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  • Writer's pictureYannick Oswald

Boards, your '6th player'.

Updated: Mar 1, 2023

In my last post on consistency, I mentioned that I like setting board meetings quarterly (with monthly or bi-quarterly updates). I claimed that ‘without this pulse, startups won't survive…’ The trend of the boom times of 2020-22 with VCs not taking board seats in competitive, often late-stage, deals was paradoxical… Yes, it was certainly easier for many to just write/get a check than to run board meetings. I believe that several recent big ‘blow-ups’ in 'startup land' could have been avoided had there been better board oversight.

I recently talked to one of the investors of one of the largest and most controversial recent startup bankruptcies. While struggling to understand why this could happen, he still had no insights into what had actually happened. It seems that the business and product were phenomenal, but several decisions - taken for whatever reason by management - not only deviated the focus and put the company at risk, but ultimately made it go bust. There were just no checks and balances.

When people ask how I feel about the current market, I often reply that I am glad that things are in the process of returning to normal. Taking on capital from a venture investor is a process that should take time, for both sides. First, investors need the time to get to know the business and do their due diligence. Much trust is involved when VCs invest in startups, especially at the early stages. You can never really know everything. There is no trusted CFO yet, no audited financials. Second, companies need to do the work to understand a firm’s investment strategy and (past) behavior. It is also crucial to get to know the individual partner that is involved with your company and will sit on your board. Sometimes this takes one or two months, sometimes up to a year, until both sides are ready to work together.

Joining a new board and taking on a new board member should be something everyone is proud of… and wants to do. Besides the ‘checks and balances’ a board brings to a company, here are some thoughts on how founders should work with their board and leverage it.

Boards, a startup’s sixth player.

I like to refer to boards as a startup's 'sixth player', especially the first investors to join it. In Basketball, the sixth player is a player who is not a starter but comes off the bench more often than other reserves. He is a player who can play multiple positions, hence his utility in substituting often. Having a great sixth player means a team has excellent depth. All the best teams had a great sixth player (Toni Kukoc ftw!). The best startups have a working board.

A trusted person to work with: I often describe my working relationship with founders as a ‘WhatsApp relationship’. You can call me anytime, nomatter the topic. If I do my job well, founders trust me and share the good and bad news. Founders must understand that an investor’s success is her/his success. Only then can I be a truly great board member who can ‘read’ situations well and jump in when relevant.

As a sixth player, board members should be able to play multiple positions. Board members should be helping founders think big, set the strategy, raise capital, hire executives, and the list goes on. When taking on a new investor, I advise founders to strike a balance between board experience, operational insights, network, and motivation.

Boards work for companies.

Boards work for companies – not the other way around. This is the foundation of every great board. CEOs should think of the board as another team, with additional brains to pick from. They have their leadership team (their direct reports) and their board. And a great CEO will work to build the board into a functional team, just like they do with their leadership team.

I am often the first investor to join the ‘board’ of a company. Soon a second one joins after the next round, and so on. A great board of private companies usually has 4 to 7 board members (sometimes one outsider or independent board member) with several observers supporting the members. As companies become more mature, governance issues become more significant. They are always important, of course. But the balance of board energy early on is less on governance and more on the startup phase. Whereas later, there is more emphasis on governance. In the early days, the focus is more on helping the company get to the point where the business is working and can scale.

Taking someone else’s money always comes with responsibilities. This is true for everything in life. A board is always required to provide oversight on the company's financial statements or audit, the company's compensation plans, and the ongoing maintenance of the board. That is why certain matters need to be approved by the board — you can’t sell the company, contract debt, do an acquisition, transfer or increase the number of shares, define your own compensation as CEO, etc., without the formal approval of the board. Hence the formal aspect of it. As such when a board gets big enough to justify them, it makes sense to create committees of the board to deal with these specific responsibilities (compensation, audit, governance, etc.). A lot of the logistical work boards must do can be done in committees and simply be reported to and ratified by the board. This leaves more time in board meetings for the meaty strategic conversations where boards can add the most value.

So far so good… How can great boards be so useful to founders?

As mentioned in my last post, regular board meetings bring consistency to a business. After you ensure that your company and teams have an operating system, board meetings create the same ‘drum’ for your C-level, but also the CEO. If done well, you align C-level reporting with the timing of your board meetings. Your management team will hustle to hit their deliverables and goals for board meetings accordingly. Boards are an almost free outside forcing function for the CEO. Ensure everyone attending board meetings has quarterly goals to hit that are tracked at each meeting. They’ll hustle in slightly different ways than otherwise. And the CEO can learn a lot by watching how they rise to this challenge. It is also a great way for investors to be more included, and to learn about your team. You invest so much time into recruitment... this is a great way to showcase what has been built.

Second, it is an opportunity for the CEO to take a step back and think about ‘what’s going on’. Many of my CEOs block 1-3 days in their calendars to go through this board preparation process. Before meetings, catch up with all board members individually to get feedback on what they were thinking, what they are excited about, what they are concerned about, things they want to discuss, etc.

Third, board meetings are an excellent way to motivate your management team. Done right, they will really enjoy board meetings. Having them in the meetings makes everyone feel included in the journey at a senior level. You may not always think of board meetings as a priority. But your heads of product, engineering, sales, marketing, success, etc. … genuinely appreciate being included, to have ‘skin in the game’ at a management level. It will make them feel heard, not just by you as CEO, but also by key outside stakeholders.

Fourth, VCs that attend regular board meetings are much more proactive. They are more likely to re-invest, make intros for the next round, etc. Remember this: There is no obligation for VCs to write another check for a company (even if we never failed to do a least one), e.g. if you need a bridge round. But, great communication is a way to hack this. All but the smallest VC firms (or angels) hold 'reserves' for several follow-in investments into their portfolio companies. These reserves are used to double down on their winners, but also to give a little more runway to the companies doing OK or pretty well, but not great (yet). This is one of the important advantages of having strong investors on board early on (important note: if you can get a VC at pre-seed or seed, always take them over side gig investors!). Keeping your investors in the loop helps you to get this optionality.

Fifth, it helps you comply with your investor information obligation. If things become difficult, investors can’t say they didn’t hear about something, or were unaware, if you presented it clearly to them in a board meeting. Therefore, always be honest and transparent. This is a real benefit in difficult times. It becomes a 'shared responsibility'... This is also why it is key to have good board members, not just 'yes men' who do not really have a clue or care...

Last, but not least… you should get useful feedback. Boards should be a sounding board for you. Some board members are more proactive than others. But everyone can bring something to the table in certain situations; board meetings help you to get to know your investors.

How to prepare for board meetings.

A board’s job is to make sure things are going in the right direction, and when they are not, to step in and make changes in an attempt to get things back on track. A good board can provide immense value to a CEO and his/her company. Like all organizations, boards need leadership. Early on it comes from a CEO; later on, it usually comes from a board member who steps up, or the chair when one member officially takes on the role.

As mentioned before, CEOs should catch up with all board members individually. This makes the preparation much more efficient. Then I would send out a short agenda. In general, this is what I would put in the deck: CEO commentary/big picture, performance data (usually some nice dashboards), business plan (actual vs. budget), growth (sales and marketing, etc.), recruitment update, key events update, critical discussion topics, miscellaneous matters (legal, comp, other), and housekeeping (approve minutes of last board, etc.).

To sum it up: If done right, boards can be a big leverage for your startup’s success in the long run...

Last month, we organized two founders dinners, one in Milan and one in Brussels. I was blown away by the talent of these groups. Italy and Belgium illustrate well why I am so bullish on Europe. Much to be done still, but it is happening - we are just getting started...

Life is awesome,



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