Bad Advisors: The Problem with Localism

TL;DR Nutshell: One hour with an advisor who has exactly the domain expertise your company needs could be infinitely more valuable than 100 hours with someone who doesn’t. Yet, unless you live in a large ecosystem, that all-star may not be in your city. So go find her. Time is precious and mistakes are costly. Never put localism before competence and results.

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My wife loves farmers markets.  I love healthy, delicious fresh food, as well as supporting decentralized agriculture over conventional mega farms.  But I also personally have a ‘thing’ against rewarding inefficiency and mediocrity. I dislike the way in which a lot of the pro-local ethos appears to almost celebrate how badly businesses can be run – hand-made, hand-picked, artisanal, small batch, etc. etc. If it doesn’t actually produce a tangible benefit to the consumer (better taste, as an example), why should I wake up early on a Saturday morning just to reward your bad business skills?

Funny thing is that there’s one local farm here in Austin that has begun to just dominate farmers markets. More variety, more staff, consistent quality, better pricing, even better branding. They’re everywhere. I love it, and whenever I have to go to a farmers market, I usually just end up shopping at that one booth. And when I’m not at a farmers market, I’m probably shopping at Whole Foods, which is the farmers market fully self-actualized. Say what you want about its prices, but John Mackey and WF took the pro-local, pro-environment, humane food value structure and scaled it (out of Austin) like no one else has since. And it is spectacular.

Touchdowns; Not Pep Rallies. 

Now back to tech. Celebrating your local business / startup ecosystem is a great thing. There’s deep value in the close, repeat relationships and networks that develop through working with people within your city. But with that being said, there is still a completely unavoidable fact: nothing comes even close to supporting a local startup ecosystem as much as the building of scaled, successful tech companies. All the meet-ups, startup crawls, networking events, hackathons, pitch contests, publications, parties, etc. are great and important in their own way, but, to repeat, nothing matters more than the building of great companies. Touchdowns. Wins.  Pep rallies do not attract the kind of deep talent that ignites a local economy; awesome companies do.

Once you accept that building successful companies trumps all else, there’s another unavoidable fact: working with highly competent, experienced advisors with truly valuable insight for your specific company, whether they’re in Silicon Valley, Seattle, Los Angeles, New York, Austin, Houston, Boston, London, Dallas, or wherever, comes first, second, and third before working with someone who may be more accessible to you locally, but can’t deliver nearly as much value. 

If it’s my company, my capital, and my employees on the line, I ain’t got time for the guy selling his tiny backyard tomatoes across the street, even if he knows everyone in town. I need that big, juicy peak game stuff, and if I have to go to the coasts to get it, so be it. Hit your goals with quality, imported help (if necessary), and you’ll sow a dozen A+ farmers in your city for the next entrepreneur to reap. THAT’s how to support your ecosystem.

Bad Advisors <> Influencers. 

Bad advisors are usually influential, well-known people in a local economy. They aren’t bad people. They just don’t have very useful advice, and often give bad advice, to early-stage founders. 

If you want to start a startup-oriented business – let’s use an incubator as an example – and generate a lot of buzz around town, you are going to want to work with the influencers in your community. They know whom to call, what strings to pull, and can even usually put in some cash, to help establish your incubator’s brand around town. What do all of those influencers expect in return? Profit? Perhaps. But more often than not, they want access. They want to be involved. How can they get involved? As mentors /advisors.

So it should not surprise you that when a new incubator, accelerator, co-working space, or other startup-oriented org launches in your town, a significant portion of the people involved will be there not because of the value they can bring to startups, but because of the value they brought to the person starting the incubator, accelerator, or what not. They may be C-suite executives at a prominent local company who have never worked anywhere with fewer than 200 employees. They may be wealthy businessmen in industries totally unrelated to your own. Sometimes it’s just a guy who is really F’ing good at networking.

It’s an unfortunate fact of reality that many business referrals, even in tech ecosystems, are made more with an eye toward perpetuating the influence of the person making the referral (reward people who refer back, are part of your ‘circle’) than the value that the recipient of the referral will receive. Finding people who care more about merit than about rewarding their BFFs is extremely important for a founder CEO. Those people will be honest with you when there simply isn’t anyone in town worth working with. I find myself saying that often about lawyers in specific niche specialties needed by tech companies, although increasingly less so each year.

Widen your network. 

The take home here should be to (i) understand why those influential (but sometimes clueless) local people are being pitched to you as advisors, even when they don’t really have very good advice (but they may have money, and it’s green), and (ii) go find the advisors you really need, wherever they are. But please save your equity for the people actually delivering the goods. Vesting schedules with cliffs. Use them.

