Key Questions
- How are startups governed?
- What is a board of directors?
- When should I set up a board?
- Who should be on the board?
- How should I interact with the board as a group and board members individually?
- How should I handle a problematic board member?
- Does a board of advisors support governance?
Start Here
Brad Feld: Startup Boards
(5 min read + links.) The Board of Directors approves annual plans, reviews progress, manages executive compensation, and votes on key issues. Understanding these governance levels is crucial for founders to effectively manage their startups and navigate decision-making processes with investors and shareholders.
Steve Osborn, Melanie Levy & Tom Burton: Board Basics
(25 min listen.) In this podcast session, Osborn, Levy and Burton focus on the basics of board meetings for growth-oriented companies. They discuss when to form a board, who typically sits on a board, and how the composition of a board evolves over time. Key points include the importance of having an odd number of board members to avoid deadlocks, the role of independent directors, and the distinction between advisory boards and formal boards. They also address the common investor request for board seats and the balance of power between founders and investors. The session concludes with advice on the frequency of board meetings, recommending quarterly meetings for effective governance and emphasizing the importance of avoiding surprises during these meetings.
Learn More
Reid Hoffman: Building a Great Startup Board: Part 1
(41 min listen.) In the first part of a conversation about startup boards, Reid highlights the most important questions to ask when putting together this crucial support team. Drawing on his own experience as a founder, he offers insights on how to find experienced board members, why a board is so important for a startup, what weaknesses to watch out for in board members, how the role of the board changes as the company grows, and whether the roles of chairperson and CEO should be combined. An important point Reid makes is that board members are not supposed to manage the company; their main responsibility is to serve as a supportive catalyst and provide oversight for the management team, especially the CEO.
Reid Hoffman: Building a Great Startup Board: Part 2
(36 min listen.)In the second part of a conversation about startup boards, Reid focuses on the fundamentals of selecting board members and common mistakes startups make when putting together a board. Having been on both sides of the fence, he offers entrepreneurs advice on how to choose investor board members, when a board member should be fired, and how board diversity benefits a company. Reid wraps up the conversation with examples of great board members he has worked with.
Delian Asparouhov: How to Run an Effective Board Meeting and Make an Effective Board Deck
(12 min read.) In this article Asparouhov provides a comprehensive guide on preparing and conducting effective board meetings for startups. He emphasizes the critical impact of high-quality board members, recommending founders spend time recruiting the right independent directors. He advises gathering feedback on the meeting agenda two weeks in advance and dedicating a week to preparing a detailed board deck. This deck should cover the company’s mission, executive summary, key performance indicators (KPIs), major initiatives, and housekeeping items. As per Asparouhov, during the meeting, you should ensure the environment is conducive to discussion, involve senior team members for their segments, and conduct an executive session for board-only feedback. Afterward, share the meeting’s outcomes with the entire team to maintain alignment and transparency.
Steve Osborn, Melanie Levy & Tom Burton: Running an Effective Board Meeting
(27 min listen.) Osborne, Levy and Burton discuss how to run an effective board meeting in this podcast session. They cover the importance of preparation, setting a clear agenda, and providing strategic, rather than operational, oversight. Levy emphasizes that board members should not be surprised by any information presented, advising CEOs to preview bad news beforehand. Burton highlights the necessity of transparency and the role of executive sessions for frank discussions. They both stress the significance of fulfilling fiduciary duties to protect against legal liabilities. The session concludes with practical advice for CEOs on handling unexpected questions during board meetings.
Dave Kellogg: The Board Boss Delusion
(4 min read.) Kellogg addresses the misconceptions founders often have about their boards of directors, which he terms “the board boss delusion.” He recounts a conversation with a founder who lost crucial development time due to following misguided board advice. Kellogg emphasizes that the board should not be seen as a boss but as a resource offering diverse perspectives. He argues that the role of a CEO is not to please the board but to lead decisively, accountable only for results. The article advises founders to maintain control, use the board for guidance without being dominated by it, and ensure they lead their company’s direction without succumbing to pressure to conform to board expectations.
Dave Kellogg: How to Lead a Strategic Board Discussion
(5 min read.) Kellogg discusses the challenges and strategies of leading strategic board discussions in startups. He highlights that startup boards are often diverse in expertise but unified in their high expectations and involvement levels, which complicates strategic discussions. Kellogg suggests preparing a focused presentation to guide the discussion and emphasizes involving only relevant stakeholders to ensure productive dialogue. He recommends forming smaller working groups for deeper exploration of complex topics, thus tapping into specific board members’ expertise without overwhelming the entire board with details. This approach not only utilizes the board’s capabilities effectively but also enhances decision-making by fostering more meaningful engagement and consensus.
Elad Gil: How to Choose a Board Member
(8 min read.) In this guide, Gil talks about the critical role board members play in a startup’s journey, particularly after closing Series A or B rounds. He outlines that board members can greatly influence a company by making strategic decisions, hiring CEOs, and providing essential business insights. For selecting an independent board member, Gil suggests detailed criteria including operational experience, market knowledge, and personal rapport. He stresses the importance of alignment with the company’s vision and an entrepreneurial mindset to counterbalance venture capital (VC) board members. Moreover, Gil advises thorough vetting and alignment with investors on board member specifications to ensure the selected individual truly represents the company’s interests and not just those of the investors.
