It is essential for business owners and leaders to have proper guidance regarding their management and processes, especially since it feels so lonely at the top. That’s why the assistance of professional advisors is imperative in this regard. However, one must not forget that getting advisory services is a two-way street, and your business will always be your baby at the end of the day. Elliot Begoun sits down with Chuck Cotter of Holland & Hart LLP to delve into the most important points to remember to make the most out of your working partnership with advisors. They discuss how to determine their commitment and deliverables upfront, the red flags of unreliable professionals, the right equity share to set, and why we must not religiously follow every piece of advice like gospel.

—

Listen to the podcast here

Chuck Cotter On Finding The Right Professional Advisors And How To Make The Most Out Of Them

This is a show about your questions. Back for another time, my brother from another mother, Chuck Cotter. We thought we’d talk about all kinds of things. One topic that has come up repetitively has been around advisors and advisor agreements. How to compensate advisors and the difference between establishing a board of advisors and a board of directors. We’ll tackle that at the onset but we’ll go in whatever direction your questions take us. We’ll do the obligatory introductions for those reading the first time. Chuck, introduce yourself, tell everybody a little bit about yourself and why you aspire to be my younger brother.

I’m Chuck Cotter. I am the Head of the Consumer, Food, and Beverage Group at Holland & Hart. It’s a law firm. I’m a lawyer and advisor for consumer products, brands and investment funds. We represent over 100 brands in the space, a lot of the top tier funds, and do 60 to 70 venture and M&A deals a year in the space. That’s what we do.

I say this often about Chuck, Finity and the team, in general, is that they have business minds. They’re lawyers, but they’re also good business advisors. To me, that makes a big difference because they think about it from how it’s going to impact the business, just not how it works from a legal perspective or words on paper. I’ve been getting asked a lot maybe it’s because I’m speaking a bit about it. That’s the importance of every founder having their community of champions. We talk about three types of communities, consumer which is your consumer tribe, your collaborators which are your peers and other folks in the industry or around who are working in concert with you.

There’s that team of champions, those people who have fought the fight before, who can help open doors and do all those things. The question that’s been coming up is if I’m interested in becoming an advisor, how does that go from being informal to formal? What does that look like? Maybe we’ll talk a little bit about that. Let’s talk first about what an advisor does and what they don’t do. Do you want to chime in or do you want me to go first?

I’d like to start with, what’s the difference between a board of directors and a board of advisors or a director or an advisor? A director is someone who will give you advice but who also has a vote on company decisions and has duties to the members and stockholders at large. An advisor is someone who gives you advice for the purposes of decision-making and steps out of the way. They don’t have a vote in the decision, only you do and other directors. It is truly advice.

That’s an important distinction. I don’t know how you feel about it, Chuck, but I typically urge earlier brands to wait until they’re further along and until they bring in institutional money. If they’re raising to form a fiduciary board of directors, when you add governance and all of that stuff into a business, it’s a different dynamic. Oftentimes having one too early means you have to unwind a lot of things and that adds complexity. What are your thoughts?

I agree. If you’re a corporation from a technical perspective, you have to have a board from the day you’re existing, but it could be a board of one person, the founder. In that sense, the founder makes all the decisions until you’re raising meaningful money from folks, therefore you should be giving them a board seat and putting around the rigor and structure of having quarterly board meetings and all that stuff. Until that point in time, keep it as informal as possible, stick with advisors.

There are times where advisors will grow into boards, but let’s talk first about single advisors and then an advisory board. What have you seen best practices around how to engage with an advisor? We’ll talk about the compensation and how to structure it, but engagement around advisors and how to select them and how to choose who you need around you.

With the whole term board of advisors or advisors, I’m like, “What do you need a board of advisors for?” I know people use that term all the time, “You need advisors.” Unless everyone’s meeting together at a particular time, the term board of advisors is confusing. I generally think the best advisors you can get when you’re early stage are people who will start giving you advice and helping you before being a formal advisor and having an advisory agreement with some equity or whatever your arrangement is with them. That’s a good way to help select them as well. Folks who genuinely want to help and in genuinely wanting to help have given you some good advice and you want that to continue.

