Entrepreneurial Leadership and Management . . . and Other Stuff


Every Company Needs a Board of Directors – Startups Too

OK, maybe not every company. Raw startups – two people in a garage kinda thing – shouldn’t waste their time with anything formal. But young companies – those that are established and on their way, regardless of their size or level of funding should, as should any company more established than that. It seems that we frequently relate having a board of directors to some kind of funding event. Of course, it often happens that way. Investors require one or more board seats, which becomes the impetus for creating a formal board – at least one with non-employees on it. But even without funding, companies should establish and use a board of directors made up of people from inside and outside the company.  A board of qualified people can offer great benefits to a company, its management and its founders.

To me, the most important of these is that board members, unlike informal outside advisors, have a fiduciary responsibility to the company and, therefore, offer advice that is often better thought out and more responsible. After all, it’s their job. Additionally, because there is greater long term continuity with board members than other advisors, the input received from directors tends to be more specific, context sensitive and applicable to the company’s long term strategy. Finally, a board tuned in to what the company is doing and how it is doing it can provide dynamic guidance, including a kick in the ass now and then, that advisors without an ongoing, interactive relationship with the company are unable to deliver.

To some new company founders, these advantages may seem to be a bit abstract. In fact, lately, I’ve seen some resistance to the concept of establishing a board of directors entirely. From what I observe, this seems to be primarily driven by three factors:

  • Fear that creating a formal board will somehow turn control of their baby to their new “boss”
  • Reluctance to “spend” the equity necessary to recruit and retain quality board members
  • Belief that they already have advisors who deliver all the guidance they need

Yes, there have been cases where boards have fired CEOs or somehow otherwise wrested control of the company from its leader or founder. I’ve certainly never seen this type of thing from non-investor board members and even with board members who are investors, it’s incredibly rare and definitely a last resort type of move. Virtually no one outside wants your job.  If they did, they’d just go start another company or take their money to another playground.

Yes, you will have to compensate outside, non-investor, board members.  Don’t be cheap. The compensation will be with equity, likely a single percentage point or lower and vesting over four years.  What you will get in return will likely help you immeasurably. It may not be the sole difference between long-term success and short term failure (it might), but the advice you get will at the very least make your life easier and substantially increase your odds for success.

Finally, and I sorta hit on this earlier, having many advisors and mentors is terrific.  You shouldn’t have fewer of these when you establish a board – they are always valuable.  They do not, however, take the place of a dedicated group of individuals who have committed their efforts and wisdom to the success of the fledgling enterprise.  Outside advisors will never have the volume of background data that your directors have to analyze situations nor will they feel the responsibility to do the right thing. Directors are tied to the company’s success and failure. Advisors and mentors are not. There’s a huge difference in responsibility and, ultimately, quality of action.

So there you have it. Do you still have a reasonable excuse for why you shouldn’t establish a board? If so, I’d like to hear it.  “It’s hard,” by the way, doesn’t count. You’re an entrepreneur, just work harder and smarter to get it done.

 February 22nd, 2010  
 Boards, Startups  

Build Platforms on Platforms

Being a software guy myself, I often find that I dig a little deeper into the successes and failures of the software-oriented startups that I work with than I do with the non-software oriented ones.  When I do, I suppose that I shouldn’t be surprised, although I routinely am, at how often I come across some very consistent and basic technical errors that are made by these companies.  Chief among these is the lack of thorough thinking about the architecture of the end product prior to the start of coding.  It’s, of course, natural to start hammering out code as fast as possible in order to get a product to market but, inevitably, the Piper needs to get paid and fundamental problems with the architecture will eventually require a wide-spread rewrite of the system or, even worse, will be a serious resource drain and time sink to in every future release.

You’ve probably read dozens of books that have discussed the importance and value of planning and how time spent in architecting a system is a drop in the bucket compared to the time it saves on the back end.  I neither have the skills nor the eloquence to drive that point home any better.  What I’d like to do, though, is to present a high-level view of how you might think about the architecture of your product so that it provides a framework for you to make rapid changes to the application and makes it easy for others (partners, customers, etc.) to extend the product in ways you may not have considered.

