Graduate Master Session: How to Maximize Shareholders

All right, and we're live. Hello everyone, uh, welcome to this month's, uh, FI Graduate Master Call. Uh, I have the pleasure to have with me Greg, who is a top Foundry Institute mentor and an expert in a variety of different areas, to join us. Um, and, uh, before I have Greg make an introduction, um, I just want to make sure that for those of you who are new and have not been on a Master Call yet Just to let you know that this is a highly interactive call. We're doing this for you. We're here to basically answer your questions. And so as you can see there on the— on your right-hand side, there's a chat room. So feel free to ask any questions that come up during this call and/or this webinar, and we'll make sure to address all of them. So we'd like this to be as interactive as possible. So with that said, Greg, would you mind giving us a brief introduction on yourself?

Yeah, sure. So my background is actually started as a designer, then became a developer, and then been a product person for a long time and eventually became like a salesperson and serial entrepreneur, done multiple startups. I was early on at a company called Klout, which did influencer tracking. And after that, I started a company called Chute, which is a YC company. We raised about $20 million almost, um, in our last round. Um, and I'm even actively still applying to Y Combinator right now for another batch. So I'm a glutton for punishment.

Yeah. And, uh, and, uh, you know, I'm sure you've had a lot of interactions with various shareholders at various different, uh—

I, I have many different fronts, sometimes helping friends and sometimes, uh, our own. So yeah.

So, uh, you know, maybe we can, we can start this discussion on kind of like trying to define a shareholder. Um, you know, um, you know, from your perspective, how would you define, uh, what a shareholder is? And perhaps give us the definitions of the various types, if you know.

Yeah, I think, um, we chat a little bit about this. I think, you know, I think a lot of people make the mistake of being a shareholder is only the, like, a person who's invested money, right? Um, but I think that you have a lot of great advisors. You may have in have, you know, even some early, you know, sort of like customers, right? All have sort of like share and stakeholder. I think like, you know, you might almost mix interchangeably, right? Because they are people who are willing to assist you in the process. Some of them have like a financial interest, like AKA they want to return on their investment, and some of them want to return on their time, right? So I think it's fair to treat them both fairly importantly.

Yeah, no, that makes sense. So maybe we can kind of start at the kind of hierarchy and make our way down. So maybe we can start with an advisor. You know, how, you know, could you maybe define for the audience how you view an advisor and kind of what their role is?

Yeah, I think, you know, advisors, they're anyone with more experience and expertise than you is probably how I would think about it. And hopefully that is, you're looking and seeking out those kinds of people as often as possible, right? You always want to hire above yourself and you also want people who have other kinds of insights and visibility that can give you access to, you know, the world at large.

And then I guess if we're going to go down the hierarchy from there, then there's investors and there's various types, but maybe we can kind of just on a broad level kind of— Yeah. Define that?

Yeah, you know, your investors, I think it's, it's a much more, um, uh, obvious relationship, right? Um, there's sort of like an exchange, um, uh, you know, of equity. Um, but, you know, it— for the most part, I think it's important to remember, like, someone's investing because they believe in the idea, they believe in the business opportunity, uh, and fundamentally they believe in you, uh, as the, you know, the person to sort of carry that through. And, um, they may be rough on you or feel like they're giving you a hard time. And that sometimes can feel like they're doing this just because they're watching their money. But I don't know that that's always the case, right? Most of the time I've actually found it's less that they're like, how am I gonna get my return? And more about like, I know you, how do I help you through like a problem that you're trying to solve?

Cool. And then I guess the one below that are board members. So can you define maybe what a board member is and what their role is?

A board member is something you should avoid for as long as possible. But in truth, like, you know, board members— there's usually a couple statuses on board members, right? Like, there's sort of like a board observer, which is sort of someone who doesn't necessarily have any direct input or feedback— or sorry, doesn't have input that is afforded like an actual vote in the system, but they're there to be able to hear sort of the high-level progress and and issues that the company are facing. A lot of times when you raise money, you may not give up a board seat, but you may give an observer seat up. Early on, usually the founders are the board. Once you raise like sort of institutional money though, you will pick up actual board members, usually like one, you know, per round, or often one per round. And so I think as that starts to happen, You know, then you have a little bit more of accountability. They're there as a forcing function to sort of keep you on the rails, right? There's two kinds of board members as well, right? Like there's sort of usually like sort of the folks that invest money and then sometimes there's what they call like an independent board member, which is someone that you choose to add sometimes from industry, someone sometimes with certain special expertise. That comes in and usually depends on if you've outlined for this to be a present person or not.

Yeah, thank you so much for those definitions. So everyone, for all of you that just joined in a little bit late, again, these master calls are designed to be highly interactive. There's a chat room on the right-hand side, so feel free to ask any sort of questions that come up, anything that you'd like us to answer for you. We're doing this for you, and so we'd like to get as many of the questions as possible from you So while everyone's gathering their questions on how to kind of maximize their shareholders in their company, we're going to go ahead and go through, you know, some best practices, let's call it that. So, you know, maybe we can start with the topic of time management, you know. Yeah. How do, you know, clearly a lot of these folks are are strapped for time, right? And so how do you think about that? And how do you think about, like, you know, maximizing their time?