Videoconferencing is pretty damn good and cheap these days.  I use it with clients all the time. LinkedIn and Twitter make it 100x easier today to expand your network than even 10 years ago. Hustle. Every founder team does not need to fit the super extroverted, Type A entrepreneur stereotype, but I’ll be damned if any company can succeed without someone who can get out there and shake the right hands.

Interestingly, some people are working on building curated (important, get rid of LinkedIn’s noise) marketplaces to help founders find well-matched advisors, hopefully at some point across geographic boundaries. Bad Ass Advisors appears to be the best example I’ve seen thus far. If BAA doesn’t become a hit, something like it will. The value prop is obvious.

 Most startup ecosystems have some awesome people to work with. Find them. Local can be valuable.  But as your company grows and evolves, don’t let the geographic boundaries of your city force you to settle for influential, but not very useful advisors. Customers > Community. All day. Every day. Never forget: you’ll help your local economy and ecosystem far more by going big and going far than by going local.


Also published on Medium.

  • https://www.invoiced.com Parag Patel

    This is a refreshing blog post and the biggest issue I see in Austin. People just circle referring each other with low quality startups, advisors, mentors, founders, investors etc.. Compared to my experience working at startups in Boston, the environment here just seems low intensity and low quality.

    I think by Austin startups going big and (non-local) it will fix the low intensity and low quality throughout the ecosystem here. Austin is a great place to live but just lacks the quality talent.

    At Invoiced we are hoping to help that by being laser focused on high quality and bring the intensity to the game.

    • José Ancer

      Even more of an issue in other ecosystems than Austin, but yes you do see it here as well.

  • http://seobrien.com/ Paul O’Brien

    Awesome article. Damn. What a wonderful, important, and needed point of view in Texas.

    Respectfully, for the sake of fostering (not disagreeing) with this discussion, a very frequent discussion of late in the venture capital community is that Texas has an aversion to failure, criticism, and losses. Great companies are not the result of nothing but wins and touchdowns, that’s just not realistic of the fact that most companies fail, most entrepreneurs fail, most successes have pivoted, screwed up, and wasted money along the way.

    I’d offer, “nothing matters” more than more transparency, open discussion, sophisticated media coverage, criticism, celebration of failure, recognition of mistakes, and appreciating that big wins stand on the shoulders of lessons learned. We have big wins, Trilogy, Home Away, Indeed, Bazaarvoice, Spiceworks, Solarwinds all come to mind as relatively recent and notable wins from Austin but does anyone really know their story? What they went through? What they screwed up? (because we all know there are some major f-ups therein too). We don’t not really, and thus we don’t learn, we don’t do better, we don’t bring to the VC markets battle hardened experience (or rather, we don’t show them that we have it, only that we win, win, win… and yet we don’t really, on the scale of the coasts). Texas generally (historically perhaps) isn’t comfortable socializing and celebrating those things and thus, we don’t learn nearly as quickly nor efficiently as some other startup regions. We start way too many things that have failed before or obviously will fail because we’re not exposing the bad. To some extent, I think that’s the very thesis of your article…. it doesn’t do anyone anyone good to get a local advisor because they are convenient and local if they have no battle scars and experience in YOUR industry.

    • José Ancer

      Interesting point, though I’m not sure I’ve really detected much of that ‘aversion to failure/criticism.” But I’m just one sample. I think we’ve got a pretty good entrepreneurial spirit here, and I’ve seen companies fail and the entrepreneurs get a welcoming reception/soft landing from the community.

      The point of this post was not at all that local community doesn’t matter. It’s very important. But it needs to be kept in its context. It does feel at times like the emphasis on “ecosystems,” which is a relatively new thing, has for some people hit an extreme where they’re so focused on building their local startup community that they aren’t doing everything they possibly can to find the best resources for their businesses WHEREVER they are. Local becomes localism when it becomes a constraint (referral circles, bad advice, ignoring better people elsewhere), instead of an enabler, on the ability of companies to scale.

      • http://seobrien.com/ Paul O’Brien

        Good points and we should be clear, I’m absolutely NOT saying we don’t have a great entrepreneurial spirit here and that those that fail don’t get a landing. Austin (Texas) is a very “supportive” ecosystem. This observation is much more macro, higher level, and cultural that in general, we don’t appreciate failure as much as we do success. It makes sense, historically we’re a corporate, small business, and Sales oriented economy. People who work for companies tend to favor the idea of having a good annual review or needing a good looking resume to get their next job. People who run small businesses have to always be working. Sales is about closing. We naturally have a tendency to think the win is more valuable.

