Tag: Board of Directors
When I started blogging in 2004, there weren’t many VC bloggers. I followed Fred Wilson and David Hornik’s lead and just started writing what was on my mind about, well, anything that was on my mind.
Today, VC content pieces are everywhere. I’ve become less interested in writing this kind of stuff so my blog has evolved into whatever is on my mind, but a lot less “VC stuff.”
Every now and then I come across a spectacular VC blog post (or article in Techcrunch, or one of the other places VCs now put their content pieces.) As I was procrastinating from what I was working on, I noticed an article titled Mike Volpi on the art of board membership.
It’s a spectacular article. Go read it now. I particularly like the topics he went after.
- Nature of the relationship
- The mirror
- What happens in between
- Availability and relevance
- Delivering a message that can be heard
When I wrote Startup Boards: Getting the Most Out of Your Board of Directors with Mahendra Ramsinghani, we tried to include constructive thoughts about how venture-backed boards work and how to improve them, along with plenty of examples. As I’ve been on some great, ok, and terrible boards (and have been an effective, mediocre, and ineffective board member), I find clear articles like Mike’s powerful as I reflect on how I act as a board member.
I ever get around to writing a 2nd Edition, I plan to reach out to Mike and see if I can include some of this. In the meantime, I leave you with his powerful, and well said ending.
Board membership is a privilege and a nuanced responsibility that can have a transformational impact on businesses. Sometimes investors, independents and entrepreneurs forget this. Entrepreneurs should expect a great deal from their boards — not as blind supporters but as true copilots. Likewise, board members should not view board membership as a list of icons on their LinkedIn profile, but as a subtle yet massively impactful role they play in the creation of great businesses. When these relationships function properly, the two parties become true partners in the entrepreneurial journey.
I was at a board meeting last week that introduced something new into the mix that I thought was brilliant.
At the beginning of each section of the board meeting, there was one slide that was titled: “What Are We Trying To Get Out of This Section.” Before we started into a section, whoever was leading it walked everybody in the room specifically through what she was expecting to get out of the section.
I think we did this five times over a 3.5 hour board meeting. The first time it felt a little pedantic, but by the last time it was clearly magical. Each “What Are We Trying To Get Out of This Section” was different. Sometimes it was a decision. Other times it was feedback. Once it was a set of introductions.
You could feel the people in the room get recalibrated whenever this slide came up. The previous section had come to an end. The new section hadn’t yet started. Take a deep breath. Erase all the noise in your brain. Pay attention again, especially if your mind has drifted because of the bloviating of the Boulder-based long-haired board member.
I’d never seen this particular tactic before. I hope to see it again.
I spent the past few days in Tokyo at the Kauffman Fellows Annual Summit. Over the past five years, there has been a large increase globally in the number of venture capitalists and people interested in becoming VCs. As a result, an organization like Kauffman Fellows is more important than ever as it helps build an incredible community of the next generation of VCs to learn from each other.
In the mid-1990s, I learned how to be a board member by sitting on a lot of boards, learning from other experienced board members, and making a lot of mistakes. I still make a lot of mistakes (that’s that nature of venture capital, and of life in general), but I like to believe that I’m a much more effective board member than I was 25 years ago. That said, I still have my bad days and walk out of a board meeting feeling unsettled for one reason or another.
Recently, Mark Suster, Fred Wilson, and Seth Levine each wrote excellent posts on how to be a good board member. Each post is worth reading from beginning to end carefully.
Mark Suster: How to Be a Good Board Member
Fred Wilson: How To Be A Good Board Member
Seth Levine wrote a five post series: Designing the Ideal Board Meeting
- Designing the Ideal Board Meeting
- Before the Meeting
- Your Board Package
- The Board Meeting
- Board Conflict
I especially love Fred’s punch line, which I strongly agree with.
“Which leads me to my rule for being a good board member.
It comes down to one word.
If you care, really care, deeply care, like the way a parent cares for a child, you will be a good board member.”
If you are a board member (or interact with a board as part of a leadership team) and want to go even deeper on this, I encourage you to grab a copy of my book Startup Boards: Getting the Most Out of Your Board of Directors
And, if you are having a board meeting that I’m a part of, take a look at my post from 2014 if you want hints about My Ideal Board Meeting.
