I do “publish” a lot of thoughts on what I am seeing in my industry (VC, startup companies), but just not HERE! Time to put those comments here….
How to Run a Great Board Meeting…
Today I want to put a thought out there on how to run a board meeting once you take institutional capital. First, when I say institutional capital, I mean you have taken capital and set the expectation that you are going to try to get the Company, someday (say inside of 7 years), to a real liquidity event, which I describe as north of $200 million dollars in value. This could be an M&A event, or it could be (hopefully) a standalone company that seeks an IPO and to have enough credibility (and visibility) to create a market in its stock.
Obviously, that is ambitious and requires that you create a powerful economic model and an important product or service position in an important market – so if you have raised capital that has this ambition, then you have taken institutional capital.
Board meeting requirements are usually written into the terms of such a financing, and are a big part of the communication culture of startups today. So, how to run one as the CEO or founder (or both)?
Why are We Here?
First, let’s define the purpose of the meeting. An important purpose is the reporting function and fiduciary oversight. Investors have put money in (often not their own money and they have to answer to their own investors) and want to see how their investment is performing. While basic and necessary, this is the simplest form of meeting with your investors, and I don’t think this is the main function of a board meeting, certainly not in the successful companies of which I have been a part.
A nasty corollary here is that often management, or founders, want the investors to leave “jazzed” about the Company! If that is even an implicit goal of a board meeting then all the information will be warped and unreliable and sincere questions will be met with deflections and defense.
Another important purpose of the board is to understand where management is taking the Company and then apply their contacts and industry knowledge in helpful way. Investors need to be listening and deeply understanding during this activity, and I personally prefer it when the investors keep the “I know a guy” comments to a minimum during the board meeting. There is plenty of time for that when investors are one on one with the management team.
Because startups are about companies creating their product, their team, their market positioning and market identity in rapid order, every week and every day -- critical decisions are happening. Often without the management or board being aware that they were making a decision! In such an environment a key role, and maybe the most important role, of the board is to help the management team make better decisions – but that is a very tall order.
In this last, highest purpose of a startup board, I have found that the concept of “hindsight” delivers the best standard by which to judge the effectiveness of a board. In hindsight, so much is clear. We often beat ourselves up with the “benefit” of hindsight, when many past decisions can look silly.
Think about a big project (or company or career or relationship or startup) you have been working on. It really can be anything. Your current perspective, July 2009, on this project has factored in hundreds of variables and you can try to make some guesses about issues that are really facing you and this project today. However, six months from now, in January of 2010, you are going to have a much clearer view of what issues were really facing your business in July of 2009. In hindsight, you will have a better view.
Let’s look back 6 months. From you current perspective, what were the real issues facing your project in January of 2009? Can you recall what you would have said in January versus what you would say today regarding this issues facing the project then? I think it is very difficult to “predict the future” around a company or market, and not usually productive to use a smart group to try to come up with such predictions. However, a better, and more valuable effort, in my opinion, is to try to see the business today through the eyes of tomorrow, or what I call “stealing hindsight.”
Most of the successful companies I have worked with have engaged in this effort to some degree, often implicitly, and this has led to better decision making by all. A good first way to put this technique to work is to ask yourself, “In January of 2010, what will I say were the top issues facing my project in July of 2009.” It is a subtle difference, but a board that can do this has by definition a lot of other issues worked out and can be very helpful to a startup management team.
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