        But startup cultures mostly have loses, not wins. Marketing is all about failure (finding what doesn’t work and optimizing business requires appreciating the bad). Investors are only going to fund the first time entrepreneur who has significant traction; otherwise that first time entrepreneur had better had learned A LOT by screwing up, before most investors would be comfortable handing over their money – no one invests in someone who hasn’t learned what mistakes to avoid. So our culture talks about the wins, our media covers the success, our startup community is always hungry to reinforce customer adoption, revenue, and exit (wins); and evidence of that is that we know very very little about the mistakes made in our bigger companies. We don’t dissect the failed startups in the media and teach everyone what not to do.

        I agree with your clarification that no one is saying Local isn’t important, I caught that in your article and I’m reinforcing it: Local is critical and understanding how one’s local works, behaves, reacts, invests, advises, etc. is critical to knowing where you should be focusing locally and where/when you might want to think beyond for the ideal resources.

    • Paul Spitz

      Being able to talk about the mistakes and failures is especially important to startups, and that’s where mentors from big companies often lose their relevancy. I always chuckle when someone who works for a multi-billion dollar company with 80,000 employees talks about their “entrepreneurial” approach and spirit. When someone at that company works on a new project, they have vast resources at their disposal, they don’t have to go a year or longer without pay or benefits, and when it fails, they just go work on the next thing at that company. The stakes of failure are much greater for startups. You’ve spent all this time, with no pay, trying to make something, without support or resources, and if it doesn’t work, that’s it. You’re unemployed.

      • http://seobrien.com/ Paul O’Brien

        Precisely Paul. There is a tendency for incubation stage programs to favor successful startup CEOs as advisors when in my experience, the companies that have excelled are those that favor CEO advisors only later when the role of startup CEO shifts from vision/hiring/funding to developing a company. In the earliest stages, the people you need are VPs, execs, the others in the trenches with the various things you need to execute efficiently and effectively to get going.

    • http://www.guengerich.com/ SteveG

      Overall, excellent points about seeking great advisors. I’ll offer, however, my support for what Ash Maura has written, which is that the key is to avoid taking advisor feedback as judgment or validation, but rather as a means of identifying and prioritizing risk. At the end of the day, it’s still the founders’ job to own their business model – not the advisors.

      Paul, re: the stories of Austin successes, that’s exactly what we tried to do, in a small way, with the book “Naturally Caffeinated” this year. Lessons learned, pivotal moments, and other stories from more than 70 experienced entrepreneurs in ATX, incl. Brett (Bazaarvoice), Jimmy Treybig (Tandem), Admiral Inman (MCC), Hugh Forrest (SXSW), Sam Goodner (Catapult Systems) and a whole bunch more. You can get it here: bit.ly/ncamzn — published by Capital Factory accelerator company, Weeva.

      Lastly, Jose’ re: localism, I think it’s incredibly important to perpetually refresh your local network. In a community like Austin that is under-going growth and high change, there are new people coming into town every week, each with a fresh new perspective and expertise. It’s easy to get comfortable w/ the same or highly overlapping small networks of business & tech colleagues with whom you build social relationships, unintentionally limiting your access to potentially great advisors “right next door” in the same city — whether Austin, Detroit, Boulder, or San Diego. So, my answer is, constantly explore new groups and seek out new associations, wherever you are.

      • José Ancer

        All excellent comments. Particularly important comment about founders’ job to own their model. Best way to avoid referral circles is to not ask for open-ended referrals but targeted intros. Do your diligence, find out YOURSELF whom you want to be connected to, and then find people who can connect you. Don’t expect a handful of local advisors to figure that out for you.

  • lucaslindsey

    José, first off great post. This resonates a ton with my experience trying to get a startup community off the ground in a small market (Tallahassee, FL). The launch of our incubator has attracted a great deal of interest and support from local and regional business execs and advisors. Some are first class All Stars, others are well intentioned but lacking, and a few, without beating around the bush, are vultures. The ability to live local and enjoy the quality life benefits and cost of living advantage of a great city is one thing–indeed it’s often a compelling reason to try and build in a smaller market–but as you point out there’s a huge need to leverage out of market mentors and advisors.

    I think one off incubators in small to mid size markets will continue to struggle with this issue. It’s through networks and coalitions that they might be able to collectively assemble a great portfolio of advisors. At the end of the day, though, it falls to founders to keep hustling and thinking big. They can’t wait on their incubator to master plan a badass advisory network.

    • José Ancer

      100% agreed. I think the story here is not of founders being victimized, but of their drinking a little too much of the local ecosystem kool-aid and not hustling as hard and as broadly as they should be.

  • http://epicplayground.com/ msitarzewski

    It’s a classic subject. If only there were a way to keep track of the not so useful people with no domain expertise without making a “list.” 😉