I used to be chronically late to everything, both personal and professional. In my twenties, before cell phones, I was one of those people that others referred to as having “Brad time” which did not correlate with the actual time in the world. My calendar and schedule was a rough sketch, not even a guide.
My lack of attention to time finally imploded on me around age 35 when Amy said she’d had enough on multiple dimensions of our life. The foundational issue for us was that my actions didn’t match my words, and by being late all the time, I wasn’t honoring my priorities (which I would regularly say was Amy over everything else …) If you ever get us together at a meal and want to hear some epic “Brad was late” stories, ask her about the Postrio dinner of 2000.
Since then, I’ve gotten a lot better at being on-time. I’m not a “five minutes early to everything” person, but I’m rarely more than a few minutes late to anything. I’m very scheduled throughout the week, so it’s often hard to transition between the thing that ends at 2:30 and then be on time to the thing that starts at 2:30 and get it exactly right each time. And, throughout the day, when I end up going until 2:35 for whatever reason, the 2:30 call then goes a little long, and everything backs up a little so that I’m 15 minutes late for the last meeting of the day. And now I know to always say “I’m sorry for being late” whenever I’m late.
Over the years I’ve tried many different approaches to
Today, I use a different approach. I try manage the clock better during a meeting when I’m in charge, and prompt others when I’m not. That works a little, but it’s annoying.
I find this particularly challenging on calls that are an hour long with multiple people. Or, in three hour-ish board meetings with a lot of people. I don’t control the agenda in those meetings, so clock management is up to someone else. And, most people are painfully bad at it.
There are a few tips for anyone who wants to do this well.
Next, front end load the meetings. Do the stuff you need everyone on the call or at the meeting for up front. Some things need you to build into them, but don’t leave them “for the end” – build deliberately to each deeper discussion or decision you want to have. Leaving the critical discussions and decisions for the end of the meeting is a guaranteed way not to get to them.
Send out materials well in advance (at least 48 hours) and assume everyone can read. If they don’t, that’s their problem, not yours, and they’ll get the hint pretty quickly. Instead of going page by page through your materials, or using the materials as a crutch to “review” things, summarize they key points and focus on discussion and debate, rather than review.
Finally, build in buffer. Almost everyone needs to go to the bathroom during a three hour meeting. At the minimum, it’s good to stand up and stretch your body. All video conferencing systems, no matter how good, continue to have weird friction at the beginning of the meeting, so have a front-end start buffer, rather than anxiety around the inevitable five minute delay. And, when the meeting goes off the rails and you get ten minutes behind because someone (e.g. me) can’t shut up about something and your time enforcer was daydreaming about Dali paintings, use the buffer to catch back up.
This is a problem that has been persistent in my life for over 30 years. If you have magic tricks that have worked for you, I’m all ears.
Seth and I have each attended over 27,367 board meetings. Ok, I don’t know the actual number, but it’s a lot. We’ve both been on good boards and bad boards. Boards that have helped companies and boards that have sunk companies. Boards that know how to resolve conflict and boards that have multiple passive-aggressive actors engaged in a complex dance that serves no one, especially the company.
So, I’m totally digging Seth’s new series. Not surprisingly, since Seth and I have been working together for over 17 years, there’s a lot that is the same as my board approach. But, I’m also learning something from each post which I plan to incorporate into my board world going forward.
The first four posts are up. In order:
- Designing the Ideal Board Meeting
- Designing the Ideal Board Meeting – Before the Meeting
- Designing the Ideal Board Meeting – Your Board Package
- Designing the Ideal Board Meeting – The Board Meeting
If you are a founder, CEO, investor, or outside director who is on a private company board, this is a must-read series. And, if you want to go deeper on how boards work, grab a copy of the book I wrote a few years with Mahendra Ramsinghani ago titled Startup Boards: Getting the Most Out of Your Board of Directors.
I’ve decided to stop serving on non-profit boards.
I used to have a rule that I’d only serve on three non-profit boards at a time. I let this get out of control and found myself on eight non-profit boards with a commitment to join a ninth one.
During our Q4 vacation last month, Amy and I talked a lot about this. I realized that I wasn’t enjoying the non-profit board service, even though I deeply enjoy my personal engagement and support of the organizations I’m on the boards of.
