Interview with Martin Zwilling, VC and advisor: “Partner with someone who has done it before”

Eugenia | Blog Posts | March 17, 2010

If you are an entrepreneur trying to make it in the business world, you are probably already following Martin Zwilling‘s blog posts on Startup Professional Musings.

And so you should, because Martin has been around tech startups for the last 30 years. He is a Board Member at Callaman Ventures, a member of the Arizona Angels Venture Group, mentor in the Arizona State University Technopolis program and advisor for several startups.

You write on you blog, you are advisor and investor, how much time do you spend on each activity?

I probably spend about 80% of my time as an advisor, and only about 20% these days as an investor. The recent recession has dramatically reduced my investment capabilities, but I am still active in the local angels investment group, and review investment opportunities on almost a daily basis.

As an advisor and investor, you probably receive tons of emails from entrepreneurs, how do you select the startups you offer advice to?

I generally answer all emails and notes from Twitter, Facebook and LinkedIn. Sometimes I spend as much as a couple of hours a day answering mail. I offer more extended advice only under a contract, and I usually limit these to local clients that I can meet and interact with on a regular basis.

Do you only pick local startups?

Yes, I pick local startups for a formal advisory role (join Advisory Board), because I can “touch and feel” the company and management. I sometimes do advisory consulting on an hourly retainer basis for remote startups. I also often do Business Plan development or Financial Models for startups, either local or remote.

How about the startups in which you invest, are there different criteria?

Like most investors, I invest primarily in domains that I have experience, such as software development. I can advise clients on any business issue, since those are similar across domains, but I try to reduce my investment risk by limiting my focus to companies where I have in-depth technical knowledge.

Are there startups where you are both investor and advisor or are there ethical issues in doing this?

I think all investors feel they are advisors to that company as well. I don’t see any ethical conflict in doing this; in fact, I think it an obligation of all investors to be advisors.

How much equity does a startup normally give away to an advisor?

That varies depending on the level of involvement, but I recommend to startups that adding a member to their Advisory Board will likely cost at least 1% of equity. Some advisors will ask for half equity and half cash, or a cash retainer of maybe $500 per month.

What does an advisor do: are there weekly/monthly meetings, do you only give advice when entrepreneurs ask for your help, do you introduce them to people who might help them?

As a member of your Advisory Board, I’m available for email and phone consultation, with a 24-hour response commitment, and I will attend monthly board meetings, if local. I also commit to introduce them to people who might be able to provide funding, or specialized services such as legal or financial.

Can you give us some examples of how you, as an advisor, have influenced a startup’s life?

Generally there are many factors influencing a startup’s life, so no one can take single credit for an event. But I have been a strong influence in certain cases to get a patent filed to protect IP, to get a business plan written to plan the business, to get funding by introduction to key people or angel groups.

What mistakes are the most frequent ones?

Some entrepreneurs like to talk, but never get a business plan written down. Others start talking to investors before they have done their homework, leaving a bad first impression. Others focus on building a product, and don’t have a plan to make money with it.

For entrepreneurs wanting to start a business, what’s the best way to learn, except for their own (painful) experience: blogs, books, success stories, mentors?

The best way to learn is to partner the first time with someone who has done it before. Another alternative is to find one or more Advisory Board members that you trust. Of course, all the sources you mention are valuable also. Don’t try to re-invent every wheel.

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You can follow Martin Zwilling on Twitter at @StartupPro