There is nothing revolutionary here.  Let’s just call it a reminder that you will end up rewriting your application or, at least, its framework, in the future if you don’t adopt something like this early on.  You may not see it yet, but like I’ve already said, that rewrite is going to be very expensive and painful and will ultimately cost you customers, competitive advantage and money.


The idea here is that there are are two programming interfaces.  One separating you’re application from your core libraries or base layer of functions and another separating your application, as well as the lower-level programming interface from the outside world.  The lower level, base programming interface, allows you to build an application virtually independent of the core functionality of the end product.  Architected this way, you can build and test the application and the base code separately and make incremental changes to each part far easier.  In fact, one can be changed without affecting the other as long as the base programming interface remains the same (it needs to be well thought out to start with, of course).

The higher-level programming interface gives you the power to add functionality to your product quickly, using the code in the base programming interface as well as code in the application layer.  Using the application programming interface, you can prototype new functions rapidly and get quick fixes for bugs to users faster.  Perhaps even more importantly, it enables easy access to most of the guts of your system to partners and customers so that they can extend it as they see fit.  This access can be provided without having to publish hooks to the internals of your core system and exposing a boatload of potential problems that foreign calls to those components can create.  If you’d like, though, you can also expose some of that base functionality to the high-level API as is shown in the “optional” architecture slice in the image above.

Simple, yes.  It requires more work up front – both in planning and in coding – but with such an architecture, you’ll be able to roll out new functionality quickly and to fix mistakes as fast as you find them (well, almost).  Ultimately, you’ll get the functionality your customers want into their hands faster than if you hadn’t adopted such a system.  You’ll also be able to continue to roll out enhanced and improved functionality without getting bogged down with thinking about an architecture rewrite or with a huge backlog of nasty bug fixes.

The anxiety about getting your product to market will lead you to think that hacking together a system and refining it later is the way to go.  Virtually always, this is a mistake.  Speed is of the essence, but only the speed which you can deliver sustainable, quality product that continuously stays ahead of the competition.  Look before you leap, it’ll make life so much easier.

 February 1st, 2010  
 Computers, Management, Software, Startups  
 Comments Off on Build Platforms on Platforms

Does the Loudest Person You Hear Give the Best Advice?

I’m fortunate that I get to work with many startups, both independently and with TechStars where I’m a mentor.  There is no better way to learn than through teaching (learning is the most fun you can have, at least for a sustained period) and there are few better students than entrepreneurs.  Good entrepreneurs always want to know why they should do something and not just what they should do.  They test, challenge and refuse to take anything for granted; they’re highly motivated, smart and understand success is not about them as an individual, but about the team they can build; and they strive not only to make their first venture a success but also to become strong, solid leaders and managers that can build many great companies.

So, with all these qualities, it shocks me how often entrepreneurs choose a mentor because they’re the loudest guy in the room.  You know that person, the one who likes to talk incessantly about all of his or her accomplishments and is quick to give advice on any and all subjects.  The person who speaks before listening and has never had any failures.  Yeah, that guy.  Somehow, in the sponge-like desire that good entrepreneurs have to vacuum up every morsel of knowledge, they often attach themselves to the first person who sounds like they know anything.  Unfortunately, that’s usually the one who brags the loudest.

So, here’s a simple three-step plan on how to avoid adopting Mr./Ms. Know-it-all as your savior:

  • First, recognize that you’re your only savior, everyone else is there merely to supply data, offer up some wisdom and, maybe, hold your hand.
  • Second, put yourself in a situation where you can get access to many mentors.  You can do a load of legwork or sign up for a program like TechStars where mentorship (and a boat load of mentors to choose from) is the core of the program.
  • Finally, ask questions.  Don’t grill a potential mentor, after all, you’re looking for free help.  Instead, have a conversation and learn about what the person has actually done – how they’ve succeeded and how they’ve failed.  Make sure they have real accomplishments and real failures (you learn more from failures than successes) and can communicate what they learned in a way that works for you.  If hubris is what you hear, try somewhere else.

