work by ourselves until a big growth occurs.

Thanks for the advice Axwell,

Axwell

No I am saying you can buy back the 10% from EI, at whatever the value of that 10% is at the time. Its not something they like to do , at least early on, but the option is there is what we were informed at the time. Someone at New Frontiers will surely be able to advise you on all of this anyways before applying.

To be honest if I was you I would be thinking long and hard do you need that 50k - it may seem like a lot of money when you are working part time and cant afford wages etc and basically have no money starting off. But its 10% equity you are giving away and the support from EI after you get the CSF seems to be pretty poor. At least in the area of business I was applying, totally different area to manufacturing and we didnt get it. But based on those I know that did and the support they got I would be confident most would say it wasnt worth it. You seem confident enough of a private investor within a year, if that's the case then is it worth giving away 10% now just for 50k? Also whats the feedback you are getting about your business on New Frontiers or from the two guys you met already and hope to have as advisers. Do they believe the business has the same potential that you do, not to be harsh but its always easy to think your business is the next big thing and its going to do amazing until you get some proper feedback or advice from others looking at it from the outside.

If you have the belief in the business then consider working part time until its making enough money to give up the jobs and go full time or look at getting a small loan or whatever it takes to just get you up and running. If you are already on New Frontiers then you should have access to mentors and people who can give you advice already and help you with the application for CSF if you go that route or look at other options.

New Frontiers will stand to your application but your team is small so they will be looking at your experience and the gaps. Not having an experience in manufacturing or sales is going to hurt you for sure so you need to look at how you can prove to them you can succeed with these gaps in the team, be it through advisers, taking on another member or working in this area part time to build up experience etc. Also as I said before job creation is the big one. Have you looked at a previous CSF application, are you aware of the specific criteria in relation to jobs and turnover?

If you get to phase 2 of New Frontiers or even before then I would be talking to someone there about CSF and see what advice they give as they will better know your product and business, I am as I said speaking from my experience and those I know but in a totally different sector to you. You are lucky enough to be on New Frontiers so use it for all its worth.

tacofries

Axwell wrote: »

1.) To be honest if I was you I would be thinking long and hard do you need that 50k

2.) You seem confident enough of a private investor within a year, if that's the case then is it worth giving away 10% now just for 50k?

3.) Not to be harsh but its always easy to think your business is the next big thing and its going to do amazing until you get some proper feedback or advice from others looking at it from the outside.

4.) Have you looked at a previous CSF application, are you aware of the specific criteria in relation to jobs and turnover?

1.) The reason I am so keen on the CSF is because if we fulfil certain criteria they will match any private investment. Despite this extra cash injection from the CSF, by EU law their stake will still only remain at 10%. Thus we are getting great value for the equity given away.

2.) We have someone who is very keen to invest. By this I mean he has said to us that the money is there whenever we are ready. Unfortunately he wouldn't be able to open the doors that the 2 advisors could and so I am holding off on him for the foreseeable future.

3.) The product is brilliant. Showed it to a number of people now and the reaction has been extremely positive. We won a fairly big competition as well so it's not just all in our head thank god!

4.) We are applying for the CSF in September but I already have started filling it out so we will be well prepared on that front!

I am really wondering should I wait until I have protection on the product before approaching a potential advisor, or should I first go to them looking for advice on business strategy without showing them the prototype?

I don't want to look disrespectful but at the same time I want as liitle people to see the product as possible.

Axwell

tacofries wrote: »

1.) The reason I am so keen on the CSF is because if we fulfil certain criteria they will match any private investment. Despite this extra cash injection from the CSF, by EU law their stake will still only remain at 10%. Thus we are getting great value for the equity given away..

Are you sure on this bit? Could be new, its gone through a few revisions since I originally applied but it was 50k for 10% with a matched 5k investment from the company or an investor. If they will additionally match any other investment then that's certainly a good reason to consider it. Protection on a product is going to be costly, at the very least have an NDA for any potential discussions but with most products once they become a success China kicks in and its being copied multiple times and there's little you can do about it.

If you have someone willing to invest with the money there waiting and have these other 2 potential investors with the contacts would you not consider offering them all 3 of them equity and going that route? They could fast track the business in a year far beyond where it could be with just CSF and some helpful advise from the 2 guys if you don't offer them equity. Again as I said Manufacturing isnt my area so I am sure others will be around tomorrow with plenty of advice but just trying to highlight other options or considerations maybe as to the value of the CSF and EI.

tacofries

Axwell wrote: »

Are you sure on this bit?

I am sure others will be around tomorrow with plenty of advice but just trying to highlight other options or considerations maybe as to the value of the CSF and EI.

Yep, I was initially told this was the case by someone who has received investment from the CSF and then I rang them just to make sure!

To be honest I am sort of scared in trying to deal with 3 potential investors, as in who gets what stake and what commitment they will have etc. This is my first big venture and so I am really trying to figure out how to do it the best/quickest/most profitable way possible. That is an option though!

