VC, author, blogger and marathon-runner Brad Feld and I are working on a book for entrepreneurs that demystifies the "board" dynamics and inner-workings of a boardroom.
Brad, who once was an entrepreneur, has been an investor in over 100 early-stage companies. Having sat through thousands of board meetings in companies like Zynga, he has seen some best practices. In between running marathons, blogging and tweeting, Brad also writes books that make the entrepreneurial ecosystem better. Startup Boards will be his fourth book (after Do More Faster, Venture Deals and Start-up Communities, which is being released later this year).
It's my second book. As a life-long student of venture capital and start-ups, I recently finished writing The Business of Venture Capital, in which I interviewed Brad and some forty leading VCs to understand best practices of early-stage investing. Brad was tremendously helpful in shaping this book (and yes, he responded to my cold call with a simple "Happy to Help" email, proving that there is still a force for the good in this universe.) We hope our combined experiences can help entrepreneurs manage board expectations and dynamics more effectively.
"Mom, I have a board meeting today"
That sounds important but really, entrepreneurs enjoy building products, interfacing with customers and generating revenues. As they raise their first round of venture capital, a board of directors is formed. The word 'board room' conjures up images of important people, puffing on cigars or sipping scotch while sitting in leather chairs. The size of the board varies - three to seven board members depending on the stage of the company. Typically, the board meets once a month. So how does an entrepreneur manage this beast called the board, which has five heads, lots of opinions and shows up every four weeks? Indeed, managing these relationships can be tricky for any CEO. We will share real world examples with some do's and dont's.
Why do investors ask for a board seat?
VCs manage money for other investors and have a fiduciary duty. OK, that's a very important sounding word -- fiduciary -- but VCs have to raise money for their fund, just like you raise money for your company. Part of the VC pitch is that they create value in start-ups by being active investors. Active investors have a say in how any start-up plots its moves in the market. This is where the board comes in. Call it adult supervision or governance. These investors are here to protect and grow their investment. Part of the whole venture capital game is to manage (or suffer) board meetings. And trust us, most VCs enjoy sitting in board meetings and telling entrepreneurs what to do, how to do it, how often to do it and then some. Some (hyper) active investors may even want to have a say in your logo design. A good board can be a guidepost and a positive catalyst. Bad boards micro-manage and cause angst, even acid reflux. Nexium not included!
What is a good board?
A good board member can be like a coach, a balance of discipline, honesty and empathy, working mostly in the background, keeping the CEO in the spotlight. Good VCs bring knowledge of sectors, stage-specific guidance, key relationships, and most of all, the chemistry and discipline to stay on track. Smart entrepreneurs insist on more than just capital. After all, money without the brains is nothing but a green piece of paper with a picture on it. On the other hand, we have all had our share of bad relationships -- these are toxic, emotional and hurtful. Some frustrated investors who have unfulfilled entrepreneurial dreams want to proxy-run the company and micro-manage. Others can be passive and unavailable when you need them the most. And here is the worst part: they can fire you. But you cannot fire them.
Help make this book richer
Our goal is to help entrepreneurs like you to understand the various legal and governance aspects of the board, but more importantly how to manage these softer dynamics. VCs don't enjoy firing their CEOs. It's painful and disrupts the spirit of the game. But it happens all the time. Having talked to several serial entrepreneurs, VCs and attorneys to gather inputs, we now come to you seeking the wisdom of the crowds -- to make this book even richer.
If you are an entrepreneur or a VC with some board insights, experiences or war stories, please fill out this brief survey. Or forward it to someone who can help. It should take no more than 10 minutes. Your experiences can be of tremendous help to the foot soldiers of our future economic growth.
Brad Feld, managing director at Foundry Group invests, writes and makes entrepreneur friendly videos. Mahendra Ramsinghani, managing director at Invest Detroit's First Step Fund enjoys writing, early stage investing and hanging out with those who are a force for the good in this universe.