As much as it pains me to say this, I couldn’t agree more. First of all, I hate the concept of a board of advisors because good luck trying to get a bunch of advisors to coalesce around a single scheduled time. What those wind-up beings are typically reported out meetings. That’s not a benefit to you as a founder and it’s not useful or beneficial to an advisor. An advisor is just that. When you’re stuck in dealing with something or when the shit hits the fan, you want the stable of people that you can reach out to think through, give you the advice and help you understand the unintended consequences of any of your decisions as you need and when you need it.

I also think it’s important to date before you get married. Personally, if someone says, I’m happy to give you advice, but not until you give me equity. That’s pretty much for me, the end of the conversation. People should willingly want to give you advice because they’re excited about you and the project and are happy to do so. That after some point of utilizing that advice. There is a recognition that it should be formalized and there should be some reciprocity and that you want this person in the fold and alongside you for the duration.

It’s probably helpful for those listening and thinking who wants an advisor to draw a distinction between advisors and people whose business is providing advice. It sounds funny that I want to exclude people whose business is providing advice, but that’s not what we’re talking about with advisors. We’re talking about advisors. It’s people who do have their own businesses, have their own brands, have been investors, have done any number of things, and who will advise you. I don’t mean a consultant who has a consulting business, who you can fairly expect or a lawyer. You can fairly expect after some initial conversations are going to be like, “I’ve got to have an engagement letter because this is our business.” That’s not who I’m referring to when I talk about advisors.

That’s a great point because the other thing is you have to understand what’s realistic to expect from an advisor versus somebody who’s doing this as a full-time paid gig. You can’t expect advisors to be at your beck and call. You can’t anticipate that they’re going to do a huge amount of heavy lifting. That’s what you have to be mindful of. I see a reoccurrence of something that is not healthy. These brands and founders collect vanity advisors. They want to put big names on their decks and be able to use that as they raise or talk. The challenge with that and this is my opinion. It rings as complete bullshit most of the time. Secondly, those people rarely have any bandwidth to give you meaningful advice or time. That’s where the value is. No vanity advisors, please.

It’s like a resume where someone puts something that they think will impress the reader, like language or a skill that they don’t have. Imagine you’re in a pitch meeting and someone says, “Walter Robb is on your board of advisors. What does he think about your plan to expand into such a region?” If he doesn’t know about your plan and therefore can’t even have an opinion on your plan, it’s tough to list him as an advisor and have any credibility.

It’s worse, yet they call Walter and say, “What do you think about what Chuck’s doing?” They’re like, “Who?” Here’s what I would suggest. First of all, know your weaknesses. All of us have strengths and weaknesses. Chuck doesn’t have any weaknesses, but almost all of us have weaknesses in either aspect of our business that we don’t feel as comfortable about and potential blind spots that we might have. The best advisors are the ones that complement those first. That’s where I always start. If you’re strong in innovation and R&D, then you don’t need to go out necessarily make your first advisor somebody who’s in innovation and R&D. If you struggle, for example, in finance or ops or supply chain, then having somebody there that you can work through those conversations or even that the service providers or the folks that you’re trying to bring in and get some coaching is key. What do you think about setting that up?

To your point, people who are genuinely interested and engaged are not just the big name. They need to have credibility and knowledge because you and I have both seen it. People who sell things that they can’t provide but complementary folks who have a genuine interest in what you’re doing want to support it and have shown that by how much advice and time they’d given you before they’ve even talked to you about what an advisor or a grant might look like.

Another kind of related question around advisors is, what do you do when they don’t make themselves? They say I love what you’re doing, but then they don’t do it.

