Startup Boards for CXOs Series: Post 1 of 11
Unless you’ve been a startup executive with regular interactions with a board and regular attendance at board meetings, you’re unlikely to know what a startup board looks like, how it functions, and what you can do to make a big impact. A lot of people think of a board as a large collection of faceless notables, convening meetings around 20-person tables and agendas packed with legalese about corporate governance – or worse, as nothing more than a boys’ club full of grumpy old men in a smoke-filled, wood-paneled room, banging a gavel, calling for motions and votes generally following Robert’s Rules of Order. The more likely scenario for a startup is a founder CEO with one or two other people – maybe a relative, an angel investor, or another business associate known to the CEO, and increasingly (though still not enough), not all men of roughly the same vintage who kind of look alike and went to all the same schools.
A startup board is more likely to be informal rather than formal, disorganized rather than organized, spontaneous rather than sticking to a defined agenda. You’re more likely to meet infrequently or sporadically, and to get a ton of emails with documents just before your meeting than you are to meet regularly (say, quarterly) and to receive a well produced board packet in advance of the board meeting. If the CEO has committed to hiring an independent director, that is likely their first step towards having a more formal and organized board – so that’s good news! If you’re coming from the corporate world you might think, “Wow, can I ever provide a lot of structure here and help these people get organized,” and while that’s true, it’s not necessarily the most important contribution you can make to a startup board when the company is still driving hard to define product/market fit, customer personas, and not run out of money.
What is the size and composition of a board? Corporate boards of private companies typically have three kinds of directors: Founders/Management – sometimes just the CEO and sometimes more than one founder; Investors – the angel investors or venture capitalists who back the firm; and Independents, who are hired in by the company and normally compensated with stock options (and in very rare cases, cash or consulting dollars) to be an outside voice representing all shareholders’ interests. Boards can vary in size, but the typical pattern is 3 seats for a startup, 5 seats for a scaleup, 7 seats for a larger private company, and 7-9 for a company about to go or recently gone public.
What are those important things a board member in a startup can do? Often, it’s not your direct experience with the issues that can be most helpful to the CEO and company, but a broader view of multiple situations and experiences that form a pattern in your mind. A great board member will be able to think, “I’ve seen this before and I know how it ends, so this is the moment to consider a course correction.” So, it’s not necessarily direct experience with a specific issue (although that always helps!), but the ability to understand the nuances, the gray areas, the opportunities, that a board member brings to their role, whether you’re talking about product, financing, hiring talent, or anything else.
You can help a CEO see the forest for the trees because most startup CEOs are wearing every hat in the company and are totally focused on the day-to-day, if not the minute-to-minute. As a board member, providing some perspective that helps put the daily challenges into a context is incredibly helpful to startup CEOs. Related to that perspective is the cadence of board meetings. One of the key roles for a board is to advocate for regular meetings and provide a true accountability for startup CEOs and their team. Startups are often running at warp speed and a board meeting can often get lost, get pushed, or not be seen as the strategic asset that it is. By forcing startups to schedule and prepare for a board meeting you’re providing a discipline that will be helpful as a company scales. The conversations you’ll require the company’s management team to have – and the quality of the output required to be “Board ready” will lead to meaningful thought and potentially some meaningful decisions.
Of course, one of the best things a board member can do is to provide honest, candid, and thoughtful ideas and advice to the CEO. Another is to figure out how to fit as a team member on the board (boards are teams, too!) and work with and help get the best out of all the other directors, too. I have several blog posts on how to make your voice heard and how to deliver difficult-to-hear advice. I also have a blog post on the critical function of a board: corporate governance. But, if you’re on the fence, or unsure what a board member can do for a startup, the major things are providing advice and examples that form a pattern based on your experiences, providing accountability and regular discipline around deliverables, and providing honest and candid assessments.
But to end where this post started, what do startup boards look like and how do they operate? Of course the answer is “it depends.” It depends a lot on the CEO and the investor group and what all of them expect, need, demand from the board. It depends on how well run the board is. But the most important part of “it depends” is that it depends on the company’s stage of life and specific situations. Boards have formal meetings that range from short, 1-hour meetings 10-12 times per year for a true startup to a more standard quarterly, 3- or 4-hour meeting for a scaleup or growth company. Board books, materials distributed ahead of a meeting, are all over the map in terms of format, but most of them will have a mix of financials, KPI dashboards, org charts, and discussion topics/memos. Meetings themselves will be a wide range – some will “flip through the slides on the wall and read status reports” (I hate those, personally), and some will be more issue- and discussion-oriented. Some will have management team members present observing and being part of the discussion for the whole meeting, some will have individuals from the team come in to make a presentation here and there and answer questions, and some will just be with the CEO and CFO. When the company is “at peace,” to borrow Ben Horowitz’s metaphor, meetings tend to be scheduled, shorter, and non-controversial. When the company is “at war” or going through a major acquisition or financing or sale process, meetings can be ad hoc, long and loud.
The best parts about serving on a board is the impact you can have by influencing the course of an organization’s future, the professional relationships you’ll forge, and the learnings you’ll take from the experience for your own career. Board seats are few and far between, and independent board seats even more rare, but I hope you have an opportunity to play that role at some point in your professional career if you so desire.
The remainder of these posts is designed to help you land a board role and to equip you with the knowledge of how a board functions and how to make the biggest impact. I cover topics like how to prepare to get your first board role, how to interview for a board role, and how to be a great board member. Mastering these topics will help you to make a big contribution immediately. I also dig into critical topics like governance, dealing with issues that are complex and nuanced, and giving tough feedback or advice to the CEO or other board members. These topics may never show up on the board you join, but if they do it’s important to be well-informed and prepared.
I believe that a board of directors can be the difference between a company stalling out in its growth or scaling up. A board of directors is a lot more than a governance mechanism–it can be a strategic advantage to CEOs and companies, and it can be incredibly rewarding to be a board member and help make a difference.
- Matt Blumberg, January 11, 2021
