Creating a Successful Startup Board

Creating a Successful Startup Board

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A Startup Board of Directors or Advisory Board is very different than a board of directors for a public company or a mature company. We’re trying to get you to scale, we’re not worried about public stock prices yet.

I joined my first outside Board in 2003 as an Independent Board Member. My only previous Board experience was running the Board for my first startup company. It struck me at the time that there was a lot written about more mature or public boards, but little about Startup Boards. Brad Feld published a great resource in Startup Boards in 2013. Shouldn’t there be a course on how to be an effective Board Member? There wasn’t.

How to manage a Startup Board – this is for early-stage companies that will benefit from the outside feedback, cadence, and structure from putting a Board of Directors in place. Think of your board as your extended executive team, but without the executive level compensation. They bring experience, industry knowledge, and outside perspective that can help you overcome your blind spots and accelerate your growth.

Who Should be on your Startup Board? Mark Suster Post

My general perspective of the Board is:

  • Nose in – Fingers out. What I mean here is that you should expect the board to have their noses in your business, but your fingers out. They shouldn’t be micro-managing you or doing “skip meetings” with your staff that you haven’t approved in advance.
  • *Fiduciary Responsibility – though they generally represent a specific class of stock, their duty is to all shareholders – think smallest first
  • Adding value to you and the company. As well as hiring and firing the CEO
  • Committees – at this stage nearly everyone is on every committee, you may have a lead person who is responsible for pulling things together
    • Comp Committee – sets CEO comp. Reviews compensation recommendations provided by the CEO for the rest of the organization.
    • Audit Committee – reviews the financial audits and helps in the selection of the auditors. Not an urgent project until you have something to audit.

*I’m not a lawyer, I’m not representing you legally. Most often your lawyer will sit in on your board meeting for free. If not, consider a new lawyer. As long as you don’t have five hour board meetings or require them to travel. They have a business to manage as well.

Board Best Practices

The understanding:

  • Management will get documents out in advance
    • Standard format
    • Becomes a routine
  • The Board Members will be prepared in advance for the meeting
    • Reading the docs the night before on the plane is not adequate preparation
    • Public shaming will result if not prepared – it’s a waste of management resources and other board members time if we’re not prepared – seriously, it’s a waste of management’s time and other board members if people are “winging it”
  • Agreed by all parties

This best practice flips the traditional Board Meeting Model of a CEO reporting otu in a monlague on its head – designed for startups that have less formality and generally a big quarterly topic.

  • Quarterly Meetings – occasionally there is a reason to do more frequent meetings, e.g. a fundraising round or M&A activities. But, generally quarterly is the right cadence. Set them out a year in advance.
  • Data goes to Board Seven (7) days in advance
    • Folder with PDF and other files linked
      • Financials (IS, BS, Budget Forecast/Actual) PDF or Excel (not GSheets)
    • Board Narrative Google Doc
      • Links to all docs
    • Board Presentation Google Presentation
    • Board Agenda
      • Welcome – a few minutes
      • One big topic where the company needs help (e.g. pricing, recruiting, etc)
    • *Important List of Things we’re Not Doing NOW (ILOTWND)
      • Every month/quarter there are new (or recurring) and good items that need to be documented but won’t be addressed this quarter or next quarter. Document these to remind the board and management that we collectively agreed we were not going to address them at this time
      • This document stays in the document pack quarterly
    • Administrative items
      • Previous minutes
      • Upcoming meetings – confirm dates
    • In-Camera Session
      • Outside Board member consolidate feedback for CEO Google Docs – comments (not edit) only
    • Executive Session
      • CEO returns to the Board meeting room for executive session and feedback

Board Minutes

There is a big difference between Attorney official board meeting minutes and the practical board minutes you will keep at these meetings.

Attorney captured board minutes reflect “significant discussions were held”. At this point in the maturity of the company, it’s more important that you capture the discussion and the decisions that you made at the meeting. those decisions have expecations for the upcoming quarter(s).

Agenda/Minutes

Usually, you’ll write up your Agenda and dump out a list of topics that you want to discuss at the meeting. That’s a fine place to start, but you need to then go back through the document and prioritize the items into the top one or two thing that you really need help with this quarter.

Use the Agenda as your place to take notes and create the minutes. Do a quick “save as” and change the name to DRAFT Minutes. If you don’t feel like you can focus on the meeting and the minutes ask one of your team or a Board Member to take minutes.

If there is any ambiguity in the conversation or decision you need to drive toward clarity and capture the decsions in your minutes.

I think of minutes as a document that needs to out live the current board members. If all of us were gone and someone came back at a future date and asked the question “why did they make that decision” they would be able to understand. Given a lack of perfect information at any time. I know the lawyers won’t like this, but if you want to keep your job as a CEO it’s good to document.

I usually send the DRAFT Meeting Minutes out at the end of the meeting before the Board has left the parking lot. I ask if there are any changes or edits that day, while the meeting is still fresh. That way, when you approve the meetings at the next meeting they aren’t stale and you’re not trying to remember what you decided.

Some Practical Mechanics

Presentation – the document is in Google Slides. You can import the deck from PowerPoint or Keynote if you prefer to draft in one of those tools. The point of using GDocs is that you don’t have to ship around versions and that your board can comment within the docs realtime.

Some of your board members may have a challenge with migrating to this “new technology” of Google Docs… Yes, they will need a GMail account, or a personal domain hosted on GMail. It’s a small price to pay (free).

Your Narrative doc provides enough detail to prep your board on the main topics for your discussion. If it’s a sensitive topic that can’t be shared with the rest of the team – let’s say Cap Table or Options, you can share that doc exclusively with the Board Members in advance.

It’s going to take a few board meetings to settle into a routine.

*ILOTWND is a shoutout to T.A. McCann who I’ve been fortunate enough to have as my board member as well as serving on a board together.

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