Advice about advice

Since I became a venture investor a decade ago, I’ve noticed that along with a much bigger pool of capital available to entrepreneurs, there is a lot more "startup advice" floating around too.?

I was motivated to write this post because way too often, I hear first-time entrepreneurs say things which I relate to all too well:

• “I’m doing X because that’s what my advisor told me to do” or
• “It worked well for Y when they were an entrepreneur” or the worst one of all…
• “I’m so confused, I’ve got contradictory advice!”

I put all these in the bucket of “victims of bad advice”. However, it’s not simply the fault of the person dispensing it; we underestimate the role WE play in whether the advice we are getting is great, fair or just plain bad.?

Here’s what we can do about the 5 common traps we fall into when we seek advice:

The square-peg-round-hole problem

For some reason, we tend to rely on one or two people or a very small group for all our advice needs. However, a single person can only ever be an expert in 2-3 areas at most, which means we end up asking for advice from the wrong experts more often than not.

Tip:?

• Solve for finding the person with the most experience in your specific situation - not the most popular mentor, or the entrepreneur who has ‘sort-of’ experienced the issue once before. Perhaps it's the board member who has seen it countless times before and has helped founders navigate the situation? To save your time, even ask: ‘I’m facing issue X and need some guidance. Would you say you have a lot of experience being exposed to this specific issue?’
• Whether or not you have an official Board, build an unofficial ‘board of advisors’ with expertise across a wide range of areas. An unofficial board of 6-12 is a good start to give breadth and diversity of expertise.?

The just-google-it problem?

The reason we ask advisors and not Google (or ChatGPT) questions is the benefit of getting highly tailored advice that takes into account our unique situation. I’ve had entrepreneurs I’ve never met start by asking me, ‘Who should we raise funding from?’ with little context. I could rattle off a generic list but so could Google.?

Tip:

• You are the only person that knows 100% of the context to your situation. How can you transfer as much of that context as quickly and effectively as possible to equip the advisor to better help you? Is it an email in advance with additional info or will you invest the first 15 minutes or so explaining the situation?
• All context is not useful context. There are probably a few key relevant details that are essential to unlock good-enough advice. What are they??
• Ask generic questions, get generic answers. Ask very specific questions, get considered and specific guidance. E.g. Let’s take our question from earlier “Who should we raise funding from?”. A better phrasing of this could be “For our current round we are specifically looking for a B2B investor that has experience helping their portfolio move into the US market. Who could we raise from that could help with this?”

The black-or-white problem?

I find myself in many conversations where entrepreneurs just want the ‘answer’ to their issues (this was me too!). However, founders are the ultimate decision-makers and advice just empowers us with additional information to make better decisions. Outsourcing that decision to someone who knows less about our company may not end well.?

?Tip:

• Reframe questions to elicit useful information to help with your decision rather than seek? ‘answers’ e.g. instead of ‘Should I join accelerator X?” ask ‘What factors should I consider before joining an accelerator?’
• If you do ask a black-or-white question, a good response will always start with ‘It depends…’. If not, and you get a binary response, take it with a grain of salt! Without additional context (see point 2 above) the advisor’s own biases are likely coming into play.

The Munger problem?

Charlie Munger famously said “Show me the incentive and I’ll show you the outcome.” When someone gives us advice, there is always an incentive - even if it is something as simple as feeling good about themselves for helping a founder. However, there are worst-case scenarios. A founder recently shared with me “You would think [the investor] would have our best interests at heart but their recommendation was just off. I now don’t know who to believe.”

Tip:

Take a moment to understand an advisor’s motivations for giving you advice:

• Are you paying them for advice? If so, is it equity, cash, or both? Motivations can differ depending on which.
• Are they being paid (or rated) by the mentoring program, accelerator, etc they are a part of? If so, is it linked to their relationship with you??
• Are they a Board member and if so, what type? A financial investor, strategic investor, industry expert, etc??

The blind-spot problem?

As humans we are vulnerable to any number of unconscious biases that prevent us from rationally interpreting or evaluating the advice we get.?

?Tip:

Beware of these unconscious biases:

• Confirmation bias - we value advice that confirms our own beliefs and hypotheses. This is the most common one I see given founders are strong characters with strong opinions!
• Positivity bias - we overweight advice and/or advisors which say positive things about our startup and underweight the rest
• Affinity bias - we tend to build stronger relationships with advisors, and hence rely on them more heavily, if they are similar to ‘us’

Some signs we might be vulnerable to one of these: constantly on the defensive when we receive constructive feedback, having a ‘board of advisors’ that is not diverse, low self-awareness.

At the end of the day, the quality of the advice we get is largely based on our judgement – our judgement of the right people and right questions to ask, our judgement of the right pieces of advice to take on board and the wrong pieces to discard, our judgment on how to apply the advice we value to our specific context.

I should probably end this by saying, take everything in this post with a grain of salt!