I’m no psychiatrist, but the loud braggart in the room is probably making up for something else (get your mind out of the gutter, I was referring to some business deficiency) or has had too much to drink.  Either way, they do you no good.  Be selective, find an adviser with both good advice based on things they’ve actually done plus the ability to communicate they way that works best for you.  You’ll be much happier and likely, more successful yourself.

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 January 4th, 2010  
 General Business, Startups, TechStars, VC  
 1 Comment

No. Don’t Do It. The Co-CEO Thing Won’t Work

I’ve been getting involved with more raw startups lately and I’m being reminded daily about the difficulty many teams have in establishing any form of decision-making hierarchy.  “We’re equal partners in this enterprise.”  “We started it together, we’re going to run it together.”  “We both [all] provide equal value so should have equal input.”  Yeah, I think I’ve heard it all and, at times, said and believed it all myself.  Let me try to put it as succinctly as possible . . . it doesn’t work.

Sure, when things are going well and life is good, almost any organizational structure will be somewhat effective.  It’s when the road gets bumpy, which it inevitably does, that the wheels of the multi-headed vehicle come off.  Decision-making is tough when things are tight and as much as you would like to believe that two or more people can reasonably make an informed final decision, a hundred thousand years of human nature stands against you.  This is why, by the way, when you’re out looking for VC funding, investors will simply laugh you out of the room when you say that the partners are co-CEOs.

Just because one person should be chosen as the final arbiter of decisions doesn’t mean that the entire founding team doesn’t remain active in strategy, tactics and corporate philosophy, it simply means that a single person is responsible for ending the conversation and making the decision on which path to take.  There is also no reason for differences in compensation or company ownership, if that’s what you’d like (although I’ve met VCs that get heartburn when this happens).  In the end, it’s simply about a single person being in charge; a go-to person (as viewed from inside the company and outside of it).  In all other ways, the founding team can remain equal.

Far be it from me to plug my own blog posts, but I wrote about this a couple of years ago and I urge you to read about it before throwing yourself into the abyss.

Hope it helps.

 March 18th, 2009  
 Management, Startups  
 1 Comment

Communicating with Your Board: The Summary

This is the fourth and final post (for now) in my series on communicating with your board.  You can find the previous posts here, here and here.

As a corporate director, I wince when I get a board package that opens up with a stack of detailed group-level reports and loads of spreadsheets containing every piece of financial data possible about the company’s past, current and future state.  To be sure, such information is a necessary part of running a successful business and should be included in the board package, but when information about the company is only presented this way, it’s difficult for anyone to absorb the key facts and figures about the company so that they can perform a relatively informed advisory role as a board member. 

It’s even more difficult when the audience for the information – think the VCs on your board – get such a package from a large number of companies prior to each of their board meetings.  It’s just not possible to, 1. spend the time to decipher what is going on and, 2. recall how the data presented is related to many of the programs, goals and initiatives that were previously agreed to.  For these reasons, and the fact that it’s easy to get data from various companies confused, such a comprehensive report will often be ignored.

To quote Winston Churchill,

This report, by its very length, defends itself against being read.”

Dealing with this is simple, of course.  Just summarize the information, relating it to previous discussions, goals and objectives and put that document at the beginning of your board package.  It shouldn’t need to be said, but what I mean by summarize is to make it concise and short.  Again, quoting Winston Churchill:

Please be good enough to put your conclusions and recommendations on one sheet of paper in the very beginning of your report, so I can even consider reading it”

Sometimes, it will be the only part of the board package read by some of your board members prior to the meeting.  Sad but true, I’m afraid.