Brad Feld: Board Seat for Sale
(8 min read.) Brad discusses the pitfalls of giving board seats to every new investor, a practice he dubs “board seat for sale.” He highlights the importance of deliberate board configuration, particularly for early-stage companies, advocating for outside directors to help founders gain valuable non-investor perspectives. Feld emphasizes the need for VCs and CEOs to thoughtfully consider board structure during financing to ensure effective governance and support for the CEO. He criticizes overcrowded, investor-heavy boards as ineffective.
Mark Suster: Who Should Be on Your Startup Board?
(8 min read.) In this article Mark discusses the importance of carefully selecting startup board members. He advises against forming a board too early, suggesting that a formal board is beneficial starting from the seed round of funding. He discusses the roles and dynamics of board members through different funding stages, highlighting the necessity of balancing founder control with investor involvement. Mark also stresses the importance of choosing board members who add strategic value and can complement the founder’s skills, and provides guidance on managing board composition as the company grows.
Mark Suster: How to Prepare for a Board Meeting to Make Sure You Crush It
(10 min read.) Mark outlines strategies for effectively preparing for a board meeting to ensure success. He emphasizes the importance of distributing a detailed board deck in advance, focusing on key metrics and strategic issues rather than operational details. Mark advises rehearsing the presentation, anticipating potential questions, and being transparent about challenges. He also highlights the significance of managing the meeting flow, actively engaging board members, and following up on action items to demonstrate progress and accountability.
Mark Suster: How to Stop Your Board Meeting From Going down a Rat Hole
(5 min read.) Through this article Mark offers strategies to keep board meetings productive and avoid unproductive “rat holes.” He advises setting a clear agenda, prioritizing critical issues, and assigning specific time slots for each topic. He recommends preparing thoroughly, distributing materials in advance, and involving key team members to provide detailed insights. During the meeting, Mark stresses the importance of the CEO controlling the flow, encouraging concise discussions, and steering the conversation back on track if it deviates.
Mark Suster: Managing Your Startup Board — A Short Presentation
(6 min read.) Mark emphasizes the importance of effectively managing startup boards. He highlights key strategies such as establishing trust and transparency, setting clear agendas, and maintaining regular communication. Mark advises CEOs to prepare thoroughly for meetings, provide concise updates, and focus discussions on strategic issues rather than operational details. He also underscores the importance of understanding board members’ perspectives and leveraging their expertise to benefit the company. Managing board dynamics well can lead to more productive meetings and better decision-making.
Mark Suster: High Functioning vs Low Functioning Startup Boards
(5 min read.) Mark differentiates between high-functioning and low-functioning startup boards. High-functioning boards are proactive, provide strategic guidance, and have members with relevant expertise who are deeply engaged. They focus on growth and innovation, and their members are committed to the startup’s long-term success. In contrast, low-functioning boards often lack clear direction, have disengaged or inexperienced members, and fail to contribute effectively to the startup’s strategy. The article emphasizes that the effectiveness of a startup board significantly impacts the company’s success, highlighting the need for careful selection and active management of board members.
Brian Balfour: A Simple Tool to Create Effective Board Meetings
(3 min read.) In this article Brian presents a tool for creating effective board meetings by emphasizing the importance of structured agendas and clear objectives. The approach involves defining specific goals for each meeting, preparing an agenda that prioritizes critical issues, and ensuring that discussions are focused and productive. Brian suggests using a format that includes updates, decision points, and strategic discussions to maximize the value of board interactions. This method aims to enhance board efficiency, drive meaningful progress, and ensure that meetings contribute effectively to the startup’s growth and decision-making processes.
Brad Feld: The Ideal Financial Reporting Tempo for a VC-Backed Company
(5 min read.) In this article, Brad discusses the optimal frequency of financial reporting for companies. The recommended approach involves quarterly board meetings with financial discussions but emphasizes ongoing communication with CEOs and CFOs outside these meetings. Monthly financial packages, including profit and loss, balance sheets, and cash flow statements, should be shared with the board.Brad suggests an optional monthly financial call to keep board members engaged. This strategy balances comprehensive oversight with manageable reporting workloads.
Brad Feld: Create Structure Out of the Gate and You’ll Thank Yourself Later
(7 min read.) In this article, Brad argues for the importance of establishing a board of directors and implementing a formal board structure early on in a startup, even when the company is operating on convertible debt financing. Brad uses the fictional example of Acme SaaS Corp (ASC) to illustrate how the lack of such structure can lead to a series of issues, including uncontrolled spending, ineffective product development, and ultimately, the failure of the company. By creating a board and engaging with investors as if they were equity holders, startups can benefit from their expertise, gain valuable feedback, and ensure better financial management. Brad emphasizes that treating debt investors as equity holders fosters accountability and discipline, leading to more efficient operations and a greater likelihood of success. He encourages entrepreneurs to embrace this approach, as it can significantly impact their ability to navigate the challenges of early-stage growth and ultimately build a sustainable and successful company.