So I think, you know, it's always important to remember that they're not employees, right? So we can't really call on them. We can't— our expectations sort of have to be managed, right? You know, and as a startup, you know, we have this sort of constant stream of new information, new facts, new understandings. And, you know, I think it's our job to sort of parcel that data up in the right way to sort of get it out to the world, right? And so sometimes, you know, a shareholder is sort of a trusted person that we can get feedback on without, you know, fear of embarrassment. But, you know, I'd still warn you that it's best for you to take a moment to think about what you're going to do and what you're going to get, what kind of feedback you want, right? If, for example, you're just running every time, like, you have a question, I think you're gonna— that's kind of a— that'll end up becoming like an abusive style of relationship with your shareholder. And, you know, they'll just start to ignore you, right? It's like you don't want to be the person who cried wolf. Everything is not a big problem. Like, you know, try and solve your problems, you know, try and get them to the point where you really need some help, and then sort of send that out to the world.

So, you know, based on that theme of like maximizing time, so what are some things that people can do beforehand so that make sure to make sure that, you know, people are up to date, you know, before? And so that way, like, when they use this limited amount of time, let's say, yeah, they can just get the absolute most.

So I, that's a great question. I think, um, number one, like, I would say like anticipate the questions that they would ask. Right? So, you know, what information are they gonna need to be able to like even assist you or help you? Right? What steps have you taken already to try and reconcile or answer sort of this problem that, or area that you have, you know, need help with? And then make the ask specific, right? Like, so specifically, like, what do I need you to help me with? Right? Like, and the more tangible I think that is, the better. Right? So if it's like, I need an introduction to Company X, much easier than we're trying to think about should we do this, right? Like, if you're, if you're trying to think about should we do this, then what are the pros and cons that you've already arrived at for the thing that you're trying to think about, right? Like, why do you think it's interesting? What do you think the opportunity is? Like, lay it out there for them, you know, in the most succinct way that you possibly can.

Yeah, definitely. And then, you know, just that's also one of the reasons we also push you really hard to make sure that you do a monthly update for all of your shareholders, you know, and at the very top of that email, make sure that it's somewhat skimmable, right? So your ask should be at the top of the email, right? A lot of these people don't have time to read, right? So just, if you can just get through those 3 bullets, this is what I need, this is what I need help on, that really helps everyone involved kind of proactively help you. So, you know, that's something you could definitely consider doing. Mario asked here if this is being recorded. Yes, this is being recorded. You know, do you have any like tips or hacks on kind of how to build like a good and effective advisory board member or things like that, how you can recruit some of these folks?

For advisors, yeah, it's a— with advisors in particular, I think like there's two sort of buckets that I think like are really useful like for engaging advisors, right? And potentially three. Right. But I would say like one would be domain, right? So whatever business it is that you are selling into, right, um, you know, industry-wise, right? Let's say you're selling into fashion or retail, etc., right? Like, um, you may be from that space, and so that'd be— that's great, and then you have the connections, etc., that you— that you need. But oftentimes it is useful to have other advisors from within the domain that you actually are building your business towards, right? Because I like to think about it like how to maximize the efficiency of the time I spend. And so, yeah, you know, can I proxy what 1,000 customers would think by talking to someone who's been 1,000 customers before, worked with them or has relationships with them and that understanding? That's where an advisor sort of concentrates a lot of insight and understanding, right? Like from the domain side. The second side or category that I would say is interesting or useful is, um, and sort of like your, your ex— your internal expertise, right? So, um, if you're building a hardware company and you need like someone to help you with circuit boards, right? Or if you're building a software company but you've never done payments, right? Um, if you are a technical founder but not good with marketing, right? Like, these other people are filling holes or gaps potentially in the skill set that you have. And as I said though, I want to, I want to point back at that They're not employees, right? Like, so, so what they really can do is sort of separate a lot of the noise and give you the highest amount of signal possible. But then you're still like, you know, ultimately going to have to go do that work, right? Like that experience is invaluable, right? Like in helping to grow or scale things, right? The third kind of bucket, and I don't, I don't like this category as much, right? But, but it is useful often. Right, is sort of just for connections or connectivity, right? And so there are advisors that you work with, some people have worked with, you know, literally for like more for sales or business development. And I think that it's an interesting feature, interesting relationship to have. I think it's just one you have to be cautious with just relative to like what you're, how they're compensated and things like that.

You know, one kind of follow-up question along that same topic here from, from Benet is just, you know, how disciplined should you be in moving people on and off based on kind of how the company's doing, how the company's scaling and things like that? You know, what are your thoughts on that?

That's a really good question. I, you should always be evaluating your advisors. I think like advice in general is the kind of thing that takes many months to sort of become valuable. Right. You know, like it's not a thing that is done only over coffee. It might be a thing that you maybe it's like once a month you're meeting up with someone and it may take several months. I think, you know, the— who is it? Techstars or whatever has like those standard sort of advisor agreements, right? So, yeah, right. And I think they last like a year usually, right? I think like a, like 6 months, I would say is— I sort of say it's like It's like 30 days to evaluate. And then if you're sticking, then it probably lasts like 6 months to a year. But, you know, like, don't feel embroiled in that process. But I think like if you're asking someone, if you've arranged or made a commitment like around a certain thing, then you should be prepared to like commit just as much as you're asking the other person to commit. Right. So I think like just don't be a jerk about it. Like, you know, don't, don't try and use people up like as quickly as possible. But at the same time, your needs will constantly evolve. And so your domain expertise might stay on longer, right? Like your domain advisors may last longer than your expertise advisors will, right?

You know, and Barbara also has a topic on this thing, on the same kind of general question here. You know, one of my advisors wants me to create a project, quote unquote, list, you know, for, uh, that they could be for the advisor so they can kind of work on behalf. In other words, kind of specify exactly, uh, you know, yeah, you know, what are your thoughts on that?