It’s a touchy topic, especially with people who are big names or influential. You’ve given an advisory grant too because you want it to be able to put them in your deck and all of the sudden, they haven’t returned your phone calls or emails for two months and they’re vesting shares that you gave them for advice. You’re in this position with those folks where, is it even worth even though they’re not giving me any advice terminating this arrangement and pissing them off? Which is exactly why you want to make sure that they have shown they’re committed before you start giving them things like advisory shares. If you’re not in that position, to me, it’s simple. If I’ve promised someone shares to give me advice and they disappeared, I have a conversation where I say, “I want to make sure we were aligned on expectations. We gave you a share grant. This is what we’re going to be doing for that. You’re not doing it, so we either need you to do it or we need to stop vesting the share grant.”

First of all, one of the keys in all of this is before you worry about even trying to codify this into advisor grants or an agreement is to come to a conversational level set of expectations. In other words, if you’re asking somebody to be an advisor, formal or informal, the next aspect of the conversation is what you’re needing for them to be as an advisor such as, “Will you be able to respond to emails I send you within 24 hours or 48 hours? Can I get 30 minutes of your time once a month to walk through some things? Will you be willing to look at monthly financials and give me feedback or review a deck that I’m going to take to a retail,” or whatever those things are. Get those expectations out there and have the dialogue back and forth.

They might say, “I can’t guarantee I’ll get back to you in 40 hours, but I’ll always respond within the same week. I can look at quarterly financials. I’m happy to look at a monthly, but I can’t promise that I’ll be able to dive deep and respond.” What helps me as an advisor is if I get an executive summary and specific questions. You want to have that kind of dialogue so that you get the most out of the relationship, because believe it or not, most of the advisors you are likely to choose are going to be busy. You can desensitize an advisor by overwhelming them with emails or information or detail to the point where they begin to put it all into the parking lot because they can’t triage it and can’t deal with it. Part of getting the most out of the advisors is having a strategy or approach to be mindful of where they’re at.

That’s a good note for the entrepreneurs. It’s the opposite of the advisor who disappears because they never were being helpful. The priority state of a lot of entrepreneurs for everything is, “This is fucking urgent,” but it isn’t most of the time. Your advisors will be able to tell the difference so be good users of your advisors if you want them to be good advisors. Don’t constantly barrage them with, “This is urgent. I need your advice,” because they will check out. A lot of the big advisors, even if you’ve gotten them legitimately interested, will still psychologically perceive it as they’re doing you a favor. You don’t want to make them feel like it is not worth it.

You also want to make sure of a couple of things, to add to that urgency, that fire drill mentality. That is a massive challenge for many entrepreneurs and that’s not a dig, it’s a reality. It’s a reality that, if you can triage and batch things and build more structure, you’re going to get more value in return from the people you’re working with. If your reactivity causes their reactivity, then it’s usually a diminished return. If you’re proactive and it gives them time in return to be equally proactive, the quality of the interaction, the quality of the conversation, and the input goes up.

I just got out of a retreat and one of the presenters was presenting the science of structured weeks, how to batch things into certain days and all of those things. It’s a fascinating approach to do it. I bring that up again because if you’re going to bring advisors and what you want is to maximize their value to you. One of those ways is to make sure that when you do engage them, that you’re engaging them in a way that gives them the time to digest the information, respond to it thoughtfully and give you good advice.

A practical example would be if you know you’re going to deliver a deck to investors in ten days, if two days before that delivery date you asked your advisors for their input, some won’t respond. Some will give you rushed, not particularly thoughtful advice. You may get lucky, and some can fit in some thoughtful advice. You give them a full week and you’re going to get some thoughtful advice it’s going to make that deck much better. It’s about being proactive and ahead of the curve with your advisors.