So, the summary should be the first thing in the board package and should contain:

  • High-level sales statistics, including major or important deals
  • Rollouts of products or services
  • Changes in key customer, partner or channel relationships
  • Important legal or accounting issues facing the company
  • Changes from the staffing plan – major hires and unexpected departures that will impact the business
  • Unexpected changes to the financial position of the company
  • Unusual market or competitive moves
  • Status of major initiatives within the company

You get the idea.  Additionally, any item that was reported on before should also include a note making it clear if there has been a change.  This is especially important for items that have specific, timed deliverables.  The key is, again, that if it takes more than one page, you’re not focused enough. 

I’d bet you’ll find that summarizing your board material in this way will not only make the board package more convenient for your audience, but it will also help you discern and focus on the important parts of your business.  There’s nothing quite like trying to make things short and complete when explaining things to others in helping one understand the material for themselves.

 May 16th, 2007  
 Boards, Management, Startups  
 Comments Off on Communicating with Your Board: The Summary

Communicating with Your Board: At-A-Glance Financial Information

This is the third post in my series on communicating with your board.  You can find the previous posts here and here.

Consolodating key financial information on a single page is a great tool for communicating some of the most important data about the company in a quickly-grasped snapshot.  Because of this, it’s not only good for your board, but your employees as well.  Presenting the data this way makes it much easier for an audience to understand the financial health of the company without pouring over the complete set of financial statements.  It also gives you the chance to make clear to your audience what you believe are the highest priority financial metrics for the company at any time.

Creating such summary information doesn’t let you skip the troika of financial statements (P&L, balance sheet and statement of cash flows), but it’s no additional work either – another page in your spreadsheet refering to data in the complete statements almost always does the trick.

While the exact format of such a one-page statement should be discussed with your board, the format below describes one that is used in a company that I work with, proposed by another director.  I’ve come to like it a lot and always keep the spreadsheet on my desk a few days before and after the respective board meeting so I can quickly refer to it as I think about the progress of the company.  It has three sections:

  1. Finance
  2. Headcount
  3. Subjective updates that either have an impact on the current period or will likely have an impact on future periods

I’ll go into each one separately . . .


As is true for much of the operating life of companies, the focus should be on cash.  As such, you should list the key spending areas of the company – the big line items – and sum them up to come up with the gross burn rate for the previous period.  As I mentioned in my previous posts in this series, it’s good to have numbers for previous periods as well.  You should include the last two (for a total of three) to five (for a total of six) months as a minimum in this table.

Once you’ve established the gross burn, you should summarize any cash infusions into the company.  Generally speaking, these will only include a few line items, like investment income, financings and collections.  By subtracting this sum from the gross burn, you’ll derive the net burn for the company.  Again, this should be reported for the previous months as well.

In this section, it’s also a good idea to list the key balance sheet entries and any bookings numbers (so the forward potential for revenue is observable).  For the balance sheet items, I like to see accounts receivable, accounts payable and any deferred revenues.  Of course, given the structure of the company and accounting methods, other data may be important in this section.  Capital equipment should be included if you’re running a business that requires a lot of it.

Finally, for bookings, you should list the bookings for the previous month, quarter and year-to-date.  It’s also a good idea to list the similar data for comparable periods a year earlier.


In this section, you should summarize headcount by department.  There is no reason to break your small company into too many small departments here, you can simply lump them together by function if departments don’t work out.  In the cart, you should list the actual headcount as of the time of the last report, any additions or deletions since then and the current headcount.  You should also list the headcount plan per department and indicate any delta between the numbers.


Finally, you should add a few lines of important data that either had an impact on this current summary or will ikely have an impact on future performance.  Items like tax filings, lawsuits, delayed products, loans being called, key people leaving or being hired, etc, should be listed here.

So, in the end, the consolodated report will look something like this (Google Spreadsheet):

Again, it’s short.  At the most, it should cover a single page.  It’s also easily derived from the financial statments that you already have – your spreadsheet editor will do all the heavy lifting.  In the end, it will improve communication with your board and your company and it will help to make sure your board is up to speed at all times.