I, I think it's a good idea, but here's the only caution I would provide, right, is that I think, uh, just build in the practice. The worry I have, or the concern with advisors acting on your behalf, is, is kind of, um, is, it is sort of like twofold. Right. So one is, on one hand, I think like it's great that they want it, right? Like, but, but, but what happens is, do they understand what the things mean? Right. So let's imagine this is a bullet list. Like, you like, make sure you provide enough clarity and information so that they actually know, like, here's what I'm specifically trying to get done. Right. And then make sure that, you know, whoever takes it is going to be the owner of it until they can't do it. Right. And so I think like if you need an introduction, who's the person that's going to reach out? Those actually work like better if you get 2 or 3 people sometimes inbounding on a specific thing. Right. But for other things, you want to make sure that they know precisely what you mean by that thing. Right. The second thing that I also think is also important, though, is just to also— you have to set the boundaries about what's in and what's out. Right. In terms of information and what they share with other people, right? Because, you know, your advisor may know a great deal about the business, but, you know, in specific circumstances, what you want is intentionally for someone to not know all of those things, but maybe to know some slice of those things. And so it's important to also sort of just have clarity and some form of like sort of boundaries around like what you want to include or not include in the process of doing that. But in general, I think it's a great idea if they're engaged enough to be willing to do it. I also would make sure it's prioritized and I probably wouldn't make it that long because I think like if you run into a situation where people go cherry picking and it's like, don't make it your wish list of what you want your business to be, make it a wish list of things you need to do, right? So don't put down like something that you want 5 years from now on that list also, because then if they go and do it, you know, there's sort of this feedback loop of like, I did the thing you asked for. What did you do with that thing? Right. And make sure you follow up to say, like, keep them in the loop now. Okay. You made that introduction for me. Here's an update on what happened with it.

You know, Vinay also asked a question also related to this in regards to him trying to get more aspirational names. I assume you're just trying to get some big names. Vinay, feel free to type in on the chat, you know, any suggestions and best practice how to attract like some bigger names on your advisory board.

Be good. Right? Yeah. It's— someone asked me the other day about same thing with sales. How do I get more customers? And I said, get one customer, right? And then you'll get two. And so, you know, the social proof is sort of invaluable in this regard, right? Like, these things are relationships, right? So, you know, like, it may not mean that you have— you may have the best solution or you may have the worst solution to the problem. But if they like you, right, like, they may choose to help you, right? And, and that's an either-or. So, um, the more that you show your openness to take their advice, to, to be able to like, um, try and to work with their advice and maybe even operationalize their advice, right, um, that's great and awesome. And that rapport that you build with them is a really important part of the process, I think, of like convincing someone to join. Right. The way you find these people, by the way, I think I've, I've always had the good fortune of having a lot of good friends that know a lot of good people. But I look for the people who talk on the topics, who write about the topics, etc. Right. Like it's, you know, if you take a person who's like VP somewhere at a company, but they have no outward presence, like they're not putting their thoughts in the world. They just are operational internally most of the time. That person is probably harder to get involved than someone who say like writes on Medium a lot about the topic because, or speaks commonly or often about top, because you know why? That person has ideas that are likely overflowing that they don't know where to put them. And so they're looking for a vessel to sort of move their ideas just as much, right? As they actually need a solution in-house at the place that they may be, right? So I would say like try and find those people, right, who actually are effusive with their own ideas outwards that are also there. And that's a better part of the Venn diagram, better part of the overlapping circles to sort of start with initially as a target.

Yeah. And I think that also answers the question you put in here, Vinay, about, you know, what's in it for them. That's the answer right there. You know, before we move into like more like tactical things, we have a whole entire stuff about how to basically use advisors, how to use shareholders in your company and things like that. There's one question here from Lee. I hope I pronounced that right. And, you know, they're asking, you know, what's the difference between an entrepreneurial partner and a consultant? You know, do you have any thoughts on that? I'm not really sure. I haven't really encountered that much in my life.

I'm not sure which— what they— so there's two— I'm not sure what Lee means by entrepreneurial partner. Per se. But I, if I were to guess, it's sort of a function of are they sharing in the risk with you, right, in sort of succeeding, right? And so a consultant— and I am, I do consulting, that's like, you know, how I make my living as well, right? They, they may care about the outcome, but they're not compensated based on the outcome, right? Like, their work is maintained because of the outcome, right? Like, if I do good work, people keep me, right? If I don't do good work, they let me go, right? My guess is that maybe what Lee's saying is, is that there are people who work in a more bespoke, ad hoc manner, or sort of an entrepreneurial manner where they're like, well, look, like, I wanna win this kind of work as well, or I wanna win the adjacent or the related work. And so they can partner with you to sort of help you sort of move forward, right? So there's sort of like, what's in it for them again, right? Like maybe like, oh, well, I'm actually trying to sell my product to them as well, and it's not competitive. And so there's a good like symbiotic relationship that may exist there, right? And for other people, it's less about— you're just really trying to rent their expertise. And so, you know, they may choose to trade that expertise in for equity, right? Or they may choose to trade that expertise in for, you know, money, right?

And my advice to that would be don't get caught up in the titles, right? Just understand exactly how people are willing to engage and what— to what extent they're willing to help. People make up titles all the time.

Yeah.

I saw somebody call themselves a sales scientist the other day. It was like basically a sales— you know what I mean? So people make up titles all the time, so don't get too caught up in that. Just try to understand how much they're willing to risk and if they're willing to kind of help you out on kind of on an equity basis and what that looks like. And if things get more specific on that in that relationship, Lee, feel free to email grads@fi.co. We read every single one of the emails and we're happy to kind of like help guide you through that entire process so we can make sure that you're kind of working in the right direction. And Vinay, I promise I'll get to your accountability question in a bit, because it's really related to a lot of the topics that we're going to be covering here real soon. So, you know, you made this really interesting point, you know, in the notes that you sent me before about using shareholders as scouts. Yeah.

