Managing Your Startup Board - conferences.law.stanford.edu › vcs2020 › wp-content ›...
Transcript of Managing Your Startup Board - conferences.law.stanford.edu › vcs2020 › wp-content ›...
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Mark Suster
Managing Partner, Upfront Ventures
Managing Your Startup Board
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Many entrepreneurs think about boards in the traditional sense as providing “oversight” to their activities.
Shareholders
Board
Executives
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And of course this is the legal & fiduciary
role of a board
Shareholders
Board
Executives
}
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But if you want to be truly effective as a founder you should think more about how YOU manage the BOARD.
Board
Executives
Make your board an extended part of your
executive team: super-connected,
free interns.
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"I can always get money. Where else can I get very connected and powerful
people to do work for me?”
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- Founder
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Photo by Brittany Simuangco on Unsplash�6
How boards initially see you - it’s a bit like new parents - it’s not adversarial at all
• Unconditional love
• A sense of responsibility
• An important role in “oversight”
• Define their own image by your success
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As you grow what you think you should do & what the board thinks can diverge
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Ultimately it’s up to you to take appropriate risks - but you
must then manage the board
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The Continuous Board
A different way to think about managing your board
!9 Photo by Sasha • Stories on Unsplash
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Board meetings are how most founders think about board interactions
but they're actually the least valuable part of your board relationship
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A great board is a highly-engaged group
who knows your business intimately
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If you build trust they’re the only people you can
share most sensitive decisions with
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Many founders treat boards as administration functions that solely receive quarterly updates. Let’s call this the “waterfall board.”
Time
Research
Design
Build
Test
Deploy
Waterfall Software Development
User Feedback
Waterfall Board
Q2Q3
Q4
Q1
BOD Update
BOD Update
BOD Update
BOD Update
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The “continuous board" approach involves more frequent interactions – call / text / email at any time for quick input to iterate and course correct.
Continuous involvement makes
your board feel knowledgable & take
ownership of decisions
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Building a High-Functioning Board
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Each member of a high functioning board…
- Knows each other personally. Has a working relationship where they can resolve differences of opinions
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- Truly understands the underlying businesses. Knows strategy, execution & financial metrics
Each member of a high functioning board…
- Knows each other personally. Has a working relationship where they can resolve differences of opinions
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- Finds this board assignment important relative to their other time commitments
Each member of a high functioning board…
- Knows each other personally. Has a working relationship where they can resolve differences of opinions
- Truly understands the underlying businesses. Knows strategy, execution & financial metrics
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- Doesn’t have incentives that are misaligned with the company, its shareholders or other board members
Each member of a high functioning board…
- Knows each other personally. Has a working relationship where they can resolve differences of opinions
- Truly understands the underlying businesses. Knows strategy, execution & financial metrics
- Finds this board assignment important relative to their other time commitments
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- Knows it’s his or her fiduciary obligation to serve interests of the company first & foremost
Each member of a high functioning board…
- Knows each other personally. Has a working relationship where they can resolve differences of opinions
- Truly understands the underlying businesses. Knows strategy, execution & financial metrics
- Finds this board assignment important relative to their other time commitments
- Doesn’t have incentives that are misaligned with the company, its shareholders or other board members
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Ultimately it’s in your interest to invest in creating these working
relationships - not just with you but amongst non-exec board members.
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A board that knows and likes each other is more likely to resolve hard
conflicts.
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• Schedule board meals / social time
• Encourage non-exec board sessions
• Help plan non-exec board calls
Building relationships takes effort
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Board Members
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Source: Mark Suster, Both Sides of the Table
Your board will increase over time and it’s highly likely you won’t retain a board majority (and that’s ok)
Time
Roun
d
Seed • 2 Founders • Maybe Seed
Investor
3 Person
D+ • 1-2 Founders • 3 VC Investors • 2 Independent • 1-2 Board
Observers
7 Person
B • 2 Founders • A + B Investor • 2 Independent
or common
5 Person
Founder Controlled Independent or Investor Controlled
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What makes a great Independent Board Director?
A Good Mentor
Industry Experience
Local
Has Skin in the Game
Time to Commit
Startup Experience
An Honest BrokerThere in Good Times & Bad
Diplomatic
Source: Mark Suster, Both Sides of the Table
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Board Meetings
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Photo by Pineapple Supply Co. on Unsplash
If you ask your board about your logo or brand colors, they will debate it for 30 minutes
…if you do this, that’s on you
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Executive Management• Strategy, monthly budgets, hiring / firing, financial results • Sales, marketing, pricing, product, support, HR, finance
It’s your job to “run the company” and not let your board micro-manage operations. It’s your job to keep board meetings “at board level.”
Source: Mark Suster, Both Sides of the Table
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Executive Management
Board of Directors
• Strategy, monthly budgets, hiring / firing, financial results • Sales, marketing, pricing, product, support, HR, finance
• Annual budget • Strategy & performance • Fund raising, M&A, audit, executive compensation • Exec team hiring / firing
A board’s role is to provide oversight of the company on behalf of all shareholders.
Source: Mark Suster, Both Sides of the Table
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Executive Management
Board of Directors
Investor Governance
• Strategy, monthly budgets, hiring / firing, financial results • Sales, marketing, pricing, product, support, HR, finance
• Annual budget • Strategy & performance • Fund raising, M&A, audit, executive compensation • Exec team hiring / firing
• Fund raising, M&A, debt • Scope and structure of business
Some key decisions also require approval from shareholder groups, beyond board approval.
Source: Mark Suster, Both Sides of the Table
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PresentDebate
In thinking about how to run any individual board meeting it’s important that you understand what you’re trying to achieve
Of course each meeting can be a combination of both activities
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Inform
Decide
It’s equally important that you know your goal for the meeting. Are you seeking to make major decisions or to align board members?
Not every board meeting requires a big decision to be made
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PresentDebate
Inform
Decide
Filibuster
A common mistake is to spend BOD meeting presenting more materials than a group can digest.
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A better use of time is to debate the most strategic topics being weighed by the exec team, tapping your directors’ collective wisdom.
PresentDebate
Inform
Decide
Advice
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PresentDebate
Inform
Decide
There are times where exec teams require decisions and want board sign-off to underline a key move you plan to make.
Approval
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• M&A
• Capital Raise
• Annual Budget
• Hire / Fire Critical Executives
There are times when you really need the board engaged in an existential question
PresentDebate
Inform
Decide
Huge, Strategic Decisions
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If you have four board meetings a year you can run different playbooks based on the board meeting
Q2 Q3 Q4Q1
• Next Year’s Budget
• Detailed meeting with heavy debate
• Broader exec teams attend / present
• Board lunch / dinner
• Strategy session
• Board only
• Update session / deep dive on business
• Broader exec teams attend / present
Example
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Boards. At times your best cheerleaders, coaches, mentors and
disappointed mom & dad.
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Remember that board members have personal identity tied up in your
successes & setbacks. They aren’t rooting for failure.
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Photo by Brittany Simuangco on Unsplash�41
But even your biggest champions have oversight
responsibilities to encourage what they ultimately believe is right, which isn’t always
what you want to do.
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If you proactively communicate with and manage your board you’re much more likely to
stay in sync.
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!43
Mark Suster
Managing Partner, Upfront Ventures
Managing Your Startup Board
Thank You