Building a tech startup, or any new company for that matter can be as exhilarating as it is terrifying. This also rings true for founding teams that have never done it before, especially when they’re doing it from the ground up and bootstrapping it on their own. It’s no coincidence that an estimated 70% of tech startups fail, with that number climbing much higher within the smaller subset of the web3 industry.

Fortunately, there’s a fix to help first-time founders make the right moves and progress further along their roadmap to hit more milestones:

Utilizing advisory services or bringing on business consultants to help lend experience and credibility to your company.

The blockchain industry is particularly notable for prominently featuring well-known and highly-regarded web3 advisors or business consultants on their pitch decks and other investor documentation, but it remains a mystery for many investors why this is so common.

 

What Is a Startup Advisor?

To put it simply, a startup advisor is an external mentor or credible individual who can lend both relevant skills and experience to offer founding teams. An advisor’s invaluable guidance can help these teams navigate the perils of building and scaling a successful business.

Arcanum Ventures witnesses a number of web3 start-up launches seemingly every day, even in uncertain market conditions. These companies are often led by founders doing it for the first time, which can mean they are slow, inefficient, and afraid to make the wrong decisions. This has created a massive demand for experienced advisory professionals who can lend their intuition and knowledge to push these companies forward.

 

Why Work with Startup Advisors?

No matter how impressive a startup’s core team is, advisors are nearly always a necessity and for good reason. These professionals are normally brought on to fill gaps in the founding team’s experience, facilitate connections, or boost investor sentiment through the optics of being resourceful, which in turn can help demonstrate that the team is consciously bringing in outside help with an understanding of all aspects of their company. By supplementing the skillset and savvy of a founding team, web3 advisors can help shore up gaps and address key issues holding back the launch or scaling of a business.

In many instances, startup advisors are founders themselves with work experience in small or large corporations that can prove very useful for a start-up team through both guidance and clout. The more impressive the track record a web3 advisor has the more perceived value and credibility their input holds. So choosing an advisor or team of tech consultants can make or break a company early on.

 

How to Choose the Best Startup Advisors for Your Company

Before considering whether soliciting the help of a start-up advisor is necessary, it’s important to first understand the myriad of ways in which an advisor can help a company grow. An advisor’s value can come from their specific area of expertise or their brand recognition and everything in between.

Advisor’s Network

Certain strategic advisors are recruited to help a startup reach a specific milestone, sometimes helping the team acquire new business or forging an impactful partnership. For example, a blockchain gaming startup could recruit the help of a strategic advisor that can create connections with prominent gaming guilds. This can provide a massive advantage by gaining a small army of committed players from day one. 

It’s not uncommon for selection criteria to include previous work history in the same industry. Gaining an ally who has connections to facilitate the discounted licensing of proprietary smart contracts or affiliate marketing services for DeFi products can be a game changer for cash-strapped startups.

Advisor Expertise

Another recruitment strategy would be to consider areas of expertise for potential strategic advisors. Aside from having founding or startup experience, many advisors and consultants have worked as marketing specialists, tech consultants, and even financial analysts that can provide token economics support to help build unique utilities and holistic ecosystems for blockchain startups. 

It’s always a good idea to supplement the lack of expertise in a founding team with the knowledge of someone that has lived and worked in that specific focus area. For example, a team developing a legal arbitration platform would benefit by recruiting an advisor who is an experienced legal professional.

Ideally, a startup should aim to recruit a team of advisors that provide support across all major business functions. This could potentially include financial advisors to help with treasury management and business strategy, or marketing advisors to lend a hand and offer guidance to talented CMOs.

Advisory Reach

It’s even common for prominent KOLs or influencers to come on board as advisors, lending brand recognition and community interest to the project along with incidental tips and input to accompany their ‘stamp of approval’. This is a double-edged sword, however, and can bring unwanted criticism. People familiar with the blockchain industry are surely aware of the fact that there are plenty of advisory scandals and controversies regarding influencer promotion.

To summarize, it’s advantageous to bring on web3 advisors or startup specialists that can offer wisdom no matter their area of expertise. But there’s certainly more that goes into this decision apart from who to choose as your next startup advisor.

Ultimately, the most important factor to weigh when deciding whether or not to bring on an advisor is the actual cultural fit and whether you envision yourself working well with the individual. The working relationship should feel easy, exciting, and respectful as both parties collaborate and align incentives. 

 

What Do Startup Advisors Get?

Aside from the importance of sourcing the right people to help your company grow, there is also a need for founders to consider different forms of advisory compensation and contracts that can be structured between advisors and a founding team. 

Traditionally, advisors will come on and serve in a support capacity in exchange for some form of company equity. Owning even a small piece of the company can properly incentivize an advisor to do everything they can to help guide a founding team toward success. It’s important to note that advisors that have too many ongoing engagements might not be able to bring enough value to justify their equity share of the company.

Many companies in the web3 industry have started to offer token equity compensation for advisory support. In some cases, web3 startups have even begun to offer a mix of shareholder equity in addition to a small slice of the token supply, in an effort to limit exposure in a single side of company ownership.

There are even some advisors that prefer to take payment in fiat or stablecoin for labor-intensive support like marketing or operational services. Ultimately, an agreement must be made between the founding team and advisor to align incentives and strengthen the collaboration between the two parties.

 

Looking for Guidance or Web3 Advisors?

At Arcanum Ventures, we take pride in offering a diverse range of advisory services. Whether it is ideation, acceleration, incubation, or simple strategic advisory, Arcanum Ventures is passionate about working with the best and brightest in the web3 industry.

Interested in learning more and bringing on some of the hardest-working advisors in the blockchain industry? If you share our passion and ethos, we encourage you to reach out and speak with us.