Can you elaborate on that and So yeah, so one of the things I, you know, I sort of believe is that shareholders make like really good scouts, right? Um, and I think like what they can do, right, um, is find out things that may be hard for you to find out, right? Um, and, and there's a little bit of this notion of them also potentially being spies, right? Um, so, you know, what's interesting is that they have good contacts. Let's say you have like one of these sort of domain advisors, right? Like someone from the industry, they may not be ready to like make an introduction. You may be too early, right? Like they're like, I'm not gonna send an email connecting you two up yet. Like there's a bunch of work for us to sort of move through. And so like a lot of people are defensive about their time, right? And so they're like, I have contacts. Um, it's best that I sort of work with them, present to them, right? Like until they get comfortable enough to be like, okay, I wanna meet these people. Right. And so like from that point of view, from a scouting point of view, right, they can like actually find you new people to talk to. They can find you new recruits to maybe work at the company. They can find you through their networks, etc. All kinds of answers, right, that may be useful or appropriate or timely, right? If you let them know, right? Like, so someone's like, you know, I'm looking for someone in this space, you know, their stuff is coming at them all the time. And so, you know, or they have a network or they have, they're like, I'm going to be at an event, I'm going to see some people like now they know what to keep their ear open for, in case you're looking for something in particular.

You know, so the next question is very related to this as well as like, you know, how do you think about, you know, board members, advisors, investors, in terms of how much you share, and how much accountability you should give to each group, you know, and I thought this was pretty interesting, given how you think about like, them as scouts and potentially even as spies in an organization, right? How do you think about that?

Yeah, I think it's challenging. I would say you shouldn't be working with someone you don't trust to begin with, right? So if you actually have a worry that this person may have the wrong motivation, you're probably right. Right? Like your gut is most important thing in this situation. I would say like, get some references, right? Talk to other people that they've been able to advise or help, right? Other founders, etc. You know, that's a great signal, set of signals, right, that you could like sort of leverage to understand like how helpful can they be? What kind of advice are they good for? Or what kind of help are they good for? Right? And I, you know, I think like, that's why I sort of mentioned earlier about like sort of also trying to make sure that you sort of quarantine off what information you want to be available to what kinds of people. Because you've ever seen how government people are like, "That's classified." I don't know how I would ever do that job. It seems incredibly hard to build the walls between things. You just have to assume there's a little bit more looseness than even what you prescribe. If you're worried about something super proprietary that you think is internal, Right? Like, I usually try to keep that for like my board members or other things, but like lightweight advisors, like it's more about extracting out what, what, like a specific kind of help. Right? And so I maybe might be more like drawing down from, you know, my advisors and more telegraphing to my board, like to the extent that I have one. Right? Of course, you can have agreements like NDAs and whatnot to sort of try and protect you as well. But, you know, honestly, I don't know what that would do for you.

Yeah. And Tiago, if someone breaks your trust, I mean, that's a pretty good answer for you right there. That's, you know, that's the time when you basically end a relationship. And a lot of advisors or shareholder agreements in general to have some level of vesting unless they're investors, which is a whole nother situation there, which we can kind of talk about. But if it's an advisor in your case, then, you know, that's, you just basically terminate the relationship right there. He's also kind of asking, you know, how do I know when to kind of like let go of an advisor? And also like if they're not delivering value, right? Like if you have determined that, hey, we're gonna do a 30-minute call once a month and we're, you know, and they're not showing up to that, then that's a clear indicator that they're not really engaged in the business. And if you have even more detailed things on that, like this is what we wanna accomplish in every call and they're not accomplishing that, you're giving them homework and they're not doing it, That's also another way to kind of evaluate that and think about it, you know.

And the flip side, I'd say, is if they're too demanding, right? Like, um, you know, sometimes people can just want all— they want you to tee up all this extra stuff. And it, you know, to the extent that it's work, um, that's of value to you, right? Like, to sort of like get that clarity or get that information forward, like, okay, great. But sometimes, um, some like early investors, you know, like, or people like, you know, early friends and family, they may be on you all the time about like, what's going on, what's the status of things like, you know, etc. And, you know, to the— yeah, you can't fire, you know, an investor, but, you know, you can definitely go of an advisor, right? Like, who's, you know, sort of like just creating more work for you than, than they're actually creating value. Yeah.

And, you know, to Barbara's questions here is like, what about an advisor who did a really big project up front but hasn't been involved since? Well, I mean, that's a pretty clear indicator that it's time for you to give them the ax.

Yeah. And again, I also would say like it goes back to the point of like, what was the arrangement that you had? Right. Like, you know, like if you're clear about what's expected, especially if you sort of have equity or etc., sort of, you know, flowing through, like this is why it's important to have these conversations sort of upfront.

I want to kind of come back to this idea of using advisors as spies. I think it's pretty neat, pretty neat concept there. You know, do you have some best practices on how to kind of like, you know, engage with your you know, your advisors and kind of have them give you like the information that you need.

