Should You Ask An Advisor To Invest?
“I would like you to invest $50,000 in my startup,” “Peter” said to me.
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Peter and I had been introduced a few weeks earlier, and I’d met with him a couple of times. I really liked what Peter was doing, and I was happy to advise him. However, investing in Peter’s company was another matter.
“I’m going to give you something more valuable than my money,” I said to Peter. “I’m going to give you my time.
“I believe in what you’re doing, so I’m happy to advise you and work with you,” I concluded.
Peter said to me, “Let me think about it.”
The fact that an experienced person is going to give you their time is a bigger indication of their belief in what you’re doing than their money.
The one thing in life that you can’t get back is your time. There’s only so much of me to go around, so I am very selective about who I work with.
If I don’t truly believe in the project and the CEO, then I’m not going to work with CEO. It’s not the money, but it’s that I can’t get back the time.
My dad said to when I was beginning my career that I shouldn’t worry about the money, but I should worry about the opportunity, and the money will follow. I have followed my dad’s advice my whole career.
Time is more important to successful people than money.
In fact, my dad’s advice has become even more important to me as I’ve gotten older. My business mortality is right in front of me.
I understood that Peter was asking me for money because he felt it showed my commitment. However, from my perspective the money wasn’t critical. It was measuring the time I spend with Peter versus other opportunities I might be presented with.
The next day Peter called me and said, “Okay, you don’t have to be an investor.”
Peter and I agreed on the equity (stock options) he would give me in exchange for my time. Then we got to work. Peter built a powerhouse over the next few years.
However, it’s a great endorsement when an advisor does decide to invest in your startup.
“I want to invest $100,000 in your next round,” Dave, my advisor and mentor, said to me.
Dave already owned a sizable chunk of the company through our advisory agreement. He would make millions if we were successful.
“I am honored,” I responded to Dave. “It means a lot to me that you believe in what we’re doing.”
Cathal, who was on our board, also pledged to invest $100,000. It was another great endorsement of our company.
Indeed, it was something that all our new investors mentioned as a reason they wanted to invest. if the insiders were investing, then something must be going well.
That’s why I decided to invest $50,000 in Peter’s company buy purchasing my stock options at their exercise price. There’s no guarantee the options will be worth anything since the company is still private, but it seems like a good bet for me to take.