I came across an article recently that described the “entrepreneurial advisor complex.” While I unfortunately cannot find the article, it rightly bemoaned advisors who promise the moon but cannot deliver. Particularly egregious, according to the article, are advisors who ask for equity — with no vesting requirements — and then fail to deliver. This particular breed does more damage than just the cash-guzzling variety of advisors: they can kill start-ups with their mix of ineptitude and cap table destruction. “Right on,” I cheered, but then I realized I was part of the nascent entrepreneurial advisor industry. I also realized that these bad actors are a threat to the services First Avenue is trying to provide.
As an initial matter, “entrepreneur” is one of those terms that no one can lay claim to in the traditional sense. If you want to be an entrepreneur, you can roll out of bed one morning and declare yourself an “entrepreneur.” There is no test, no association, no license needed to be an entrepreneur. It’s an open field. Contrast that to lawyers, accountants, and doctors who have years of schooling, mandatory tests, and professional associations with continuing obligations. You may roll out of bed one morning and want to be a doctor, but you first must have several years of school before you’re allowed to operate, prescribe drugs, or otherwise practice medicine.
I think it’s great that entrepreneurialism is an open field, but it does have its drawbacks. Figuring out the qualifications of a founder is always a challenge. It’s not objective, but subjective. One of my frustrations in this work is trying to sort the weak from the strong. Without objective standards and with the industry’s penchant to celebrate failure, evaluating the strengths and weaknesses of an entrepreneur is difficult.
Similarly, entrepreneurial advising does not have any regulations. People are free to enter or leave the field at will, and checking qualifications is tough. No association is in charge of regulating unethical behavior, monitoring qualifications, or credentialing professionals. This allows for anyone to become an entrepreneur. This does provide a broader market for services, but with the broad array of service providers, the chances of bad service outcomes, intentional or not, increase.
That’s why educating the market and our customers is part of our business model. On a market-level basis, we spend much of our time helping the Birmingham entrepreneurial ecosystem develop. On a company-specific basis, we will generally give candid feedback to any Birmingham start-up or founder. We generally follow the Techstars principle of #GiveFirst. This is not to say that we give forever or give with no expectation or reciprocity, and we are also mindful of the issues around the #GiveFirst principle. However, as we want to find relationships that work, we are deliberate and consider it part of our customer diligence to have several meetings with clients and prospective clients before engaging with them. Ideally, these sessions help the entrepreneur and if the entrepreneur moves their company forward without our assistance, we still consider this a win for the ecosystem in general.
First Avenue Ventures was founded on the belief that as we shift more to an entrepreneurial economy, entrepreneurs will be in need of more professional services. Lawyers and accountants provided necessary services for start-ups, but a gap existed in the market. Through more than two decades of working (legal, operating, and otherwise) in the start-up ecosystem in Birmingham, we have seen probably close to a thousand different start-ups. This experience provides a unique perspective that we can offer to Birmingham clients.
We are building First Avenue on the belief that the economy in general is becoming more entrepreneurial, more start-up-focused, and more innovative. As that process happens (assuming for our sake that it does), a more efficient and professional model will emerge, particularly in tertiary markets such as Birmingham. As that happens, our value proposition and experience will allow First Avenue to become a valuable entity. Therefore, we are vested in getting to a level of professionalism. Educating the market as well as exposing unsavory characters is critical to our mission.
So here are some of our core beliefs in delivering entrepreneurial advisory services:
- While we look for equity, we will only take it when our interests align with the company and founder. Generally, we expect equity to vest.
- We are up-front and do not charge entrepreneurs unless and until we have a written agreement.
- We seek a blend of cash and equity and/or bonus so that our efforts are aligned.
- We only engage with companies and founders who we believe we can help by adding value.
As we move forward, we expect these core beliefs to change, but we always value commitment to our clients, alignment of interests, and only doing for clients what we would do in the same situation. Maybe as the industry evolves, we will have trade associations, credentialing organizations, and the like. Regardless, we intend on always taking the high road.