Uh, yeah, look, I like, you know, look, when you're in, when you have a company and you're in sales, like, I, everyone tries everyone else's product out, right? Like, no matter what it takes, right? Um, you know, I've seen fake email accounts at, you know, etc., fake identities used to sort of get demos, going through customers and having them do it. And certainly in that vein, you can have your investors do it. Now, look, like, I think like trying to get like your investor or a share, a stakeholder, a shareholder to go out like to intentionally get that, you know, like say a fundraising deck or something from someone else. Look, you know, it's a cutthroat world. Some people think that's the way they should do it. I don't necessarily condone that, right? Like that, that that particular edge of it. But if it's like, you know, getting a demo of something or something like that, like, you know, everyone's done it in one way or another. Um, you know, so I think like there can be good reason there. There's an inherent notion, right, that someone comes and shows their advisor and investor knowing that they have another investment, you know, like, and this is advice to you as well, right? Like, you should presume they may have a conversation with the company that you think is in the same space or that's competitive or whatever it be. So, you know, and on both ends, going with your eyes open, right? Like, like, how would you feel if it happened to you, right? You know, is that too far of an ask? And then presume that, you know, if you don't have a relationship with someone, you know, if you're pitching a shareholder or an investor, um, you know, there's a chance that, that some of that information may go elsewhere too.

Yeah, you know, and I'd love to like drill in a little bit more on your first point, which is, you know, how to like think about making advisors as scouts, in other words, to help you kind of bring up information as needed at the right time. I think timing is like really important to this, right? Because it could be like something that's really actionable now or won't be, you know, have you done any, any kind of best practices on that and how you thought about it, you know, in the past?

Yeah, so I think like, the good thing is like, usually if you're raising money, right, there's usually like a bit of a vision attached to sort of like the startup itself, right? And so, you know, a good shareholder, a good investor likely has their own designs in their mind of what you will become and how you become that. And so to that end, they likely will bring you things that map into that universe, right? But I do think, like, you know, as you start to move through your roadmap, move through sort of your company's development, this is when you want to plant the seed you know, like either we're thinking about a new industry, we're thinking about a new use case, we're thinking about a future capability, you know, to the extent that they're aware of that, right? Like as things come their way, as they meet new companies, as they do things at their own jobs, whatever it may be, all of these things are great strong signals where they could be scouting and bringing those, those things inwards, right? And sometimes, like, you know, most things with startups is really about timing more so than it is about anything else. Right? Like, you know, two people executing perfectly, but one at the wrong time, one's going to lose and one's going to win, right? And so sometimes being able to have access— and that's why you like these sort of domain experts and sort of advisors involved— is that when people become ready for these things, if you could be the first one through the door to sort of present your offering, you have a greater chance of being the one who gets the business.

What are your thoughts about, uh, you know, this is Marcelo's question, what are your thoughts about basically getting a customer or a partner to get on your advisory board?

So, um, I think it's good. Uh, I think, um, you have to be— the only thing, in general, I highly recommend this, right? Um, if you have a customer engaged enough to actually sort of be willing to like sit there and give you a ton of input and feedback, etc., like, that's a wonderful thing, right? There's two things that I would say that I think to consider or keep in mind though, right? One is it's easy to be swooned by sort of the feedback they give, but you may end up building a solution that's too specific to them, right? And so you wanna be careful that, you know, like that you've got enough of them, right? Like to sort of like you have enough of a read on them to understand like what you're building that's generic enough for the whole industry. right? Uh, versus like just for them, right? So separating the wheat from the chaff, right? The second thing that I think you have to think about, um, but I wouldn't necessarily worry about this too, too much, is the signal that it, it may give to the other potential customers if one person is involved, right? And so this is why, for example, like strategic investments are like very challenging for startups because they can be great in that it's a huge signal, like this is the way the industry is going to go, Right? It's best if you have it from like the industry leader, right? Like if, you know, whoever's the best at X in your space, that's a great signal. But at the same time, a lot of companies, especially like say like low margin companies, etc., right? Highly competitive spaces. They're like, why is that person there? Like, are they getting information about like what's going on in my business? Right? Are they hearing, you know, things that I don't want them to hear? And so to some extent, having this too early may have detrimental effects to you as opposed to like sort of doing what you think. So how public you are about it, like, may just be the flag to think about. Like, you can have them as an advisor, you may name-drop them when it— when you feel it's appropriate to someone out of space or out of industry, you're not competitive with them. But, you know, you might want to keep that card close to your vest like until later, maybe when you formally establish like a customer advisory board or something like that. And then you make that more public.

And then how much info do you disclose? Let's say you decide to go down this path, like how much info do you want to disclose to something like this?

Yeah, this is always a good question. I say none, right? Like, what I don't like disclosing dirty laundry, I guess, is to Vinay's point, question, right? I, I, they don't want— here's the last thing the customer wants to think is that you're out of control and have no idea what you're doing, right? Like, so, you know, so this is a little bit of like, you know, judo. When you're in a conversation, you sort of like, you got to be fast on your feet. If they give you an idea, great idea, that maps to a thing that we were thinking about, right? Like, if you start to do those kinds of things, right? Like, yeah, look, we went down because we were all drinking last night, not a good thing. Like you know, like to be bringing up with the customer, right? Like, you know, we didn't anticipate this use case. Okay, like that might be a thing that you can sort of do it, but you know, there's a gradient there. You know, what do you consider dirty laundry, right? Like I think it's sort of like the better thing to sort of start to sort of create better piles around, right? Like there's things that are growing pains and then, you know, it's all about how you position information and ultimately you wanna position it in the best light possible, and you want to be honest when honesty is the best antidote.

My advice is don't do it. Just leave it at that.

In general, I would say like dirty laundry in front of customers is ideally best not happening. Yeah.

Yeah. You know, Vinay is talking about potentially a customer focus group and things like that. Focus groups are tough, Vinay. Like, you know, a lot of times because people are not using the solution in the right— and they're not actually using it, they have a really hard time, right? Like, you know, projecting what's going to happen and how they're going to use it. Um, so, you know, just, just, just, just think about that. I, I would caution on that, uh, on, on you actually trying to get people to actually use the product versus actually set up these focus groups where people don't know what they want. You need to kind of think on it. They're never gonna really tell you.