Also, you get the hold them a little bit more accountable that way too because if you give them a week or if you give them 10 days, 3 days, and if they haven’t responded, you can remind them. There is some advantage to that. It’s a better way to learn to manage your business as a whole is not to treat everything as a drill and to try to batch things. That’s going to be a topic for another episode because the person that presented that science of structured weeks, we’re trying to get onto the show because it’s an interesting thing. Let’s talk about advisor agreements because this is what a lot of people ask, how much equity do I give up? Do I vest in it? Should I be doing it with a vesting schedule? Should it be done on time? Should it be done on milestones? What are your thoughts around all that, Chuck?

Here’s the gist of what I expect and advisor agreement to have. You’ll keep everything confidential. There should be a confidentiality provision to any advisor agreement. Here are expectations of what you are going to do for the company that, in some cases, is as light as you’ll be available, ad hoc for phone calls and emails. We will have one one-hour meeting in person or on Zoom or whatever in a month. For others, it’s far more detailed because of their particular skillset, you will review X each month and provide us feedback in addition to the other things. As far as the compensation, it’s very rare to give advisors cash for an early-stage company because their business is not consulting. They are serving as an advisor to you and their business is something else or they’re retired or whatever.

Instead, you grant them equity, how much equity is normal, depends on how far along you are because 2% of a company that’s pre-revenue is different than 2% of a company that’s already doing $10 million in revenue. How it vests? I would say the default would be a time-based vesting schedule. It’s shorter than the default employee time-based vesting schedule, which is usually four years with a one-year cliff. For advisors, you’re usually looking at 2 to 3 years to vest the grant fully. Usually not with a one-year cliff, because an advisor will say, “I’m providing you plenty of value in that first year.” In particular, circumstances where there’s a very specific deliverable or set of deliverables, you might tie vesting to that, but otherwise, I tie it to time. If someone’s not doing what they’re supposed to do, you terminate the arrangement and they stop vesting.

I agree with that. I know people have tried hard to put milestones or deliverables in and that’s very difficult to hold it, but in my opinion and Chuck, I’m asking for yours, you should have clarity around your advisor agreement. When you’re issuing any advisory shares or grants, you are doing it with an agreement that specifies what the expectations are of the advisory arrangement. Would you not suggest that?

One hundred percent because if they’re not delivering, the conversation is so much easier than, “We talked and I thought you were going to do something different.” It’s, “Not only did we talk, we put our expectations in your advisor agreement and you haven’t been delivering.” That’s an easier conversation to have and it also keeps you both honest.

It’s the appropriate level of formality to a business as you scale. One of the toughest things I think early on is to think bigger than you are from a structure standpoint. You have to think about what this business is and it has to be bigger than you or a relationship. It needs to be something that a company would establish. It’s really important to get into that habit of codifying and coming to clarity around those expectations. The other point that I was going to add to the compensation thing is getting back to who your advisors are. As you move up the food chain, pun intended, if advisors and you’re trying to woo bigger names with busier schedules, it’s going to cost you more theoretically. Keep that in mind too.

I want to talk a little bit about vultures and things to avoid because people selling themselves as advisors to early-stage entrepreneurs who know their intent and their product well but don’t necessarily know what the ecosystem is, what’s fair and what people should be doing as advisors? It’s where I see people get taken advantage of because it’s also the period of time where they don’t have a lot of professional advisors that they have built relationships with that they can vet what people are asking for like, “If someone is asking for this, is it crazy?” If you don’t have that type of person yet and you don’t know who to look out for, you’re more likely to agree to crazy things which you’ll regret.

For example, before you consider, Chuck, being an advisor here, you need to know. To be blunt, that pisses me off. For the most part in this industry, we are very fortunate that most of the players and most of the participants are trying to do right by our founders and right by people in general. There are those that don’t and there are those that are predatory. There are also, I will tell you in my experience, some that appear predatory but are naive. They don’t understand what they’re asking for and what’s fair. For example, we’ll see some early funds or small incubator programs ask for huge advisory shares or grants for a very small investment. There are folks that are doing it with more intention. What are some of the don’ts, what are the watch-outs, Chuck?

