I’ve written a few posts about boards recently as part of a series on the subject. I should note that my friend Brad Feld has written a new book on the subject that I would recommend if you want the bible on the topic. I admit that I haven’t yet read it but I’ve had numerous discussions with Brad over the years about board structure & conduct and consider him a mentor on the topic.
In the Early Days
When you first start your company and raise initial venture capital your board probably consists of 1-3 founders and 1-2 VCs. The main thing you’re concerned about in this phase of your company is maintaing control of your board, which in a legalistic perspective is ensuring that founders & management have the majority of seats on the board.
Most experienced VCs won’t push you to give up founder control at this stage of the business nor should they. With small amounts of money invested (sub $3 million) the risks are reasonably low for most VCs and the consequences of bad decisions or decisions a VC has limited say in is tolerable. Obviously I’m a proponent of still working closely with your investors to make sure that they feel bought into your decisions which will matter a lot if you ever need their support in the future.
And here’s an important point that I think modern entrepreneurs often forget: Investors are “co-owners” of your business. If you raise millions of dollars from professional investors it is no longer “your” company but a shared company that you control.
Recently I wrote the first post in a series on board meetings, entitled, “Why You’re Not Getting the Most out of Your Board,” which focused on the need to prepare properly, set good objectives and discuss mostly strategic topics.
Even if you follow this game plan meticulously your board meeting can be taken off course by well-intentioned board members who lead you down a rat hole.
Here’s how it happens …
1. Topic Creep
You start out your board meeting and a well-meaning board member who read your deck noticed a detail she didn’t understand on page 18, “Bob, I noticed that your margins in Canada declined from 48% to 46% while your margin in Mexico is up by 4%. Can you please explain the discrepancy?”
I call this “topic creep” and it is killing your board meeting. It might be useful for Sally to know the answer to this but it isn’t the most valuable use of the time you spend together as a board.
Most board meetings are “update meetings” where management downloads its status to a group of investors. These outside board members spend most of the board meeting trying to reacquaint themselves with the company’s business and critical issues.
This is hardly ideal and some simple changes could help management avoid both issues. Put simply, the majority of board meetings becomes an exercise in management trying to reassure investors that “we’re doing a good job” and for investors to sounds smart so they can prove that “we’re adding value.”
Both of the functions are a waste of time. So most board meetings become bored meetings.
I’ve attended more than 150 board meetings in the last few years alone. Every time I think to write a post about this I figure the most recent board meeting I’ve attended will think it’s about them so I don’t bother. So I’m going to write a series of board meetings posts unrelated to anybody or maybe an amalgamation of them all. These posts are not about any individual company even though they’ve all heard me say these things often.
Rob Bailey is the CEO of DataSift. He wrote a post this long weekend on how he manages the board of DataSift.
You should read it.
More importantly if you don’t know DataSift but have the need to process real-time social data or historic data it’s worth checking them out. It’s valuable to any business for marketing, customer research, product development, market analysis, etc.
In Rob’s post he asserts, “You get the VCs you deserve” and the corollary “You get the performance out of your board that you deserve.”
His argument is as follows
Spend time building investor relationship long before you raise money.
It has always surprised me that founders were so quick to fight over how many board members there were and so quick to agree to have as many board observers as people wanted.
I have always been vehemently against board observers and wrote some of the reasons in this previous post. But over the past couple of years I’ve slightly modified my views, which I’d like to explain:
The Case Against Board Observers
Unless your company is really struggling or there is something very controversial going on at the company (i.e. removing the CEO, selling the company without consensus) then NOTHING ever comes up for a formal vote. Almost all decisions at private, startup, VC-backed tech companies is consensus driven.
The reality of a board meeting is that the most influential and most persuasive voices normally shape the decisions. But the time spent on discussing issues can be really lengthy and get way off target when you have board members who aren’t disciplined or structured.
This article originally appeared on TechCrunch.
I haven’t had too many board meetings lately so I want to get this timely post out now lest somebody think I’m talking about their company or board in particular. This is a post about ALL boards.
Back when I ran board meetings as a CEO, the biggest annoyance was Blackberrys. You would always be able to tell what was going on by seeing the unhealthy infatuation board members had with staring at their crotches. Somehow they imagined you didn’t notice that they were glancing beneath the table secretly firing off one-line emails.
Every entrepreneur I know bitched about it and the smartest boards banned Blackberrys.
Fast forward to today. We now have ultra-lightweight laptops (MacBook Airs) or iPads and totally available Wi-Fi connections. So every board meeting I’m at has laptops opened or iPads fired up. They are just there to “be productive” and review your material. Um, yeah. This is a mistake.