The purpose of the board meeting is to move the company forward
Venture Investor, VenRock Partner, Waterfall Evangelist
Start having board meetings as soon as you have taken in other people’s money.
Work done for BoD meetings should be productive work that benefits the company.
The true test of a healthy BoD comes when the management and the BoD disagree.
Lesson: BoD Management with Brian Ascher
Step #1 Purpose: The purpose of the board meeting is to move the company forward
I think it's really important to start having board meetings as soon as you've taken in other people's money. Because that should come with it a serious obligation to do right by your shareholders. And shareholders could be friends and family, it could be angel investors, but I think that's still other people's money that you want to hold yourself to a high standard of using carefully. And so that would be a good time to start to have maybe a three-person board, and that board profile may change overtime as you have institutional capital come in, but that's a good time when it's other people's money.
A related question would be if you don't have professional investors, should you have board meetings? I think as long as it's other people's money, you should, because somebody should look out for even your friends and family, your angel investors. I'd even go so far as to say if you can find the right people to be on your board, and you have a constructive, open-minded mindset, I think a board can be helpful to any company even if it's 95% controlled by the founder, a 100% controlled by the founder.
If that's the case they're going to be fully protected from being thrown out of there or you know ultimately they're going to have all the voting authority, but you're going to have a group of people around the table who wants to see you succeed. Ideally has a little bit of equity as a way to align interests, but I've even heard of individuals creating boards not in a formal sense the way a corporate board is, but folks thinking about their careers in terms of I'm going to have a board of Brian, a bunch of advisers with expertise in given areas or mentors organized in some way.
They typically don't have board meetings with everyone in the room, but I think it's just a healthy way to have other people provide input. In some respects, you can think of a board even investor board as people are paying me the CEO or the founder in terms of giving me dollars as part of an investment, in order to give me helpful advice. You don't have to take all the advice, but they're truly there to see the company succeed, and that is a gift.
People spend huge sums of moneys to get coaches, and experts to give them advice. And typically your board has invested money or is not requesting cash in order to give you advice. And so that's a gift if you approach it with the right attitude.
There are actually in multiple purposes for board meetings. And ultimately it should all come down to moving the company forward to achieve the goals of everybody else, all shareholders, all employees, all investors. And so while sometimes there's a lot of work that goes in in advance, and it comes at the expense of all the other work that the team has, it should be productive work. It shouldn't be busy work.
It shouldn't be well we do this for the board, but we don't actually look at all these metrics. Or our board is down in the weeds, and that's a big waste of time. You need to find the right level of reporting ideally in advance, so you're not wasting valuable board time. Ideally that reporting is consistent with what's really important to you, the management team, and so it’s one set of numbers the key success factors and key metrics. And then you’re bringing really meaty strategic topics to the board, and they're helping you think it through, advance the purpose of the company, overcome challenges, and then make introductions and help with recruiting and all the other good things that a highly functional board can do.
When management and the board are not aligned, that's where the true test of a healthy board is. Ideally you could break that tie through running experiments and let the market decide if it's a question about health of a business product or whether you need to go to a new customer segment. Giving a time frame to finding their criteria for success or failure, figuring out a way to run the test with minimal resources, that's the best way to solve a problem. If you don't have the luxury of time, then it's going to be force of argument perhaps looking back.
It could be that hey this company has had a product that has missed plan eight quarters in a row and you're running out of money and you just can't fund it anymore. Even in those situations I like to present the challenge back to the management team. Here's the deal, guys, we can't afford this product line, we are running out of money. If you can figure out another way to finance it, maybe you can get a strategic partner to invest, maybe you can find some non-dilutive capital, maybe you can cut another program somewhere else. Then that buys you the time to do it.
But sometimes it just comes down to a vote. There is no experiment to run, there is no way to cut somewhere else, and we're going to hit a wall. You just need to decide and it's going to come down to votes.
I've almost never in 15 years of being on boards encountered a truly divided vote where it was clearly all management on one side, all outside directors on another, and we were just at an impasse. Usually a thoughtful reasoned discussion comes out with a happy solution, if not unanimous agreement on the topic.