To your point of some of these people being naive, I would divide the people who ask for crazy shit into two categories. They know better and it’s predatory. They don’t know better and therefore, they’re not qualified to be asking for a meaningful advisory grant in the first place because they don’t know what they’re doing. One easy category because it’s fact-specific to say watch out for is people who say they will help you raise money. The number of times I’ve seen that turn out to be BS is huge. There’s also an illegal overlay. If someone is not a registered broker-dealer, they can’t help you raise money and take a commission. It’s illegal. It’s not only illegal for them, it’s illegal for you. Anyone that helps you raise money, if they do it in an illegal fashion, any of your stockholders will have a legal right to ask for their money back at any time. That’s the consequence. First of all, people who tell you they’ll help you raise money tend to be shady. Second of all, it is illegal.

Especially at the early stage, when you’re much bigger, it’s different. When you’re dealing with your friends and family, pre-seed to seed stage, that’s an important call-out.

When you’re bigger, there are good investment bankers that will help you raise large amounts of money. That’s not what I’m talking about. I’m talking about when you’re early and Joe Schmo or a guy who has got a consulting business says to you, “Give me 5% of the company and I’m going to help you raise $1 million.” First of all, it’s illegal unless they’re a broker-dealer. Second of all, they almost never do.

I’ll add a third. Third of all is if you’re looking for an easy button for raising money, then get out of this business because there is no easy way to do this. This is depending on the kind of category, product, your unit economics and all of that. Raising capital is a big part of your job. It sucks. It’s hard and time-consuming. There is no easy button. There is no simple way. It starts with building relationships and being able to build a compelling case for why you and your business represent a good opportunity for investment, and going out and finding for yourself the right investor for your business. It’s hard work. You’re going to get 99 noes for every 1 yes that you get.

As far as other gotchas, people who want too much, it’s relative. A large grant when you’re early may be less crazy than a larger grant when you’re later stage. A larger grant for an advisor who’s going to help you build your entire go-to-market strategy is different than the grant that’s reasonable for someone who’s going to be responding to emails and phone calls occasionally. I would say it’s helpful to put some parameters around it. Advisors are getting a quarter-point or maybe half a point. If you’re early stage, maybe even as high as three-quarters of a point or a point. When you have people coming in and saying, I want 5%, 6%, 7%, that’s crazy. That’s bonkers. You wouldn’t give that to hire unless we’re talking to a CEO hire or something. You’re not even giving that to a full-time employee. People who are asking for that much, it’s too much. They either don’t know what they’re doing or they know what they’re doing and you shouldn’t want them as your advisor.

I would encourage you to date first. If an advisor isn’t willing to give you some advice without an expectation of immediate reciprocity, then they’re the wrong advisor. This is my opinion. It shouldn’t be the advisor coming to you saying, “I’m willing to be an advisor if you’d give me shares.” It should be the other way around where you’ve had some good productive phone calls with somebody and you say to them, “I value the advice and the time that you’re giving me. I’d like to formalize this and invite you to be an advisor if you’re interested.” That’s the right way. If it’s the other way around, to me, that’s a watch-out.

If somebody is holding their advice or their information hostage and ransoming it for equity, they are not the right person to be an advisor. It should be somebody who gives it freely and somebody who you invite in. If you’re taking advantage of somebody and you’re calling them five times a week and you hit them up all of this time, it’s acceptable for them to say, “I can’t keep doing this. If you want to talk about exploring a more formal relationship, that’s great. Otherwise, give me a little bit of time between calls.” That’s a different story. One of the other questions that came in was somebody asking about the term clawback. What they’re saying here is if you have an advisor that’s vested, but at the end of the day, it doesn’t work out and you don’t want them involved at all.

It’s hard to get an advisor to agree to the idea that even if they vest their stock, you could take it away, and you can understand why. Vesting is generally there because it allows you to stop them from earning stock. If they’ve already earned stock, it’s difficult to take it back. Sometimes you can put in there right to purchase at fair market value. You can certainly put in there a right to clawback the stock if they’ve been terminated as an advisor for a cause. Generally, it means violating confidentiality or something like that.

