What You’re Getting Wrong About Startup Boards

…Dedicated to the memory of the late David Ladd, my best and favorite board-member ever.

“Today is a great day. I am going to a startup board meeting”… said no one ever.

And yet if you are an investor or a founder, this is part of your life, and a key way you make an impact on companies you’re involved with. Let’s spend five minutes discussing what this means and how to do it properly.

This post is the first one in a series about startup board meetings,

The Basics — That Almost Everyone Gets Wrong

Whoever appointed you, your duty is the same. Your duty is to the well-being of the company, i.e. all the shareholders (and in some ways — all the stakeholders). That is THE LAW (in most cases — Delaware law). You have a Duty of Care and a Duty of Loyalty — to the company. Even if you are an “Interested Director” you are to apply the same judgement, care and logic as if you were not representing an interested party. The only exception is when the company is insolvent — in which case your allegiance switches to the company’s creditors.

Granted — as a thoughtful director, you should be able to state the position of the shareholders you represent. For instance if the matter at hand is a transaction that is beneficial to the company but as a VC you are not interested — you should express your judgement (“it’s a good deal”) but also the predicament (“but it’s not good for us, so the VC I represent may block it through its veto right if the board approves it”). But your loyalty, should this come to a vote — is to the Company.

Usually, this manifests itself in subtler ways — should the company seek a buyer or double down on risk-taking? Should the company acquire another struggling startup (that you happen to have an interest in?) Should the Founder-CEO be replaced with the ambitious CTO? Personally or as a shareholder you may have a preference. Your job, however, is to judge what’s best for the company — express, and vote, that judgement. That is the Duty of Loyalty.

Loyalty, Molly Edition — By Gary H.

Raising Companies Is About Caring

Come Prepared

Your job is to engage with the CEO and others regularly. You should come to the board meeting after you already know everything that will be discussed, and what is your position. A good CEO orchestrates this, but she / her can’t do it without you giving her your time and attention.

“The board is a play whose script was written beforehand” — Jacques Benkoski, USVP.

Engage Continuously

Resist the urge to micro-manage.

Feedback is good when provided the right way. The Board meeting is not a feedback session. You can literally have a feedback session after every board meeting — after the executives and other directors left the room, you can convey constructive feedback to the CEO. In fact — you should, whether it’s positive or negative. But not during the meeting.

Extend your duty of care beyond critique. Using your contacts and your influence to open doors and attract customers, talent, and funding to your companies is the primary way you can help.

Care — are you the kitten or the hound in this image?

Understand Your Impact

You have a bully pulpit — for better or worse.

Prepare to be Sued.

  • Make sure that the company has adequate Directors and Officers insurance coverage.
  • Get a lawyer in the room — a lawyer at the board meeting allows you to have Privileged Communications as part of the meeting. When things go to court, this may save you a lot of grief.
  • Most importantly — abide by your duties.
Lawsuit by ThinBoyFatter

Generally speaking, as a director you need to show you held up to your fiduciary duties — the Duty of Loyalty and the Duty of Care.

The Observer

You Will Be Remembered

No matter whether his numbers are exact or miss the mark by a few points, know this — everyone is watching, and your contribution, negative or positive, will be remembered. Just like an elected official, how you bear yourself and how seriously you take your duties has profound impact. Be remembered for your professionalism and good judgement.

this post summarizes my personal perspectives from 20 years of board meetings. Some concepts and ideas were influenced by a talk given by USVP Partner Jacques Benkoski at an INTRO CEO Club meeting and conversations with Maniv Mobility’s Prescott Watson.

The next post in the series will focus on the CEO’s role — how to manage your board rather than get micro-managed by it.

I am a serial entrepreneur, an advisor to CEOs, boards and investors. More about me at Vanguard Enterprises.

I help startup CEOs be 10% better. Founder / CEO of WorldMate (acquired by CWT), Desti (acquired by Nokia). Did time at a VC, and a startup studio. Opinionated.

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store