Please give any options which ye come up with!

tacofries

tacofries wrote: »

Yep, I was initially told this was the case by someone who has received investment from the CSF and then I rang them just to make sure!

To be honest I am sort of scared in trying to deal with 3 potential investors, as in who gets what stake and what commitment they will have etc. This is my first big venture and so I am really trying to figure out how to do it the best/quickest/most profitable way possible. That is an option though!

Please give any options which ye come up with!

Very hard to know what you should give investors/what work they will do without knowing more about your business/product. I have a side business in distribution - www.distributeyourproduct.com so I know quite a bit about bringing products to market and the various hurdles as Ive done it in a variety of industries. Its a long way from easy let me tell you! So what kind of person comes on your team could be crucial.
Probably your most important criteria for an investor is that he can provide you with further credit, without looking for more equity.

Lets just say you've made a new magic pen. You start selling it to the major stores, whom will only start a trial order in the beginning - extremely rare you'll get a big order for all the stores early. So say all in all you get 10 big stores, all ordering just 1000 units each. Problem is in order to keep the cost competitive you need an MOQ of 30,000 units at a factory. So you need someone to fund that extra stock, as the bank or finance companies won't do it without the Purchase orders as back up.
I ran into this problem with an amazing product - I had units sold of 25,000, then the manufacturer changed the MOQ to 210,000, and I could't get finance to fulfill the orders after spending a ****load to acquire the orders in the first place. No one would bridge the gap.
So dealing with selling a product you will need to distribute in different forms, having a credit line is very important, and for me one of the most important things you should look for in an investor.
If you need some help just PM me.

edward2222

tacofries wrote: »

Hi everyone,

Basically I started a company fairly recently and we are now at the stage where we would really like to get a number of advisors on board just to add a bit more experience to the team and help strenghten our prospects of receiving investment from the Competitive Start-up Fund.

I have two people in mind who would suit our company perfectly however these men are running multimillion euro companies. I have met them both on an informal basis and they are top class guys so I would love to have them on the team. My question for you is how do I go about getting these people on board? What is my best method of approach?

Obviously I want to avoid giving away any of the company if at all possible and all I am looking for is the odd cup of coffee and the ability to lift up the phone and speak to them if an issue ever arises or if I'm looking for some advice.

Thanks for any and all help,

Hhhhmmm try to have a meeting with them, well,
its really hard to get the time of these kind of
people.

For me the best way is to ask them directly
tell them what you want...
Honesty sometimes helps .

Duckett

For the purposes of securing CSF support you don't actually have to have advisors on board. The fact that you are messaging your intent to appoint experienced advisors may be sufficient. However it would be nice to have had discussions with the and you should advance early stage conversations if possible. If the alignment is right they should be curious about your technology and give you an hour of their time as you prepare your application. If they are experienced investors they will also await to see how you get on in the CSF process .......

pedroeibar1

CSF is a red herring on this topic heading. There is a huge difference between a friendly/well-intentioned meeting with someone for a coffee / taking a phonecall and becoming an advisor. Why would/should any senior businessman with long experience and great contacts bother being locked in to advising a company in which s/he would have no control, not much reward and the major downside of reputational damage (and probable liability if adjudged a shadow director)? I would run a mile from anyone who offered to accept that role and ignore any company that offered it without a proper reward/shareholding structure!

tacofries

pedroeibar1 wrote: »

I would run a mile from anyone who offered to accept that role and ignore any company that offered it without a proper reward/shareholding structure!

I know it is said all the time but my company is globally scalable. The product can be made the exact same (bar packaging) for every single country and there there is no special safety regulations on its sale. It perfectly fixes an internationally experienced problem.

With this in mind, loosely, what sort of reward/shareholding structure would you suggest?

tacofries

tacofries wrote: »

I know it is said all the time but my company is globally scalable. The product can be made the exact same (bar packaging) for every single country and there there is no special safety regulations on its sale. It perfectly fixes an internationally experienced problem.

With this in mind, loosely, what sort of reward/shareholding structure would you suggest?

You've probably heard the phrase "wouldn't get out of bed for less then 10%" before!

Download the last 5 or six seasons of Shark Tank and Dragons Den Canada. They will be a good education for the road your taking.

pedroeibar1

I would not tie it down to a percentage, both sides have got to look at the figures and take a realistic approach. A person bringing quantifiable scale to a product deserves reward, a person with a (realistically) superb product should not be forced to give away too much. The 'dragon' is not always the greedy one.;)

pedronomix

There is a bit of running in walking shoes about this dilemma. I would suggest approaching your targets with a request for some mentoring, generally people are keen to do their bit for start-ups. Sell them on the idea that you will be moving to the next stage when you have your ducks in a row and this represents an opportunity for them to get an insiders look at your business etc with a view to a more formal hands-on/investment relationship later. Certainly worth a try and you have nothing to lose, only to win!!