Being a VC from analyst level, you get to spend a lot of time observing on Board meetings before being able to be participate on one. And over time, as you attend more and more, you learn what works and what doesn’t, what the good CEOs do, as well as the bad ones; the good Chairperson and the bad ones, and the genuinely useful Board members and the tag-alongs. For an early stage company, time is of the essence and thus Board meetings can be a total waste of time – or time put to good use…
Lately, I’ve been working with a lot of earlier stage companies. Unlike working with later stage PE companies where the Board has a major compliance and control role, with earlier stage companies, the Board should really be helping - not checking. The Board, thus becomes more of a strategic sounding board and channel for introductions than a governance and control tool. What I have found in some of these earlier stage businesses I have worked with is that more time is spent questioning Management on the information they are reporting than on forward-looking initiatives and helping. As in, "the quality of the reporting has been weak" with a lack of detail and insight, which has meant Board members spending time squeezing information which should have been in the Board pack, piece by piece from the management.
An example I have seen: On the Sales progress slide: “5 new distributors approached, 1 on-boarded”. This sort of a bullet-on-a-slide just begs questions: “What happened the other 4?”, “Which geographies?” “What sales targets do they expect to hit?” etc.
The Board spends the next ten minutes competing to see who could ask the smartest and most insightful question – whilst ideally - if all this information is already on the page – a better conversation would be on the strategic insights gained and how to use them, or ideas on whom to go to next.
Having sat lately on numerous earlier stage (Angel) Boards, I firmly believe at this company stage, generalist board members are not a lot of use. A good board member at this level will be bringing one of the following three with them a) introductions to investors b) introductions on sales leads c) real industry specific strategic insight. If a management team reports well and negates the need for annoying, obvious questions, it becomes obvious quickly which of the board members are really bringing something useful to the table and which are just smart folks asking obvious questions.
I wrote before on how a good Board pack will reflect directly the normal KPIs of the business, a recap is here.
By John Rowland, Managing Partner