Top ranked sell side investment analyst turned angel investor shares thoughts on startups and early stage investing.
Sunday, June 28, 2015
Getting The Most From Your #Startup Board
Getting The Most From Your #Startup Board
The formal “fiduciary” board comes to all successful startups sooner or later.Maybe a small 3 person Board at the seed stage. A five person Board when you close out an A round. It’s part and parcel of the price you pay as a founder for taking external capital from investor types like me. But also can and should be a key source of support, guidance, value creation and yes discipline and oversight too.
The thoughts that follow are my suggestions as to how a CEO can make her startup board meetings do what they are supposed to do.Meaning get the most value add for the CEO and the company from the Board members - not just meeting your governance obligations. Hopefully what I have to say is helpful. But there are many great resources available on this topic from other more experienced investors and entrepreneurs. A small selection is included at the end of this post.
Here goes with seven Board topics ... in (roughly) chronological order:
1. Before the meeting(s)
Set a meeting schedule for 12 months at a time and stick to it. You are coordinating the calendars of multiple busy people. So lock the dates in and save everyone the stress of scheduling ping pong.
Before each individual meeting send out your agenda and board deck (or write up if you prefer that format) no less than three days in advance of the meeting. Unless you give your Board members the time to get prepped then the meeting is ... a total and utter waste of everyone’s time.
2. Meeting Hygiene and materials
Keep you meeting to no more than four hours max, ideally no more than three, otherwise you all lose focus and productivity collapses.
Smartphones checked in at the door and turned off. Yes, this is a tough one. People can’t be offline for more than a few hours without withdrawal symptoms, another reason to keep meetings short!
Minimize report out, maximize discussion. Limit the slides and keep them visual (charts/tables not verbal vomit). And, because your board members will have diligently reviewed the materials over the 3+ days you gave them (!), you don’t need to talk the slides to death, rather summarize and then ask for questions.
Don’t worry about fancy. Fancy is a waste of time. So simple text bullets. Drop tables and charts straight in from excel. And keep the format standard so each meeting requires a simple update not a rework.
Avoid confusion over multiple docs. Ideally have everything set up and sent out in a single pdf.
Keep meeting minutes brief and send them out asap after the meeting.What was discussed (not a blow by blow of who said what) and crucially action points with assigned ownership.
If some anyone is remote, use video. There is simply no way a person participating in a lengthy meeting by phone will stay fully engaged for more than a (really) short period. It’s trivial these days to have the person live in the room on a screen.
Consider having your law firm sit in on meetings and take the minutes.Good to have an third party in the room sometimes and often law firms see this as part of their job and don’t charge (extra) for it.
3. Meeting flow
Put the housekeeping issues upfront on your agenda and deal with them quickly. So things like approval of prior meeting minutes, approval of option grants.
Create high level “dashboards” that summarize your key business.These should be metrics that you actually track for business, not purely Board purposes. A few slides (the Nextview templates referred to below have some examples) can cover key financial, technology, product, sales, marketing and human capital details.
Some topics can merit more detail and individual slides. For example: an update of your YTD income statement with variance analysis and you 12 month budget; your cash flow and projected burn, hence timeline for your next fund raising; Sales goals and depending on business you pipeline with a probability weighted average rolling 12 month projection; planned key hires over the next few quarters; your product/technology roadmap with key releases over the next few quarters.
These business updates and your dashboards should repeat in the same format meeting to meeting. And because they are provided in advance and covered at the front of your meeting you can then ...
... allocate a significant proportion of your meeting time to one or two “deep dive” topics. These should be areas of significant importance where you want the Board to understand the issues and crucially get their advice on your plan action, and ultimately their buy in.
Include some senior staff for parts of the meeting as you get bigger. This can mean having a section of the meeting where you are joined by some or even all senior staff. Or this could include bringing in a few folks relevant to a deep dive topic. Erika Trautman CEO of Rapt Media points out that exposing more of her team to the Board can be very effective in helping keep senior staff on their toes and in touch with the big picture. As to when to do this Erika notes: “... it starts mattering when your leadership team has direct reports and you need to start streamlining communication across departments. We started when the team whole was about 15 people.”
Close the meeting with an “executive session”. This is where the Board members talk without the CEO present. Any concerns? How is the CEO doing? In this case is is important that a Director gives the CEO prompt and honest feedback about what the group discussed.
Most meeting agendas end with a catch all “Any Other Business” item. Around the time of the meeting that could be food (and drink)! By way of AOB for this post worth I note that many experienced Board members strongly recommend adding a purely social component to your Board meeting. Not at the time of the formal meeting itself but rather by combining the day of the meeting with a purely social dinner (night of, night before) or perhaps a group lunch.
5. About those Board votes … and surprises
Boards don’t make decisions based on dramatic votes cast around the table on the day of. In fact smart CEOs work out quickly that all key decisions are made BEFORE the meeting! That is because she takes the time to check in with each Board member before each meeting socializing any contentious issues. Hence making sure she knows where they stand and just as important they know where she is coming from and what her bright lines are.
As Ellie Wheeler of Greycroft pointed out to me: Surprises are bad. Bad surprises are the worst. The pre-meeting check in (and regular ongoing dialog) avoids the surprise bomb going off in the meeting. As Ellie noted this also a) erodes trust and can b) derail meetings. Not what you want.
6. Next steps after the meeting
Your Board members are not dispassionate observers. They need to be in the tank (your tank) with their scuba gear on. The CEO should have asks for them prepared plus be ready to assign homework tasks for after the Board meeting to Board members. These should be documented in the meeting minutes, so no one can claim ignorance later!
For the transparency minded consider minded consider cleaning up the Board deck (so taking out comp, option and other sensitive references) and circulating to the entire company and then commenting on them at the next all team standup. Board meetings are mysterious and scary things for your staff so make it an opportunity to reinforce your regular update on how things are going and where they are headed.
Save time and make your Board materials into an investor update. Don’t duplicate effort! Once you have a regular Board meeting schedule underway consider using your Board materials, again suitably edited and maybe with a short text discussion to go along with them, as the basis for you regular investor update.
7. And finally: Boards are not just about the meetings
As Ute Rother CEO of QSensei as a CEO “you run into problems on a daily basis and you should receive advice and feedback to solve them asap”. ie the best Boards operate as a resource in real time, not just for three hours every six to eight weeks.