A 101 on Founder-Board Relationships

By Susan Lyne, BBG Ventures

Over the years I’ve served on six public boards and more than a dozen private boards that have provided varying levels of value to the company they served. What I’ve learned is that the key to board success or failure lies primarily with you, the founder or CEO. How you set expectations, whether you maintain ownership of the board discussion, how and when you deliver tough news, and how you keep board members informed between meetings will determine the level of partnership — and value — you get from the relationship. This is guidance we share with BBG Ventures’ portfolio companies, but I’m hoping that more founders — especially first-time founders — will find it valuable:

Board Formation

There’s no hard and fast rule about how many board members a seed stage company should have, but 3 is a good place to start.

• For a seed company, that may be the founder/CEO; lead investor; and co-founder or independent.
• For a Series A company, there may be two investors and the founder; but you can also negotiate for the seed investor to move to a board observer role so that the common holders continue to control the board.

Independent board members at this stage are often trusted founders who’ve scaled their own company, but could also be someone with sector expertise, platform experience or a valuable network. If your team is homogeneous — gender, race, background, POV — this is also an opportunity to add a diverse voice. The key is that it is someone you trust will be honest with you; someone you can learn from; NOT someone who will blindly defend you or vote with you.

It’s tempting to say yes to every investor who wants a board observer seat (we’ve been that investor and made the case for observer status). But too many voices will change the dynamics of the meeting, so be judicious.

Board Planning and Prep

When you are forming the board, ask your board members what they expect to review at every meeting. Make sure you have consensus on KPIs at the outset. These may change over time, but the board will expect to see consistent quarter/quarter metrics until you tee up a shift or pivot.

Send a pre-read with a weekend to review it. Let board members know that you will assume they’ve digested it before they come, so that the update portion of the meeting can be covered in the first 30 minutes. The downside of not sending materials far enough in advance is that the board meeting becomes a readout — a waste of your time and ours. We appreciate a format that enables board members to drop in questions or comments, but that’s your call. The pre-read should include:

• progress against goals since last quarter, including KPIs, product updates, launches, key hires, etc.
• an org chart that shows current team and planned hires
• spend against budget
• burn rate and runway.
• what you want to accomplish at the meeting

If there is anything surprising or concerning (e.g. a co-founder leaving; a big miss on revenue; a delay in the launch) call board members individually in advance. It will go down better one-on-one, and you can put it in context.

That said, don’t avoid difficult conversations in the meeting. Ignoring something material doesn’t mean it won’t be discussed; it just means that it will be covered in the exec session, when you’re not present — not a good outcome.

Board Meetings

Keep the format consistent from meeting to meeting. This will save you time prepping the deck; and it will make it easier for board members to assess progress.

Start every deck with a slide on what you will need to show by your next raise. This is a good forcing function to keep you focused on the must-do over the nice-to-do, and it will also prompt board members to weigh in with any market shifts they’re seeing.

Follow that with progress against goals this quarter. Every meeting should start with what you said you’d accomplish; how you did against those goals; and what that means for next quarter and the year. Include a quick review of the KPIs you included in the pre-read, with a focus on best and worst; and what you learned.

The meat of the meeting should be a strategic discussion. This could be one topic, but no more than two. It could be a discussion of your ICP, how you’re currently qualifying pipeline and whether you should consider a change. Or it might be a broader discussion about GTM and what really constitutes product-market fit. Or a deep dive into user data and what it’s telling you about your roadmap. You have the attention of several people with experience and a rooting interest in your success, so take advantage of it. If you have questions that your board can’t answer, ask them for referrals to people who have the expertise you need.

Post-Meeting

Best practice is to send a follow up email within a couple of days with a summary of what you discussed, decisions made, and a reminder to board members about anything they committed to do on your behalf. This should not be long — a couple of paragraphs is plenty. But it will serve you well over time as a record of your board interactions.

Three months is a long time in startup land, so send your investors a monthly update on progress. Tracking and reporting KPIs monthly means fewer surprises, and it will also make quarterly board prep easier. These updates can be structured in such a way that the body of the email can be shared with investors you meet who ask to stay in touch, or investors who could lead a next round. Financials and KPIs can be an attachment for current investors only.

Never hesitate to call board members between meetings if there is something you need help with, or something you want to discuss. But remember that this is your company. You don’t need permission to make operating decisions or make changes in the ordinary course of business.

One last note:

Your goal at board meetings should not be to make the board happy. Your responsibility is to keep us informed about anything that could impact our investment, and to listen to our input. Don’t show best case numbers unless it’s in the context of base case, upside and downside; and caveat projections with potential risks. We are grownups and we know that company-building is full of challenges. Build credibility with board members by being honest and forthcoming — what HBR once called the “virtuous cycle of respect, candor and trust” — and you’ll get the best from us.