If you follow this link, you'll find a discussion that's been going on for several months about "advisor capitalists" and their value to the entrepreneur by Stowe Boyd.
Way back in the dark ages, Randy Komisar was doing much the same thing. Remember The Monk and The Riddle? Komisar has great instincts and high value, not the least of which is his ability to deliver VCs at the appropriate time and the right value proposition. If you're thinking about going this way, read the book.
If you accept the premise that the entrepreneur's company may never need capital, but almost certainly needs advice, advisors of one sort or another are the logical choice.
Much of the current discussion seems to revolve around how to choose one. Implicit in the AC model Stowe proposes is the idea that the "AC" replaces the expertise previously delivered by the "VC." "VC without the C," is how he introduces himself.
But antecedent to that choice (one or many; equity in lieu of cash; etc) comes the question of the criteria the entrepreneur ought to use to pick the advisor.
If you're an entrepreneur consider this:
1. How will you invest yourself in this advice? How will you validate the counsel you're being given and act upon it? It is critically important that the process of interviewing advisors, way before you get to compensation, is the question of value to you. What makes you believe this person will really be helpful to you? As you develop a relationship with an advisor, if they are to be valuable, they must be informed very regularly, and given all of the information required to make substantive recommendations.
This will take a lot of time. You will put that most precious commodity at risk - time - as you develop a dialog with your advisor. If you have the wrong advisor, at best you waste time getting advice you can't use. At worst, you get led down the wrong path and the implications are more serious.
We once had a fairly famous advisor from a big name Silicon Valley outfit who wanted us to abandon our customer base (in 1998) and move wholeheartedly and totally toward web-based (read dot.com) customers, citing the startup consulting companies of that period who were making lots of money. Thank goodness sanity prevailed and we parted company.
What is interesting about this is that the advisor had no skin in the game. VC without the "C" is also a "no downside-only upside" proposition. You just cannot argue that the time invested by the advisor is equal to the money invested by the VC.
And, if you are really invested in the advisor's advice, you should be willing to agree as to the plan and then follow up by detailing the execution in following meetings. Otherwise you're just wasting time.
2. What is the definition of expertise? "Seek the advice of leading authorities in the market that the product will be competing -- and often, this translates to the leading bloggers, consultants, and authorities writing about the market in question," says Boyd. Bloggers, consultants and "authorities writing" are hardly an exhaustive list. One broader source of expertise may be those with direct industry experience in the driver's seat. Are there VCs in your industry? Do they use venture partners? Are any of those partners interested in your company?
3. What is the ongoing value? " A consultant is unlikely to want to part with a strategic concept that could make a client into a $100M player, potentially, in exchange for a per diem and the possibility of some downstream consulting, maybe, if you're lucky," Boyd, again.
The implication here is that the consultant has the magic idea and that's the game. I don't buy it. Ideas are a-plenty; it's the people that are the whole game.
Really good advisors ought to be capable of having the leadership discussion with the entrepreneur - with you - privately, but clearly. If you've attracted good advisors, it's because you've passed the "rich or ruler" test. This is a long term discussion with high value to the enterprise and to the entrepreneur. It's way more important than the magic bullet.
I wonder what entrepreneurs and their advisors think?