There was an intellectual conflict here that Amy and I spent a lot of time discussing. Our philanthropic work is important to us. However, the actual board service part of it, while fulfilling to Amy, is not fulfilling to me.
It’s also very time-consuming. While most of the boards only meet four times a year, each board meeting is three hours long. If I include another two hours for reviewing materials in advance and travel, that’s 20 hours per year per board. For eight boards, that’s 160 hours/year. If I only worked 40 hours/week, that’s four weeks of work. While I work a lot more than 40 hours/week, the five hours per board meeting is probably low, especially if I physically travel to a board meeting.
My conclusion was that I could be just as impactful to the non-profits we support – and in some cases even more so – without being on the boards. Instead of consuming my time with board meetings, I’ll engage directly with the CEOs and Executive Directors of these non-profits in ways that are specifically helpful to them. I’m already doing this in many cases, so it’s not a direct re-allocation of time, but rather a huge time saving on my part, which allows me to more focused – and more enthusiastic – about the work I’m actually doing.
I’ve now talked with all the CEOs/EDs of the non-profit boards I used to serve on. They all understand my perspective and, in most cases, are supportive and excited about the change in my involvement. As my goal is not to withdraw from the things I’m involved in, but to increase my impact by shifting my focus and activities, the feedback was good positive reinforcement to me.
Over the past few days, I’ve had a similar conversation about reporting tempo with three different people (2 CFOs and 1 CEO). In each case, we snuck up on the issue, rather than starting with it.
The fundamental question addressed what the reporting tempo to the board should be.
A number of years ago, I decided to shift to quarterly board meetings. Historically, the number of board meetings I had per company was all over the place. Some had four per year, some six, some eight, and some had twelve. This was an artifact of the last 30 years of venture capital, where VCs often would use the board meeting as the way to primarily engage with the company.
I wrote about this in my book Startup Boards: Getting the Most Out of Your Board of Directors. I’ve shifted to a cadence I call “continuous board interaction” which is gated by the desire and need of the CEO as well as the needs of the company. As such, a quarterly board meeting is plenty since I’m having continuous interaction with the CEO and board. This approach was originally stimulated by Steve Blank’s posts Why Board Meetings Suck and Reinventing the Board Meeting – Part 2 of 2 but modified to fit the more varied and flexible reality that I operate in.
This does not mean that quarterly financials work for me. When the financials are tied to the quarterly board meeting, it’s almost impossible to have continue board interaction. There’s just not enough financial context about what is going on in the business. On the other hand, with a few exceptions (hyper-growth cases or ones where you are focusing on specific metrics), daily financing reporting is not helpful either, as is it overly burdensome on the company. It also quickly turns into metric reporting, which is very distinct from financial report, and often extremely helpful, especially in a continuous board interaction approach. However, many board members can’t handle daily anything, especially if they are on ten boards, except for the companies that they need to spend daily attention on.
That’s the context for how we wandered up to the discussion in each meeting. After the second conversation, I thanked the person I was talking to (she knows who she is) for providing the content for today’s blog post. Of course, since the conversation came up again with someone else after that, it sealed the deal that this would be a blog post.
Here is how I like to do board level financial reporting for private companies I’m on the boards of. I don’t force this – if the CEO wants to do something different that’s up to her. But I encourage this, or something like this.
Quarterly board meetings: The financials are decoupled from the board meeting. There is a quarterly financial and metric review in the board meeting, but it’s not the meat of the meeting unless there is a specific set of financial issues that need to dominate, such as the 2017 budget, a big financial miss, or a significant change to the plan for some reason.
Monthly financial package: This is a full financial package distributed to the board and executive team. It includes P&L, Balance Sheet, and Cash Flow statements. It has actuals to budget for monthly, quarterly, and YTD. It also has trailing 12 months of each (P&L, BS, CF). In addition, there is a cover MD&A (hopefully written by the CFO – not a formal SEC one, but a comprehensive management discussion and analysis). I prefer this package to be distributed by the CFO and not the CEO – it then becomes part of the operating rhythm. I also like the Q&A that occurs (in email, or in a Google doc around the MD&A) to be driven by the CFO with support from the CEO.