Matt Perry’s asking a question, “What about the board of directors? Any advice on what makes a good board member versus an advisor?” I’ll go full disclosure. The first advice would be, don’t bring a guy like me onto your board. Let’s up the difference between a director and an advisor here and what makes a good director.

I’ll cover two things. What makes a good director and when’s it reasonable to add someone as a director, maybe even a third thing which is, do you compensate directors? What makes a good director? It’s someone who understands your industry or even if they don’t understand your industry is otherwise exceptionally business savvy. Much like building advisors, someone who can complement your strengths. For example, if you’re filling out your board and you’ve got an extra seat, you know you could use someone strong at branding and marketing, people who’ve been CMOs at brands you love or admire would be a great additional board member. This isn’t lip service but is real in the sense that it provides practical business benefits.

You should also look for diverse opinions on your board because you’re going to miss things if you’re getting a bunch of opinions from people with the same types of backgrounds. Those are things that make a good board member. I wouldn’t give a board seat to anyone that hasn’t written a very meaningful check or someone you’ve invited. Someone you’ve invited, you can effectively uninvite at some point in time. Someone that you give a board seat, you can’t uninvite. Make sure that they have written a meaningful check. When it comes to board members of whether you compensate them, the people who have invested shouldn’t be getting compensation to be on the board. For example, if a venture fund invested in you, they’re putting someone on your board that’s to steward and hopefully help improve the value of their investment, you should not be giving them a board member incentive grant.

An independent board member or someone you’ve invited on your board, while I would hope they may also make a nominal investment, those are the folks that you give effectively incentive equity to make sure that they have skin in the game. One last thing, circling back to what makes a good board member is board meeting dynamics because there are some smart people who fuck up board meetings by having to talk over everybody or it has to be their idea. We all know those people, you don’t want them as directors.

That one’s important because the function of a board and the impact that board has is only as good as its worst member. If there is somebody who takes all the wind in the room and screws up the dynamics of the conversation and collaboration, you’re doing yourself and your business a massive disservice. You need people who can come into the room, you need people who can embrace disagreement or creative abrasion or whatever you want to call it. You need diversity of thought, you need diversity period. That’s important, not for optics and not societally, but it’s important to recognize that our boards and businesses should reflect the consumers that we’re trying to serve because, at the end of the day, everything that we’re trying to do is to understand better those that we’re trying to serve.

We can’t do that if we all look the same, think the same at any level of the business top all the way down. What’s important is some board training. For you as a founder or CEO of the business for the board members is putting a little effort. It doesn’t have to be anything terribly formal, but going through some basic board etiquette and governance and what their fiduciary roles are. Sometimes that’s tough in the early boards because boards are still casual, but it does play out if you can do that.

One last thing, since Matt’s a founder. A lot of times, founders are trying to think, “How do I fill my seats? I’ve done my venture round. I’ve got a board of five, my investor got 1 or 2 seats. I’ve got three left.” I’m one of them, how do I fill the others? I know and I understand because I would think the same way that one of the things founders want is, I want them to vote who I want them to vote. Especially in a corporation, directors have fiduciary duties. If you’re bringing in valuable and smart people, they have professional reputations and experiences beyond voting with the founder.

It’s not realistic to think that they’ll vote how you want them to, but you should have trust in this person that if they are going to vote against you in a meeting, you aren’t being surprised that they have come and talked to you about it ahead of time. “I know you and the investor are loggerheads over this issue.” I just want to let you know that I think the investors is right and here’s why. You want someone who will come to you as a founder before the board meeting and explain that but you can’t assume you will always get their vote.

