Startup Mentoring – Should Investors Even Care?

by Andrey Kostyuk, CEO & Co-founder of AAlchemy Ventures

Modern mentoring is successor to apprenticeship, the main form of safeguarding and passing knowledge before industrial revolution. It existed long before that, of course, born, as the legend goes, in ancient Greece. Recently we have been witnessing upsurge of mentoring in many fields, from science to business, enabling soft skills transfer yet again. But why investors should care? To answer this question, let’s ask ourselves: what is startup mentoring and how does it impact venture performance? As both mentoring and startup economy are fairly new phenomena, you will hear a cacophony of voices of the ongoing debate. This absence of universally accepted definitions is the first major obstacle in understanding role of startup mentoring. Startups are different from newly established SMEs, and startup mentoring is different from typical entrepreneurial mentoring as, contrary to classic business models, startups put growth ahead of profitability, and startup founders more often, than not, have little entrepreneurial or managerial experience.

Mentoring is perceived by startup ecosystems as somehow beneficial for mentees and their ventures. Every accelerator has a mentoring program, and any active business angel considers herself a mentor. But again, what is exactly startup mentoring? For me, after conducting over 50 interviews with European mentoring dyads, startup mentoring is defined as medium- to long-term iterative bi-directional social exchange- based homeorhetic learning relationship between a mentor (experienced entrepreneur, angel investor or venture capitalist) and a mentee (startup founder(s)), where mentor transfers soft entrepreneurial skills, provides strategic advice and networking opportunities to improve performance of the startup in exchange for mentee´s emotional, intellectual and financial contribution (Mentor´s Reward Pyramid). This definition paves way to delineating mentoring from coaching and advisory.

Coach addresses personal issues of the founder, in most cases not touching the business side of things. Advisor, on the other hand, engages in concrete business problems. Mentor is in the center of this spectrum, working with business issues via personal development and engaging the problem of business development broadly on a strategic level. Defining Mentor Reward Pyramid was another important result of the research. When asked “Why are you doing that?”, mentors uniformly and consistently answered that first of all they want to do good and give back (Emotional Reward), secondly they benefit by obtaining new knowledge out of reverse mentoring by their mentees (Intellectual Reward), and only distant third is Financial Reward, consisting of discovering investment opportunities through mentoring, securing paid engagement at a later stage, being paid scouting fees or else. These results were quite surprising and seemingly unviable long-term. Interestingly, this preference for non-financial rewards finds a potential explanation in neurobiology. Studies have shown that trusted relationships can increase oxytocin levels in the brain, underscoring the importance of trust in mentoring dynamics. This suggests mentors derive satisfaction from the relationship itself, rather than traditional monetary rewards.

The research also illuminates the tangible benefits of mentoring for startups, particularly in terms of survivability rates and time savings due to mentors’ strategic advice and engagement. Mentored startups exhibit significantly higher survivability and achieve time savings of 40% to 50% in the early stages, affirming the effectiveness of properly executed startup mentoring. So, the answer why investors should care if their target startups had been properly mentored is that proper mentoring is reliable predictor of significantly higher probability of succeeding. If startup can boast a good proper mentor, it is a sign of credible commitment – mentors are not paid, they invest time and effort in anticipation of long- term benefits which is perfectly aligned with investors’ aspirations. Mentor’s involvement literally saves investors’ money by boosting startup efficiency and productivity. Follow good mentors, and you won’t be disappointed!

About the author: With over 30 years of experience in corporate and HNWI banking, AIF management, entrepreneurship, angel investing and mentoring, Andrey Kostyuk has  co-founded AAlchemy Ventures Limited, a company that, in association with Deloitte Cyprus, one of the leading professional services firms in the region, helps Cypriot startups and foreign scaleups launch and grow their business in the EU market. Being Cyprus Chapter Director for Expert Dojo, the most active international early-stage startup accelerator in Southern California, he helps the same companies enter the US market too.

Andrey Kostyuk currently holds an MSc in accounting and audit, MBA, Ph.D. in economics, and DBA candidate at Grenoble Ecole de Management with his thesis devoted to how mentoring startup founders influences venture performance. He also holds multiple diplomas and certifications in appraising, service design, negotiations, and other relevant fields of knowledge.

Andrey Kostyuk is passionate about fostering innovation, collaboration, and social impact in the startup ecosystem acting as startup mentor and serving on boards of selected startups, and on the Endowment Board of Big Change, a charitable foundation that supports young underprivileged people to thrive in life. He is a member of several business angel networks and alumni associations, and a former expert for the Research Executive Agency of the European Commission. You can find more about the work  he does here: https://www.startupmentor.online/