I’ll state again that you should discuss the format of this type of information with your board.  It doesn’t make sense to present a summary that doesn’t fit the specific needs that the group has and the format can be easily changed to make it work well.  As Chris Wand over at Ask The VC says in his recent post, Concluding Thoughts About Good Board Packages,

While it’s tempting to look for an example of a “perfect” board package and then replicate it, the perfect board package isn’t something that can be easily copied because it’s company specific and requires a thoughtful case-by-case approach.

 May 4th, 2007  
 Boards, Management, Startups  

Communicating with Your Board: Equity Grants

As your company grows, you’ll find yourself frequently seeking approval for grants of equity from your board.  Most often, the desired grants will be for new employees, but you’ll also want to use equity to recognize and retain existing employees, consultants, advisors and even your board members.  Since many grants will be made, it’s important to be able to present a request for equity,

  1. In a standard (for your company) format so the basis for making decisions between meetings is as consistent as possible.
  2. Relative to other similar grants whether being done at the same time or having been made previously.
  3. With as much contextual information as possible about the people and the grants, themselves.

First, I’ll take a step back by saying that in almost all cases, your board needs to approve any grant of equity to anyone.  When you’re starting out, it may be the entire board who approves such grants.  Later, though, there is likely to be a formalized compensation committee of the board that will be responsible for review and approval.  Even though the compensation committee is responsible for being closer to the compensation information than the general board, it would be a mistake to believe that the members of the group remember what has happened before or understand the state of things in the company the way that you do.  There is just too much information to remember when they are not exposed to it on a day-to-day basis. 

The good news is that it’s relatively easy to present all the information needed to bring your board up to speed on the critical and contextual data in this area.  First, always include a cap table with your board package even if it hasn’t changed since the last time one was distributed.  The cap table gives the board/comp committee a great picture of who has what and makes it easy to make sure that there is some consistency in how grants are made.  Additionally, board members, especially those who are also investors, will be thinking about how any grant is going to affect their overall ownership in the company, even if they don’t admit it.  By giving them an up-to-date cap table, they can do the math themselves.  After all, it is all about me.

Second, have a table like the following in your package [note: I include the concept of options to acquire shares as part of shares]:

Name Position # Shares % Ownership # Existing Shares/% Vested Range

 Where the columns are:

  • Name: the name of the person who will get the proposed grant if approved.
  • Position: their current position in the company or the position that they will take when hired or retained.
  • # Shares: the number of shares and type of equity the person will receive.  Are they options, restricted stock, performance shares, etc?
  • % Ownership: what percentage of the company is being granted on a fully diluted basis.
  • # Existing Shares: how many shares of the company does this person already have (applicable for existing or former employees or consultants).  It’s also good to include what percentage of their options, if any, have already vested.
  • Range: what is the range of shares previously granted to people in this position or, if the position is new, what is the range of company ownership for this position in other companies at the same stage of development.

Third, be prepared to discuss the background and/or performance of anyone on the table.  In my experience, detailed descriptions are generally only required for people getting big grants, but it really looks bad if you can’t explain why someone is on the list in the first place.

This may seem like a lot, but it’s really quite easy.  It’s likely that you process all of this information already and just don’t formalize it.  The key, of course, is to not just do this one time, but to keep it up.  Consistency is important and will become increasingly important as the company gets larger.  By showing the proposed grants with context and making the comparison to previously approved ones straightforward, you increase the likelihood that you’ll get the grant approved without issue while making the entire process as smooth and fast as possible.  After all, it’s not fun having to go back to a new employee and tell them that their grant was not yet approved because the board needed more information . . .

If this stuff is interesting, you should also check out Chris Wand’s How to Create a Good Board Package series over at Ask the VC and my previous post, Board Meetings – A CEO’s Point of View.

 April 13th, 2007  
 Boards, Management, Startups  

Communicating with Your Board: Sales Numbers

I’ve mentioned before that it’s likely that your board remembers less about your business between meetings than you think.  As much as you think that your business is the most important thing in the world to them, your directors are probably on more than one board and many are on several at any given time.  So, with all the various pieces of information they are dealing with, they may not remember everything or sometimes get some facts and figures mixed up between companies.  As such, it’s important to remind your board about the relative nature of what you report to them each time you give them updated information.