What comes to that is the old gold question that they teach trial lawyers. Don’t ask a question for which you’d already know the answer. If you’re going to be voting on something, the board that’s critical or that’s important. You should have those conversations with your board members before the board meeting to get a sense of where people are in that process and understand so that you’re not caught by surprise, and you have the opportunity to have some dialogue around it. What you’re hoping for as a founder is not a universal agreement. It not to always say, “You’re right. We’re voting with you.” It’s for people to stop and say, “Have you thought about this? I’m on this board and we did something similar and it caused us a challenge here.”

That’s what you want. You need people around you who are going to question your thinking. It’s the old adage that’s been missing in our political system of late and that’s the ability to speak the truth to power. That’s what you need around you. It’s part of a component to any enterprise to go through from advisors to boards. Forget for a second the formality of it. The thing that I want everyone to understand reading is the importance of getting and coalescing a group of a community of champions around you. Those champions should be those who are there to go, you’re the best, you’re the smartest, you’re the prettiest, as well as those who are willing to say, “Dumb shit, I don’t think you’re thinking about this the right way. If you did this, this could happen.” You need to coalesce the people around you that are going to provide you with the pause, the ability to lift your head up and look forward for those clips before you’re already at the precipice with your toes dangling over the edge. That’s what you need. If you don’t have people around you, I don’t care how smart you are. I don’t care how seasoned you are. You can’t help but become tunnel vision. You can’t help but be somewhat myopic in your view. You are reducing the chances of your success. It’s that simple.

If you have some great advisors or board members and you’re looking at taking on a new investor who’s going to write a giant check and your Series A or B round, I promise you that fund is taking those people aside and asking them whether you listen. If you listen, that is a positive thing. It pays off.

I get asked that a lot, how willing to listen, and then also, conversely, how willing are they to fight for what they believe in too? For a founder, that’s a tough balance. It’s being on a teeter-totter between malleability and steadfastness. You’ve got to be able to know when to tip it and what direction. You don’t want to take every single piece of advice like gospel and do whatever they say because you’ll be zigging and zagging the whole time. At the same time, you don’t want to dig your heels in and not listen to the advice that you’re paying for or the advice that you’ve put around you. That’s a balancing act you’re going to have to learn.

The right advisors, board members or directors will say to you, “You’re not listening.” This is one of those times where you should. They’ll have that deeper conversation with you. One of the reasons why we see some of these same people appearing as advisors and directors is it takes cultivation of new talents and new people to become advisors. All of you who are founders now, as your businesses mature and as you get bigger, you have an opportunity to give back. You can become an advisor for an earlier-stage business. One of the things that I suggest is that anytime you have an advisor or a board of director, one of the things that you ask them to be doing is immediately seeking and begin cultivating their potential replacement.

It’s not that you’re guaranteeing them that it’s what’s going to happen, but it’s a great way to get those folks involved in beginning to educate the next generation of advisors and directors. There are a lot of people out there that have good minds for this and can contribute a lot. It’s a little bit daunting if you’ve never been in that role to find yourself in that role. To find yourself having to make difficult decisions and have difficult conversations. Some of the folks that do this that truly serve on boards professionally, that’s what they do. It is a professional skillset. What do you think about that, Chuck?

I agree.

When is it too early to bring in an advisor?

Before you have anything to put in front of them. In other words, it’s almost never too early. With that said, be realistic to where you are. If you’re a pre-revenue company that’s going to start on eCom and trying to sell $300,000 in your fist year, there’s a whole lot of people you don’t need their advice yet. Don’t vanity collect the advisors even if it doesn’t feel that way. If they have no real advice to give you yet, then what you’re looking for in that circumstance are folks who have been at that stage and can give you some advice. Even if they’re much later stage, if they started at eCom, it’d be great to talk to them.

What I’m about to say is going to sound like a shameless plug for Chuck or attorneys in general, but it’s not intended that way. It’s meant as honest counsel here. I find way too many founders, even in the earliest stages of their business, hold off too long from getting a good attorney involved in the formation of their business and having conversations around things like this. I would encourage people to sit down and have a discussion with an attorney and say, “What do I need to have established and set up and let’s put a budget together so that for the next year of my business, I’m in good shape.” That’s things around everything from trademarks to co-man agreements and operating agreements, but it’s also around advisor agreements and an understanding of pools. All of the things that you need to do, get that done in front because one of the most important advisors you have in your business is your attorney.

