Embrace the power of the Board meeting

Apart from money in the bank, an expanded, more formal and regular (monthly) Board meeting is one of the differences to the way a startup operates after your first institutional round of funding.

At its simplest level, the Board meeting is a reporting exercise which gives investors the opportunity to check the health of the business – its finances, people and strategy. It requires preparation and the writing of reports and accounts which take time and can appear daunting at first.

However, the Board meeting – and the work required to make it an effective exercise – holds far greater value than just checking that the fundamentals are all in place, important as it is to do so.

Director or Observer (or both)

First, it’s worth pointing out that there are VCs who choose not to take up a formal seat on the Board of a company they’ve invested in. It relieves them of the responsibilities that come with a Directorship – the fiduciary duty to do right by all shareholders, ensure accounts are filed and ensure the governance of the business is fundamentally sound. The downside is not having a vote at the Board, although it is incredibly rare for decisions to have to go to a show of hands. 

We always exercise the right to take a Directorship precisely because the role comes with those responsibilities. It demonstrates to the entrepreneur and the market that we are fully committed and will formally play an active part in making their business a success. To Fred Wilson’s point, it shows in a tangible way that we care. In my experience, I also think that it make a significant emotional difference being a Director as opposed to just an Observer.   

We love Boards so much (!) that we take a Board seat and an observer seat. The CEO thus gets an additional member of the team who acts as an extra, experienced brain and sounding board.  The Observer gets additional Board exposure thus increasing their own experience.

Diving for pearls

For the entrepreneur, the Board meeting is a chance once a month to get out of the weeds & to dive deep into the specific problems, challenges or opportunities they want to discuss in depth. Business as usual metrics and finances are always covered, but beyond that, and often where the most valuable conversations take place, the kinds of topics that are most common for deep dives are:

  • Hiring plans and compensation (cash and equity) for both executives and NEDs / Chairs
  • Fund-raising preparation – as a VC we know what the current “market” rates are for funding which is of great use to CEOs (i.e. with your projected metrics in X months, how much can you raise and what valuation)
  • Major strategic decisions around product and market over the coming quarters
  • Marketing strategy reviews
  • Technology and product roadmap updates
  • Internationalisation / new market strategies

We encourage CEOs to bring in senior team members to present to the Board – I like to meet more members of the team in this way and I’m sure it makes those presenting feel like they are even more important to the success of the company.

Almost all of these deep dives at the stage at which we invest (Seed) will always be referenced against what a leading Series A investor would want to see when they are approached for funding by the company. We are constantly asking ourselves and helping the CEO understand what the company should ideally look like by the time they need to raise their Series A. With unlimited time (i.e. unlimited cash) these are hard questions to answer in a competitive market.  With limited cash and thus time, these are extremely hard to answer / prioritise. And that is why a formal Board with experienced Board members can be especially useful.

On the same wavelength

Beyond well put together materials distributed in a timely fashion, there’s more the CEO can do to prepare for and influence the actual decision-making process of the Board. It’s about preparing the external Director(s) in the weeks beforehand, putting in some calls to align thinking in advance. An entrepreneur can orchestrate Board members in this way so that when they all sit down they are coming to those important decisions already warmed up. Then, with everyone informed, there is a better chance of a high quality and efficient discussion and ultimately a decision that fits the entrepreneur’s objectives. 

Equally, you should expect Board members to prepare themselves ahead of the Board meeting, reading the materials carefully, getting clarification when required and referring back to the previous Board’s minutes and their own meeting notes to check nothing important is slipping.  

During the Board, ensure there is a clear agenda with time allocation set against each item.  Key metrics that drive the performance of the business should be covered first, then deep dive and then admin matters that could equally well be covered in a call if time runs out.  There is little more annoying than getting stuck on a boring but debatable admin matter that eats into precious time.  Equally, people can get dragged deep into a metrics discussion during the key metrics session and the Chairperson must work hard to keep the conversation moving on.  The easiest way to do that is to suggest the CEO and that Board member discuss the particular point off-line.

It’s worth it

So while some entrepreneurs might initially feel that the half-day of preparation and meeting that a Board meeting typically consumes as an administrative overhead they could do without, they usually come to appreciate this regular opportunity to get out of the weeds and have some expert input into higher-level thinking about the business. 

In fact, I recently suggested reducing the frequency of Board meetings to every other month for a business that’s now quite mature and the Founder pushed back, explaining that writing the accompanying report (for herself and the direct reports who contribute to it) was a hugely valuable exercise in itself. 

Of course, she could have written the reports anyway, but it wouldn’t have been the same. The purpose and imperative would have changed – and this was coming from someone who writes lengthy reports requiring a lot of work. 

Even Founders who are, at first, not fussed about Board meetings and see them as a hindrance tend to come round when they begin to encounter the problems and decisions that the Board can deal with really effectively.

Done properly, Board meetings give a powerful cadence to the way an early stage business grows and meets the challenges it will inevitably face.

Beyond the Board

Meetings between Director and CEO between Boards are important too. Not just when “something’s up” but perhaps as importantly when nothing is up.  This is because the relationship between a Director and CEO is an emotional one as well as a practical/legal one. In a Board the atmosphere is a formal one in which both Director and CEO will behave in a certain way. I set up CEO breakfasts every Thursday with my CEOs (one on one, so I’ll see each CEO every month) so we can just catch up with no agenda.  What usually happens is that we chat non-work stuff for 15 minutes which is a wonderful way to get to know each other much better and then for 45 minutes get into a topic of particular interest for the CEO (or me). Part of the fun of doing my job is getting to know amazing entrepreneurs personally.  This is a really easy & effective way of doing this.

We also run multiple additional touchpoints with our entrepreneurs – from Go To Market and Talent workshops run by Siobhan and Anouk, to CEO and CTO dinners every few months.  We also run a full day workshop with the full executive team and full Episode 1 team around 9 months before we feel a Series A is likely for that portfolio company.  The purpose of the workshop is to develop a clear viewpoint around exactly what the business needs to do to raise a great Series A and exactly what risks we can collectively mitigate and how.  Just like a Board meeting deep dive, but longer and with 100% of Episode 1 experience brought to bear.

We enjoy spending as much time as we can with our portfolio and know that it is really important to do so outside of the Board in both relaxed (the dinners) and more formal (the workshops) settings.  We are investing in people, not metrics. The latter you get at the Board, the former less so. The more conversations we have together, the greater the opportunity to get to know the individuals and the businesses and to help guide them to great heights.

adrian
Adrian Lloyd
Partner
Half Swiss. China obsession at Oxford. Tech obsession at Stanford GSB. Strategy consulting to Venture Capital. Tennis, skiing, Cresta riding. 4 young children, a boxer. Fabulous artist wife, Print-maker.

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