A Couple of Perspectives for Consultants on Startup Consulting

30 Aug

Startup consulting is a challenging thing to do. Some considerations:

  1. Think about which startups have enough money to be able to afford consultants. They may have raised some significant venture money (say post Series B or C round).
  2. If partially going with some sort of securities compensation, then track record of the management team and strategic attractiveness of the company play a role. All said, as a consultant, depending on how many deals you can do and the stage of the venture you many run up against constraints. Just as an example, as an early-stage venture capital firm with a $50 million you may be able to do 25 deals, have 50% of them go under, 25% be flat, 15% be good, and 10% become rockstars, and that is after culling through thousands of deal opportunities with a team before getting to closing the portfolio vintage. As a consultant, it is hard to do anywhere close to that level of investment portfolio management and due diligence when selecting startups to do consulting with.

Note that there are some emerging shops that seem to blend venture investing with entrepreneur-in-residence models and consulting-like project phases. Purposes are to find viable business models rapidly and then fortify the team.

I’ve done some startup consulting in the past (but only as a fraction of my client base) and generally require a mix of cash an equity (and sometimes commissions for sales or deals). I sometimes also require holding an interim management position within the company. All said, I have generally found it easier to do “startup”-like consulting with carve-outs or new ventures and business units of larger companies that have more financial capital.

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