One-on-one qualitative sort of interactions, I think, is the most useful tool, like, over the time or age of your company, but especially early on, right? You know, people also don't wanna, like, be in a room, like, with potentially a peer or, you know, a competitor. So, you know, there's all these other things you have to work on, and then no one wants to look dumb, like, "Oh, I have a stupid question." Like, "I don't understand how this works." Like, people don't necessarily wanna volunteer all of that in front of other folks, right? I think for exploratory things, um, it can be better, right? Like when it's not in the product, but if it's more directionality, or it's like, we'd love to hear your thoughts, your challenges, your problems in a certain space like that, I think you, you might be able to get a bunch of people together, um, a small group of people together to like to, to do that. Um, but I think like around the product, it's best to sit individually for sure.

Yeah. And the, you know, he's asking also about the advisory board being all about me? Is it to help me get better? Not necessarily. I mean, it depends. Like, you might have some advisors that are there like that. Certainly, the Founder Institute is there to kind of help you with that too. But, you know, you're gonna use them for various different purposes. Like we kind of talked about how you basically leverage various shareholders and things like that. And so, you know, some might be there for introductions, others might be for other purposes as well. Um, so Barbara asked, one of our equity holding advisors nurtures investors but always ends up claiming, uh, uh, he is the product visionary. In parentheses, he's not. I told him this, this, uh, weakens perceptions of me, uh, and the team, but he keeps doing, doing it. When he advises—

perceptions of you in front of who is the question? Right. Um, so, uh, yeah, look, people will find a way to sort of draw a line between the advice they gave you and the thing that happened, right? Um, it's human nature. It is going to happen. However, um, why are you putting that person in a situation where they can take away anything from you anyway, right?

She says that he does that in front of an investor, which means that you should probably not put him in front of it, and you shouldn't put him in front of investor.

Yeah, like that that, that's all on you, uh, right? Um, if a person cannot be respectful or honest, then yeah, I would take them out of the loop as much as you can.

I know that he's probably making some introductions and things like that, but you can make, you know, try to move into BCC and, and then just see if you can do the, the, the things one-on-one.

This is also an important thing, uh, actually, uh, to mention, which is that you should never As much as possible, when you have bad news especially, right, I love to talk to my investors before you have that meeting with everyone there, right? Because you don't want anyone flying off the handle, and you know, you won't get a chance, um, to come— you won't get a chance to have the data to help reconcile it with everyone if you don't sort of get their feedback earlier on. So like As you advance to later in time and you have actual board meetings, you have to prepare board materials. You know, you usually don't want to just like email it out. Ideally, you've got a chance to like go over some of the rough spots, you know, and some people will be better on equity, on maybe revenue problems. Some people will be better on other things. And so you try to create allies, you know, when you get into that room with everyone there, right? If the investor is adding them in, it means that you need to have a hard talk with the investor as well about Why do you keep bringing this person in? What's the value that you think they're creating? Are you like, you know, etc.? Like, that means if they're second-guessing you in some way, then you need to work to reconcile whatever is going on there.

Tiago asked that he's basically doing his first round right now, and one of his investors wants him to form a 5-member deliberative council. So in other words, a board: 2 investors, 2 founders, 1 scientific council member. In other words, that's probably going to be the independent, just so you know. Education market with many philosophical issues. Do you find this kind of power normal for investors? Well, investors will want to try to control your company. Yeah, a bit egregious given your stage. Uh, and you know, Thiago's pretty early on, like, you know, this is going to be his first round. Uh, I would call this his pre-seed.

Uh, I think if it's a non-voting sort of group, like, it's probably not like a problem per se, right? Like As long as it's not formally your board, right? Like, you don't give them all rights to sort of steer the company, right? I think, like, if they want to be advisors, an advisory board, like, not a deliberative council, right? Like, great, we'll take your advice and we'll decide if we want to use it or not, right? But yes, I think Mike's right. Like, every— advisors would be happy, investors would be happy to have more control.

Right, they always want more control as much as possible. And it's usually not, you know, it's not usually the valuation of your deal, it's usually the terms that ultimately control the company. And this is one of them. That's right. Do that. I also have the same advice for founders too, you know, push them into like an advisory board situation, right? And then if you do that, then, you know, they don't have any like voting rights on what, what do you guys do on the company and so on. You know, Tiago, when you get a term sheet, you know, email grads@fi.co. Happy to review it for you and we'll tell you how to push back and on what. And so Vinay says, we're talking about a pretty disciplined communication plan with shareholders. What would you say is the frequency you have typically seen that works best? One group meeting a month, 2 to 3 calls informally, just curious.

It's hard to say. Some of it is depend— so think about these factors, right? Like, is your industry changing super fast, right? In which case there may be a need to sort of sync up on the industry. Like, if you were in crypto, like, every week's like a nightmare, and, you know, you may need to talk more often, right? Are you moving fast, right? Like, what's your internal velocity, right? So are you making tons of choices? You don't want too much time to lapse between sort of getting those updates in with the team, right? What is the availability and commitment that they're willing to make, right? Remember, every time you have one of these meetings, it requires preparation, it requires sort of like, you know, you know, it creates usually some internal pressure about trying to do or prepare or force the— and it may force things that you don't want to. So I think like cadence is important. You know, like, I would say probably 6 weeks. Like, if you have— when you have a formal board, like with your VCs, like, for example, they won't be available to meet all that often, right? They might take a phone call, but like official board meeting, like, we would schedule them entire, like a year out, right? Like, we knew when they were going to happen. And they were like 6 weeks to 8 weeks, sort of like apart, like every 2 months, 3 months. They likely move to like quarterly as the company gets bigger and more mature, right? And they tend to be more frequent. As a company is younger and sort of has more of a scaffold in place and more form structures, right?