Optional monthly financial state of the company board call: This is a call with the CEO, CFO, and the board. Ideally it is led by the CFO. It’s limited to one hour, is completely independent of the board meeting, and is optional. The CFO sends out a short (less than 10 page) presentation summarizing the key financials, key metrics, and any topics for discussion at least two days in advance of the call. While I rarely attend these, I find that the board members who don’t engage continuously can use this to keep current on the financials and in the rhythm of the company.
This rhythm works around the monthly financial close cycle. The CFO sets the schedule. An example would be (based on day of the month) that the financials are closed by day 15. The monthly financial package goes out on day 17 with the presentation for the optional monthly state of the board call. The call happens on day 20.
If you’ve got a different, or better, rhythm, I’d love to hear it.
I had lunch recently with a founder. We were talking about current and future board configuration for his company and he said “Up until this point, all my board seats were simply for sale. Whenever a new investor showed up, they wanted – and got – a board seat.”
I loved the phrase “board seat for sale.” It’s exactly the opposite of how I think about how to configure a board of directors, but I recognize that it’s a default case for many VCs and, subsequently for many entrepreneurs and companies.
It’s a bad default that needs to be reset.
I wrote about this a lot in my book Startup Boards: Getting the Most Out of Your Board of Directors.
In the past few years there have been some interesting changes. In pre-seed and seed stage companies, there’s been a trend against having board of directors. Instead, there is no formal board, or no formalism around the board, so it’s just a free for all between the collection of early investors (angels and pre-seed/seed VCs) and the founders. This can be fine, but often isn’t when there are challenging issues that involve founders, financing, execution, or conflicts. And, when things stall out, figuring out what to do is often harder for the founders because of the communication dynamics – or non-communication dynamics – that ensue.
Post seed boards tend to be founder and investor-centric. This is the norm that I’ve seen over the past 20 years. With each round, the new lead investor gets a board seat and all of the other significant investors get either a board seat or an observer seat. The board quickly ends up becoming VC heavy and the board room expands to have a bunch of investors in it since they all have observation rights. Having been in plenty of board meetings with over 20 people in the room, I can assure you that these meetings are ineffective at best and often trend toward useless.
One approach to this is the pre-board meeting, where only the board members meet with the CEO prior to the board meeting (similar to an executive session of the board.) This is an effective way to deal with part of the problem, but it then makes the board meeting, in the words of a good friend and fellow VC, kabuki theater.
I prefer dealing with reality. I have a deeply held belief that as long as I support the CEO, I work for her. Yes, I do have some formal governance responsibilities as a board member which I take seriously and am deliberate around them. But most of my activity with a company is in support of the CEO. When I find myself in a position where I don’t support the CEO, it’s my job to do something about that, which does not mean “fire the CEO.” Instead, I have to confront what is going on, first with myself, then with the CEO, and finally with the rest of the board, in an effort to get back to a good and aligned place with the CEO.
As a result, especially for early stage and high growth companies, I think the CEO and founders should be deliberate about the board configuration. I like to have outside directors on the board early as it helps the CEO and founders learn how to recruit and engage non-investor directors. The CEO can learn how to build and manage the board and get value out of board members beyond the classical dynamics around an investor board member.
Most of all, I hate the notion of board seats for sale. I get that many investors want board seats as part of their investment. I appreciate that some now have strategies of never taking board seats. But too few VCs think hard about what the right board configuration is at the point in time that a company is doing a new financing. I think that’s a miss on the part of VCs and I encourage CEOs to think harder about this.
“Brad, I expected your choice of metaphor would be ‘operating system’ more than ‘religion’, as the term ‘religion’ carries a lot of baggage and generally involves some supernatural truth claims. An ‘operating system’ both defines its environment and thrives within it — and the idea of an OS seems less cluttered with other analogies, like heaven, hell, and Eden.
Can you, for example, take the SV’s operating system and drag and drop it into Boulder or Kansas City? You can — but the VC’s the operating system needs to plug into may not be fast or scalable enough — the peripherals the OS expects to interact with.
The SV OS ought to work in a Bolder or Kansas City if we can ‘install it.'”
I love the phrase “operating system” to describe things. I saw a presentation from Anil Dash a year or two ago that completely recast government and how it works into the construct of an OS (it was epic – I wish I had the slides).
Yesterday I got an email from a CEO of a late stage company I’m involved in who is modifying his “board operating system.” He has a new late stage investor and it’s time to change the board OS to incorporate this new director and how he likes to work into the mix in a way that is additive to everyone, especially the company and the CEO.
