Do I Need a Startup Consultancy?

Experience is what you get when you didn’t get what you wanted.

Randy Pausch

So you’ve made up your mind at last. You gathered up your courage – and you will give it a shot. This brilliant idea just can’t wait any longer. If you miss it this time, the next time might never happen.

But as you begin researching the market and putting together the strategic blueprints – it starts to feel like this is an entirely new field for you. And deeper you dig, more question marks are popping out. How much will this cost? Where to find the right people for my team? Do I need a co-founder? Shall I charge a premium price or go for a low-end leadership? How do I acquire my first customers? Is it a workable idea altogether?

The answers Google gives you are rather ambiguous and when you talk to your friends – they either praise your idea or try to persuade you to abandon it.

Startup is usually a business which has been created recently, works in constant uncertainty and has quite a limited number of resources at its disposal. Taking into account these challenging circumstances and startup’s need for growth, having an unbiased feedback or advice would be a must. And that’s what startup consulting is there for. Hiring a skillful startup consultant might save you a lot of time and be one of the best solutions if you about to decide your startup has reached a stalemate.

Startup consulting

That is the first time you think about hiring someone professional. Someone who has both the expertise and experience to advise you what to do or at least to point to the right direction. But here comes another question: are business consultants worth the extra money? Are they able to generate the value that will make a difference for my super-early-stage business?

The short answer is they are. But not every consultant is of the same efficiency to a startup. And there is a limit on what they can do for you.

Darth Vader and Luke Skywalker

A startup differs from an established business not only by the year of foundation. The two most important distinctions are:

– a startup operates in a much higher uncertainty;

– a startup’s resources are much more limited.

This is why the most of high-end expertise of the likes of McKinsey, BCG, Deloitte and co. will be irrelevant. Most likely you’re also not able to afford them – so let’s move on.

The other type of people you must avoid at any price is “the theorists”. Precisely for the two above peculiarities of a startup, only practical experience counts here. Massive startup movement is a recent phenomenon (see this article) – and specialised startup consultancies are even more recent. The embryonic industry has so far produced neither robust quality standards nor enough competition to filter-out the incompetent. This is why you have to be very careful. And this is what God (and Reid Hoffman) created LinkedIn for. Search for the profiles of the consultancy partners and if there is no record of an own startup (or at least of working on an executive position in an early-stage company) – no Oxford MBA should stop you from trashing them.

An ideal startup consultant is a failed past founder. Sounds quite paradoxical, right? How someone who did not succeed in their own venture can produce valid pieces of advice  for another startup? It turns out they can!

The thing is that most startups fail. By no means I want to discourage you, but according to Paul Graham of YCombinator, almost every single startup is doomed (and that “almost” is as much as 0,4%. Alas!..). The reasons can be various: insufficient resources, they couldn’t hire the right team, the market turned out to be non-existent, etc. What is important is that the failure isn’t necessary the founder’s fault. Based on this research, conducted in the 90s by Stockholm School of Economics, University of New York and Universidade Nova de Lisboa, a maximum of 22% of company’s performance depends on the decisions of CEO=Founder. It is worth mentioning that the object of the research was huge Fortune 500 corporations. In the world of startups, the correlation is many times smaller.

Screen-Shot-2014-09-25-at-19.21.19

All of the above is actually good news. It means that there exists a large (and growing) segment of past founders who are not necessary some dumb incompetent wishy-washy losers, but rather normal guys, smart and ambitious – just like you. The only difference is that they may have less money and much more experience.

Some of them are already trying to monetise that experience by starting a consultancy or working as freelancers. Others are just wandering around looking for opportunities. This gives you some flexibility: having a bit of spare money allows you to hire the former, while the latter may be lured  into becoming your mentor for a small chunk of equity. Yet keep in mind that since you’re in fact offering a percent of zero, the second way may be harder than it seems. Success largely depends here on your personal communication skills, as the prospect mentor literally has to believe in you and in your idea (yes, exactly in this order).

Here are three simple steps which will help you pick the right people. LinkedIn profiles, though a useful basic reference, seldom provide a full picture. Some founders even consider that the unsuccessful projects are not worth recording at all. That’s why the key source of information for you is a personal meeting or at least a Skype call. Believe me: it is well worth the time.

1. Look for the external evidence of their expertise. Any startup consultant must have a blog. A good one publishes there regularly – and his/her posts have three qualities:

  • they make sense to you;
  • they tell you something new;
  • they are relevant to what you care about.

YouTube videos, Quora threads and conference gigs are good strong points as well.

Some startup consultants have already managed to publish a book (or two). While being a cool fact by itself, this doesn’t necessary mean that you have to give the authors any priority over those who haven’t produced a heavy paper brick yet. To publish a book became fairly easy in our days – so before sending them a contract, persuade yourself to read the first chapter or the summary. What I said above about blogs is also relevant to any book.

Also it turns out, for some reason, that publishing a book often promotes the author in their own eyes from a conventional consultant to a guru – with obvious (multifold) implications on the rates.

2. Ask them about their startup. What problem was it solving and for whom? How far did they make it? (The rule of thumb here is simply “the farther – the better”). How many active users they had? Did they raise the seed round? How about Series A? The most important: what do they think stopped it from being an ultimate success? You are looking for honest, clear and coherent answers, which will give you an impression that they learned on their own mistakes and can prevent you from repeating them.

3. Tell them about your startup. A good consultant will firstly ask you a few questions to clarify the overall picture – and then he or she will tell you something new about your business. They need to give you a glimpse to the riches of their expertise at the very beginning. True experts are never afraid of doing this. However, don’t try to extract too much of a free advice. At the end of the day, this sales process is mutual – and you need to be a good client yourself to be able to hire a good consultant.

 

So you finally did it. You’ve done your homework, conducted a dozen of interviews – and at the end of the day you signed a contract with the world’s best startup consultancy (from the price/quality perspective, of course). Now what’s next?

As consultants become part of your startup, the first thing you need to know is when you can count on them and when  you’re on your own.

This is precisely the topic of my next article 😉

In the meantime, you can check YouTeam Startup Programme we designed specifically for selected early-stage startup founders who are looking to build or extend their core tech team together with a support by professional startup advisors.

 

 

Yura Riphyak

Yura Riphyak

Yura Riphyak is a Co-Founder and CPO at YouTeam.

A serial entrepreneur, Yura has founded 4 companies since 2010, with 1 successful exit. Before starting YouTeam, Yura co-founded Hubbub.fm - a “Twitter for Voice”.
Yura is also an LSE-graduate in Economics, mentors a number of startups and teaches a crash-course on business modelling in several universities.

1 comment

  • In startups, you need to build and test. The analyses you perform won’t work because you’re doing something new. Also, you’re implementing across a 10 person company so changes can quickly be undone. Most importantly, the thing you’re working on may totally fail, so refining it to the degree you would as a consultant can be a waste of time.