At the very minimum, Vinay, you should definitely be sending out a monthly update. Summarize things at the top, have a good section, bad section, which kind of leads to your next question there, and then, you know, ways you can help. And every single shareholder should get that. That way everybody knows what's going on with your company. Uh, if you stop sending these regular monthly updates to shareholders, your shareholders would think that you're dead. Uh, it's pretty common. Most investors— it's getting to the point now where most investors are literally starting to require this, uh, you know, like in their term sheets they're trying to start to require that thing because it's like, we can't— people can't be proactive in helping you. Like, it's always reactive, right? It's like, oh, like 6 months later the company is running an issue but we haven't known about it, we could like try to fix it. Earlier, right? So everybody get on the habit of sending a monthly update. Make sure you put grads@fy.co as well on it. That's what we're here for to do as well, to kind of help you. But yeah, I'd love to hear if you had any thoughts on that as well.

Yeah, no, I was just going to say bad news immediately. I would also be careful with, right? Like, you know, you don't want to like start sending people out where they're like going to wince every time an email comes from you, right? Like, so you know, like what's truly bad, right? Like, and sort of figure that out, you know. What you think is bad is likely not bad for them, right? Like, they have a longer-term view. We react every day to everything that happens to us. So, you know, don't sort of feel like, you know, even if it was like we were planning on this deal and the deal fell through, right? Like, if your monthly update is coming, right? Like, Give it a little time. Give everything a day usually to process at least and sort of figure out, you know, like sometimes, for example, if it is with a deal you're working on, sometimes they can be a good force to go and try and help you close it up, right? Like, so, but I wouldn't send it bad. I would say like, necessarily like, we're having trouble closing. And so this is, you know, I think to my point, don't wait until it's dead. Say, hey, we're wondering, like, it might be useful, like, if you chat with our board, right? Like, we understand we're young, we're new, whatever it may be, maybe like talking to one of our advisors. Could be a way to help you close some business, etc. So, you know, bad news is a— it's, it's— there's a pervasive numbness to bad news in the startup ecosystem, right? Like, so, you know, just get used to it and sort of normalize it and rationalize it in the right way. Otherwise, you know, they also will stop wanting to, to talk to you because, like, they may just think that you're, like, hypochondriac and, like, worry about everything.

I mean, it also shows that you have like really good discipline, you know what I mean? You have really good discipline about how you run your company because you're setting up this monthly update. And it's also really good for you because you have to put something in this update every month. So it almost creates like a little management technique for you. So, you know, make sure that, you know, you've kind of put together a monthly update. It's really, really—

By the way, I would actually, Mike, to your point, I would add you should include things that aren't going well, right? Like, don't just send this highlight reel of all the greatness, right? Like, Send the things that failed or didn't work because they may be like, you know what, I know how to fix that problem that you, that you had there, right? Or, you know, I have an alternative for you, right?

Um, you know, Greg, you, you had, uh, this point in your notes about, you know, using shareholders as, as sounding boards. You know, what are some of your best practices or thoughts on that?

Yeah, so, you know, folks, here's, as I was saying just a little bit before, like when we're doing our work day to day, we are so entranced in all of this stuff and we're so inside of our bubble, you know, and Vinay, to your point, like sometimes there is, you know, this dirty laundry. Well, this is what you have these advisors for, right? Like, is to go to them, like to say, I'm having trouble with my co-founder. I'm, you know, I'm not sure, like, I'm a good presenter, right? Like, I, you know, Our sales materials don't seem to be working, right? Like these are the kinds of problems that I think like by going to them to get their feedback, they are synthesizing all the other advice and experience they have and they can sort of just give you a clear head, right? And, you know, I think like sometimes that clear head or that outside point of view, but who knows your business, right, is literally to just say, no, you're just overreacting, right? And sometimes it is to say, Okay, this is a problem. Here's like what I think you should do to fix it. And sometimes it may be, you know what, I think you're focusing on the wrong thing and it may give you a whole new direction or way to think about the problem itself. But being inside of our world all day, it's easy to think that everyone understands everything, like everyone shares all the same problems and you create this sort of, you know, web that we get stuck in. And it's good to come up for air every once in a while and just talk to your advisors And also every once in a while, just ask them honestly what they think how you're doing, right? Like, what do they think is going right? What do they think is going bad, like, well and poorly from their point of view, you know, without you sort of coaxing them down a pathway.

Yeah, I mean, and it's also just a, you know, kind of a sometimes often a lonely journey too. And so it's good to have other folks to kind of bounce it off of. And also, you know, that's also what we're here for at the graduate success group is to kind of talk through that. So feel free to reach out to us and set up office hours and things like that because we're here to help as well. Um, you know, one of the, one of the, uh, last points that you made here is in regards to using shareholders as signals. Uh, I'd love to kind of, kind of, you know, have you elaborate on that. It's pretty, pretty interesting topic.