It’d be easy for the CEO to fight this and say, “Nope, this is how we do things” but he’s wiser than that and instead is spending time thinking through how to modify the OS so that it works for everyone, including all the existing investors who are very happy with the existing board OS.
Here’s a quick table of the “current” and “future” board OS. The communication is clear and the rhythm is well-defined.
In 2014, Paul Berberian, CEO of Sphero, wrote an email to his board (which I’m on) titled Orbotix Board of Directors Expectations. We use this as our board OS at Orbotix and it’s been incredibly helpful. If you are struggling with your board dynamics, it’s worth reading and contemplating creating something similar.
I’m a strong believer that a great CEO sets the expectations for how the board of a private company works. Too many CEOs of startups don’t put the energy into this and as a result boards take on default behavior that is a function of the experience, style, and temperament of individual board members. This is, at best, suboptimal, and is often a clusterfuck.
I’ve been to a gazillion board meetings. I’ve written a lot about them including a book called Startup Boards: Getting The Most Out of Your Board of Directors and piles of board meetings posts on this blog. I still do a lot of them, but I’ve definitely been on a quest the past few years to (a) figure out what works best and (b) try to organize my world around more effective board meetings based on what I’ve learned.
On Friday, I had a Mattermark board meeting. It was our second one since we invested in Q414. Danielle Morrill wrote a post in February about our first board meeting. It was a long board meeting as I’d reserved from 11am until the end of the day for it, followed by dinner together, but it was very different than the one we just had as we search for our rhythm as a board.
At the first board meeting, Danielle, Kevin, and Andy came to Boulder and spent a few days here together. In addition to the board meeting, they spent a bunch of time with founders in other Boulder-based portfolio companies of ours.
This time the Mattermark leadership team, including Sarah, BT, and Beau came to Colorado. They arrived Thursday night and drove up to my house in Keystone (about 90 minutes away). I got up early Friday morning and drove up there, getting there around 10:00am. The Mattermark gang was up, had just finished breakfast, and were doing what lots of startups do when they are hanging out waiting for an investor to show up (queue photo of people sitting around on their laptops.)
We got a little more coffee and then went downstairs into our big, comfy TV room. Last time, we worked directly in a Google Doc. This time, Danielle made a deck summarizing everything we’d been doing back and forth in via the Google Doc over the past week leading up to the board meeting. The deck looked good on our 75″ TV and we fired up Skype on a laptop at the front of the room for Lisa (who couldn’t come) and Megan (our outside counsel.)
We proceeded to spend until almost 8pm going very deep on various aspects of the business, product, product strategy, organizational dynamics, and goals for Q215. During this time, we took 90 minutes off for lunch and had a bunch of Mexican food at Fiesta Jalisco. At about 7pm we shifted into an executive session of just founders and board and then Danielle and I spent 30 minutes just doing a 1:1.
We then jumped into cars and went out to a late dinner. My favorite Sushi place Kemosabe Sushi had an hour wait so we went to Silverheels Bar and Grill next door. We were done talking business so we talked science fiction, crazy obsessive habits, fun ways everyone had met each other, and the stuff you talk about after a long day together.
They then drove back to my Keystone house to spend the rest of the weekend together. I drove home because I really wanted a weekend with Amy just hanging around and chilling out (she’s taking a nap as I write this.)
Overall, I’ve tried to shift my board meeting rhythm to once a quarter. My favorite board meetings are the ones that including the entire management team. I like to have a meal with the entire management team as part of the board meeting. I like to have social time and give the team time and space to get to know me better, and themselves better, outside the normal pressure of the day to day grind that is startup life.
I’m a very deep believer in continuous engagement with companies I’m an investor in. As a result, I do not like a monthly board meeting rhythm. I think it’s too much overhead on a leadership team and lets investor / board members off the hook for continuous engagement. More specifically, I know many investors who only really engage with companies either around the board meeting, when a transaction is going on, or when there is a crisis. While this might be useful for some people, it’s not my style nor how I like to engage.
I’ve only had a few of these “full-day retreat at my house in Keystone followed by management taking over the house” type board meetings and I really like them. I expect I’ll do more in the future and encourage any of the companies I’m on the board of to take me up on them.