This is sounding like a shameless plug, which for those of you who know my relationship with Chuck, understand that there’s no fucking way that I’m giving him a shameless plug. To me, too often what happens is you wait until you’re in trouble or in need to go to an attorney when you can go to them in advance and never find yourself in trouble or need. That’s what I would do early on, that first advisor is somebody who can help build you the guard rails and the framework that you need to make sure that you’re protected and can do the things that you want to do to grow the business. Chuck, you’ve seen this as many times I have but probably far more. Sometimes the biggest impediment to a brand being able to raise money is some of the early things they did.

We didn’t get our brand. We gave an early investor some stupid ripe that we didn’t understand that we gave, but we didn’t have someone to know what they were doing. We did some stupid advisor grants. We gave a co-manufacturer a terrible agreement that we can never get out of and those things. One last bit of in the vein of speaking truth, the vast majority of people who can give you good advice are not going to be as fast as you want them to be in giving you good advice. The people who can give you bad advice will be as fast as you want them to be. It is completely contrary to the entrepreneur mentality because if you’re not free, you have to get so much done and this is your baby. The fast answer is not always the best.

I’ll add the other thing, and I say this a lot, be able to discern before you reach out to advisors or anyone you got involved in the project what’s interesting and what’s important, and try not to overwhelm those people with what’s interesting and hit them with what’s important. That goes from topics and from the length of topics. If you’re shooting an email to an advisor that you know is busy and it’s 500 words or more, your chances of getting a meaningful response in that advisor are about zero. If you reach out to an advisor with a question and 3 or 4 bullet points that they can digest quickly and respond, much better. Focus on what are the important things I need asked and answered versus what are the interesting things and lean in and do more of the important and less of the interesting. You’ll find yourself getting better and timelier responses. Chuck, your opportunity for folks to get in touch with you, how best to do it?

Just Google me and email me or call me.

You’re my go-to for this conversation because you give straight, no bullshit advice. This is a topic that came up a lot. There are a lot of people as they come into the new year that are starting to think about those things. I encourage you all to get the right people around you who can tell you what you need to hear, not what you want to hear, who can support you and help drive your business forward because you can’t do it all alone. It’s isolating. It can be terrifying and it can be counterproductive to try to. Thanks, everybody, for joining, and I appreciate your time as always. Chuck, it’s always good fun.

Thanks for having me.

Important Links

• Chuck Cotter – LinkedIn

• Holland & Hart

About Chuck Cotter

Chuck advises companies at all stages of growth, from start-ups to ready-to-exit, helping them successfully raise capital, complete acquisitions and divestitures, and comply with regulatory requirements. Chuck also regularly advises consumer products investment funds in investment rounds.

Cultivate Growing Companies: Chuck helps investment funds and growth-oriented clients determine the best way to reach their personal and corporate objectives – from initial formation and financing, through growth stages, culminating in a sale or other exit strategy.

As a leader of the firm’s Food, Beverage, and Consumer Products industry group, Chuck has sophisticated experience working with entrepreneurs and nascent companies in the food, beverage, and consumer products spaces.

Trusted Deal Advisor: Chuck represents clients in financings, mergers, acquisitions, and divestitures. He has represented funds and brands in over a hundred consumer products financing and M&A transactions and strives to be a practical, business-minded advisor.

Before rejoining Holland & Hart, Chuck was a partner and chair of the Consumer Products industry group at an Am Law 100 firm. Chuck worked for nine years on Wall Street, practicing at two law firms and as in-house counsel at a major hedge fund before originally joining Holland & Hart in 2012.

Love the show? Subscribe, rate, review, and share! tigbrands.com/tig-talks/