So, you know, there, there's a lot of signals in the world, right? Like, um, there's that, that are valuable to a startup, right? Like, are you working on a problem that someone has found a better solution to? Right? You started on it, and then someone else suddenly figured out a better way to do it. Right? That's an important signal. Right? When is a customer potentially ready for a deal? Right? Like, like, what, when it, when it, what's the maturity level of our industry You know, when you're starting early with these super early adopters, when should you be going for the next thing? Important signal, right? Are we using language that is meaningful to our audience, right, or to our customers? Really important signal, right? All of these things, actually everything we talked about, are signals, right? How is our competitor talking about us, right? How are they framing where we fit in the ecosystem versus where they fit? Right. Incredibly important signal. Right. And so, you know, I think because they are seeing more things than we see because we're busy working all day, you know, most of the time when you're, you know, my experience, I don't pay attention to what competitors do for the most part. Right. Like I only pay attention to it if a customer tells me it matters. Right. You know, you keep an eye on them, but like you've got to build your business. You're not trying to build their business. Right. And so these signals that are possible, right, they're visible to us, like through our stakeholders and our shareholders, because they don't have the same constraints as us, right? Like they understand and see new patterns in the world that they're like, hey, you know, I saw these guys trying to do this over here and, you know, I never really thought about it for you before, but it might be useful, right? Like they can actually bring in external signals that we're like intentionally ignoring, right? Because like we're focused on doing what we need to do, right? And, um, don't— never give up on sort of like, you know, like if you're working with traditional or institutional investors, their business is deal flow. They, they're paid to see a lot of deals and ultimately invest in the best ones. That's a tremendous amount of information that, um, that you won't have access to, right? Um, and, and then that, that to the extent that you can get that as leverage is really, really powerful.

Yeah, 100% agree. Everyone, we have about 5 minutes left on this webinar, so if you have any more questions, this is a really, really, really good time to ask those questions. So feel free to add them in here. You know, I'd love to kind of drill down with you a little bit more on this language thing. This is super important, right? Like whether you're talking to investors, talking to customers and things like that, you know, any best practices on how to kind of engage with the person and make sure that they're, that, you know, you're essentially communicating things the way they should be communicated so that you look like, like you know what you're doing, essentially, even though you might not.

Yeah, yeah, totally. So I think there's a few things that are actually pretty helpful in this regard, right? One is, if you can talk to someone, don't, don't try and give them the marketing line. Tell them what you think and have them tell you back what you said. All right, and that echo effect, right, is actually like— number one is it's likely identifying what was valuable, right? Because the things they remember are things that were important to them, right, or things that were valuable to them. So having someone repeat it to you, right, like, or do it for you, say it back to you, is actually a really powerful way to sort of just automatically get that echo of like which pieces of what you're saying is most valuable. The second thing you can do is is ask people to write it back to you, right? Like, so that's step one is like the conceptual one that becomes like some kind of phraseology, right? The next one is like, say, well, let me have— here's a phrase, have them write the phrase. Like, how would you say it, right? How would you do this? How would you communicate this point, right? And then now you suddenly end up with a few variations that may be better or maybe, you know, or maybe totally different than you thought, but that actually may perform better. right? And then you may do that with like your domain expert, right? Then you take that and you expand the circle a little bit, right? And you actually try and build that, solidify that message with maybe some early customers, right? To understand like how they do it, right? Like, you know, like if you dig like any industry, there's like all kinds of like acronyms or shortcuts. There's, you know, ways that they refer to things that as an outsider, often as an entrepreneur, we don't know those things. But we also want to really know what they mean by it, right? Like, you know, because you can Google it and get a definition, but like, the people only use one part of what that thing is. You need to know that, right? But I think communicating, you know, why you're valuable to the world is one of the hardest things that you spend your whole lifetime as a startup sort of working on, right? And to the extent that you can use them as a sounding board to get back more of that feedback, it's really, really powerful. And I absolutely remember recommend that you do that.

By the way, this also applies to like your updates and your email communications, right? Like, you know, for example, in Silicon Valley, a lot of the email communications are very short, and, and that's important. Investors don't want to read a lot of stuff. But if you're on the East Coast and you're dealing with like government officials, they're expecting a completely different level of, of, you know, communication. They might consider that rude, right? So you need to have like really clear insight on that. So if you do have experts in these particular areas, make sure that, you know, you reach out as well in all your communications. Am I positioning this correctly over email? Am I having the right etiquette? You know, what's expected of me? Are they expecting me to go over there and take them out to dinner, for example, wine and dine them, or versus, you know, just doing a quick coffee or just a call, right?

So that's a good— that's a good point, actually. I think, like, you know, we were asking, like, how do you pick your advisors? I actually think it's really useful and powerful to actually also have diversity in and the kinds of feedback people want to provide, right? Like, you need someone who is willing to sit down for an hour with you, like, and talk, right? And then you need someone who's just like, I want to go out in the world and just do stuff, and, you know, I want to send some intros, and that's like my value, right? Like, but you need that, you need the different forms, like breadth and depth, like from your advisors, right? And so, like, you got to find the right mix, because if no one will talk to you, right, like, you know, when you have these, like, you need these sounding board moments, right, or whatever, maybe then then you're actually, you're still missing something that's important to succeed.

All right, everyone. If you have any final question, this is the last time you have an opportunity to ask them, so feel free to do so. Going once, going twice, going 3 times. All right, well, since, oh, Barbara just wanted to say thank you, lots of great nuggets. You're welcome, Barbara. This was a terrific, terrific, Graduate Master Session, a much-needed one. Greg, thank you so much for taking the time out of your busy schedule to kind of join us and dropping all this amazing knowledge on us. We really, really appreciate it. Thank you so much for doing this.

My pleasure, and I appreciate it. And it's funny, you know, when someone says, what do you get out of it? Like, the reason I do mentoring at all is I actually learn more about what I know in the process of doing this, and that's like a pretty big reward unto itself, right?

Thank you so much. All right, thank you so much. We're logging off now. Thank you.

Bye-bye.