What do I mean by this?  All information, especially numbers, should be given in context.  When new numbers are being reported, they should always be linked with plans, forecasts, and previous results.  As always, any communication tool that’s good for your board is likely to be a good one for the company in general, allowing people less familiar with the inner workings of the day to day business to grasp the significance of the data being presented.  You shouldn’t have to do a lot of extra work for your board, but you may want to consider the presentation of data with the board’s unique circumstances in mind.

In this post, I’m going to give some examples of how to report sales numbers.  The problem with sales reporting is that they come in multiple forms and have to account for many components.  There are planned, forecasted and actual sales.  Sales by territory and by channel.  There are sales by product and service and, further, by product line or service area.  There are probably half a dozen other ways to cut the numbers as well.  The goal is to put as much of this data into as condensed a format as possible.  Here are some charts that do that.  Please excuse my obvious US territory bias in these charts.

 Territory  Q1 Plan  Q1 Actual  Q2 Plan  Q2 Actual  Q3 Plan  Q3 Actual Q4 Plan  Q4 Actual  Year Plan   Year Actual
 US East                    
 US Central                    
US West                    

The rows in this chart obviously represent each territory that you sell into.  The columns give a view of the plan, presumably set before the period and likely before the year began, and the actual data for completed quarters. If a quarter is not yet over, you can use “actual” column to show the results of the quarter to date.  If you run your business on periods other than quarters, you can, of course, change the headings of each column to whatever period fits.

Presenting the data this way gives the reader a full view of where you are, where you were planning to be and what the future should look like.  If you adjust your plan during the year, you can, optionally reflect it here or on a chart that compares the old and new plan.  Too often, the old goals are tossed when a new plan is adopted.  In my mind, this is an error because the original numbers are too quickly forgotten.  You can’t learn from or remember why the plan changed if it is left in the dust.  It’s good to reflect on the original plan after the individual periods and the year is over.

Many companies sell their wares through multiple channels.  Ideally, this would be another dimension to the report above.  Since that presentation is difficult, though, we have to settle for an additional chart in which we break down the numbers by channel.  The chart looks just like the one above with “channel” replacing “territory.”    Of course, you may need to further break down each channel by territory.  I leave this extrapolation to the reader <g>. Again, showing plan vs. actual both forward and backward in time is critical to understanding the meaning of the data.

The final use of the basic chart outline above is for product line reporting.  For this, “product line” replaces “territory.”  While small companies will not always break down bookings per product line (although they should as soon as it’s applicable), it’s a good idea to separate product and service sales very clearly.  This basic division of numbers (which will probably also be found on the P&L) tells a lot about the business.

Forecasting sales is fundamental to making good investment decisions inside a company. If you don’t know where and when revenue will be coming in, you won’t be optimizing your use of capital.  Forecasts can come in many forms, but should at least include the following information:

 Customer Territory   Pipeline Stage  Expected Close Date  Sale Value  Prev. Close Date

For more information on the “pipeline stage”, see my post here.  The “expected close date” is the currently forecasted date for closing the deal and the “sale value” is the total bookings expected for this sale.  The “previous close date” is a very important part of the forecast.  It tells the reader that this sale was previously forecasted to close at another time.  Like the other charts, any data on what should have been or what will be substantially increases the value of any data being given.  Without this, there’s no accountability for the forecast unless the reader remembers the previous forecast or asks further questions about every deal.

The final sales-related chart that I like to see as a board member with a failing memory describes the deals that took place during the previous period.  These are deals that closed and the company reported as a booking.  A chart like this one contains all of the critical information.

Company  New  Add-On  Renewal  Total
   Total  Total  Total  Total

Here, the closed deals are listed by company name and amount with whether the deal was the first sale into that customer, an add-on to an initial deal or a renewal of a subscription-based earlier sale.  Obviously, the terms aren’t important, but any concept that applies to your particular business is.

  • A new deal is just that, a first sale into that particular customer.  Whether you include different divisions of the same company as the same customer is up to you.
  • An add-on deal is where you’ve sell additional product or service into a customer as a follow-on to an original deal.
  • A renewal happens when either a time-based license is renewed or, perhaps, a service agreement is extended.

These charts can usually be condensed into a few pages.  Small companies with a handful of deals will probably even be able to get them all onto a single page (aside from the huge forecast that might take additional volumes <g>). 

Of course, these are just examples and they may not all completely apply to your business.  They represent the way that I have seen reporting done successfully and in a compact form.  You should discuss the representation of information with your board and decide on the best way of getting comparative data communicated.  I highly urge you, though, to find a way to not only show current period data, but to do so in context, showing comparative data for other periods and versus plan as well.

 April 5th, 2007  
 Boards, Management, Startups  

Do Boards of Advisors Work?

I have never seen a board of advisors work after the initial few meetings. I’m sure there are cases where they are managed well and it works out, but for the most part, my experience is that any initial engagement and excitement wanes and the value diminishes fairly quickly.

I think that the reason this happens is that there’s no fundamental attachment between the members of the board of advisors and the company.  Sure, there might be a small financial one, created by offering the members of the group some equity or cash compensation, but it’s very difficult to establish any emotional link that would compel the outside members of the group to put in the long term effort to continue to add value, stay engaged and work to make the company successful.

The problem is that the people who are generally targeted as advisors have other jobs and responsibilities.  After the idea of equity participation and initial interest in what the company is doing wears off – which can happen quickly – the company that they are advising becomes a much lower priority than any of their other responsibilities.  Since they are not involved on a day-to-day basis, there is no other link to keep them thinking about what their advisee needs.  Ultimately, the relationship moves from a mutual one to one driven entirely by the company until it breaks down completely.

As it turns out, while the board of advisor setup doesn’t work that well, there are other ways of achieving the benefits desired in setting up the group in the first place.

  • Compensate company adviser(s) frequently – the value of any compensation dissipates quickly when the advisor isn’t thinking about the company.  More frequent grants of equity or cash payments will serve to keep their attention focused on the tasks at hand.
  • Put them on the Board of Directors – if they add enough global value, put them in a more responsible position with the company, like its board of directors.  The added responsibility will keep them focused on the company. Of course, you can only do this for a small number of people and only for those who are appropriate for such a role.
  • Hire them as a consultant – in this way, they have responsibility for delivering value to the company with an agreed upon income for doing it.  This arrangement has the added advantage that it’s easy to sever If and when the advisor no longer adds value.  The advisor can then be replaced by someone with different experience or knowledge.

Having outside advisors is always a good thing.  They can bring perspective to your efforts and direction.  They can also bring knowledge and wisdom into the company that may be missing in the current team.  Ultimately, the structure of such a group of advisors is critical to its success, though.  The classic board of advisors structure frequently fails because it does not establish an emotional or responsibility link between the company and the advisor.  There are other ways of accomplishing this though.  When these are used, a great relationship between an advisor and company can be established although, perhaps, not as a group.

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 February 28th, 2007  
 Boards, General Business, Startups  

Board Meetings – A CEO’s Point of View

I have read several posts on board meetings lately, including a couple of insightful ones by Scott Converse, CEO of Clickcaster, discussing his first two board meetings (you can find them here and here).  Brad Feld also has a great series on board meetings which you can find here.  Having chaired, as I count ’em up now, well over 100 board meetings as a CEO of both private and public companies in the last 15 years, I thought I’d throw some additional thoughts into the mix.  Here are my top 10 (er . . . 11).

  1. Talk with each board member prior to the meeting.  Votes don’t happen at board meetings; they are just formalized there.  That’s why they are almost always unanimous.  Anything even remotely controversial or detailed should be discussed prior to the board meeting.  That’s not to say it won’t be discussed again at the meeting, but because you’ve engaged each board member on the topic ahead of time, you will have had the chance to answer any specific questions and help them prepare for a group discussion.  This saves a load of potentially wasted time once the group gets together.  Even if you don’t have any challenging topics for the board meeting, it’s a good idea to check in with each director to see if they have topics they feel are important to cover at the meeting.
  2. Have face-to-face meetings.  There is a strong desire among certain board members to have telephonic meetings.  In my experience, these just don’t work as well.  While I’m sure there are people who can stay engaged while on the phone, for most people there are just too many distractions when they are sitting at their desk (or lounging by the pool of their opulent VC estate).  You also miss the body language and facial expressions of your board members which can offer as much advice and feedback as anything they have to say.
  3. Send board material to the board at least 24 hours in advance.  Even better if you get into their hands 48 hours in advance.  Your board members are busy people and, likely, travel frequently.  Don’t expect them to spend any real time on the material if you send it to them the night before the meeting.
  4. Run the meeting like you run your company.  Board meetings aren’t free-form, non-directed discussions.  Keep to the schedule and don’t let discussions go on a second longer than they need to.  You may be compelled to abdicate your role in the meeting to your investors.  Don’t.  They want a well run meeting too.  Keep in mind that it’s your meeting.
  5. Put the summary up front.  Summarize your update to the board and goals of the meeting in the board materials sent out prior to the meeting AND AGAIN when you open the meeting up.  Everyone should be clear on and agree to what the goals are for the meeting.  Ask the board if they want to add anything to the agenda during your pre-meeting discussion (see #1) and again at the start of the board meeting, after they’ve had a chance to review the board materials.
  6. Have “closed” sessions at the beginning and end.  The session at the beginning includes both inside and outside board members (no management) and is to dispatch the perfunctory board actions like approval of minutes, option grants, FMV and so forth.  Getting these out of the way up front is important because someone may end up having to leave early, causing you to lose your quorum.  The session at the end is for outside board members only.  It’s a good idea to schedule this session to give your outside board members dedicated time to talk about you.  What?  You thought that maybe they only talked about you while you were with them?
  7. Have your management team attend the meetings.  Your board isn’t just an advisor for you.  Your whole team can benefit from the advice they give and can learn a lot from the discussions that take place at the meeting.  More importantly, each member of your team should feel like they are individually accountable to the board.  As such, when group-level presentations are in order, have the appropriate member of your team do the presentation and lead the discussion.
  8. Repeat the summary of the company’s goals, strategy and tactics at the beginning of each meeting.  Your board members should know these, of course, but I’ve found that it’s a good idea to remind them.  It helps to stir their creative juices and to get everyone aligned right at the start of each meeting.  Doing this will also help them remember what the company is up to when they’re not at the meeting and to use the concise version you use for their own elevator pitch.
  9. Don’t assume that your board members remember the detailed facts you presented at the last meeting.  This goes for numbers, especially.  Chances are, your board members are on many other boards as well.  There are numbers, facts and tidbits blasted at them all the time.  Format your materials so that all the important quarterly and annual pertinent information as well as any key metrics used to measure the company are easily found and referenceable.  Make the board aware of these again during any presentations or discussions during the meeting itself.
  10. Your board knows how to read financial statements.  The detailed financial statements should be in the package you deliver to the board prior to the meeting.  If you go over the detailed numbers at all during the meeting, create one summary slide/page with all the key items on it for review.
  11. Stand up.  Board meetings are way more casual than they were 20 years ago.  Still, when you stay seated while presenting to the board (or any audience, for that matter) you send a signal that the topic is not worthy of your full energy.  As in #4, above, it’s your meeting to run.  It’s your presentation full of your ideas and demonstrating your hard work.  Show it.  Keep your butt in the chair for general discussions, but stand up and take control of the meeting when you present.  It shows respect for the material and for the people you’re presenting to.


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 November 29th, 2006  
 Boards, Startups