Every company, by law, must have a board of directors and be in place from the onset. The board handles business concerns like stock option plans, issuing stock, and securing loans. Some entrepreneurs only appoint themselves to the board, but I think startups stand to gain much knowledge from a diverse board of experienced directors.
Frequency of Contact
When I lead startups, our board meetings occur about once a month. Once a quarter, we conduct a formal, in-person session where members must travel to the location. The other eight meetings are phone calls. With today’s technology, I strongly advise using web technology so that people can see each other and review the materials.
During the early days, I send a regular weekly email that talks about what happened in the previous week. I think it is important to share the highlights as well as the lowlights. This provides a balance of sharing what is going well and what is not. Moreover, board members should never be surprised.
I believe they should be able to name:
- Significant customer pursuits
- Recent notable victories and losses and why
- Key problems with the team, if any
- Current major initiatives
My experience is that it is vital to keep repeating those topics. I have charts that I go over with the board that list our major initiatives. Since the visuals remain similar month to month, I highlight the sections that change, typically making the updated information blue. I want to clearly indicate what changed. Anything in blue is new material.
We schedule the board meetings a calendar year at a time, setting up the upcoming year in Q4. Situations change, and the times need rearranging because other things pop up that prevent board members from attending. From the company’s side, customer initiatives or conferences may necessitate rescheduling. We try to anticipate as much as we can, but it is not possible to predict everything. I believe the directors appreciate having a tentative schedule.
I also like to have a preliminary agenda for the next six months of special topics for a given meeting. For example, items might include discussing metrics, fundraising, or the status of a new initiative. Each one cannot be addressed at every meeting, so I have a special topics list. I invite members to review any new items they would like to add to the list with me.
Monthly board meetings frequently last one to two hours, whereas the in-person meetings can run as long as five hours. However, each one follows roughly the same agenda.
- Access to Rank-and-File Team Members
- Consent Agenda
- CEO Overview
- Sales Overview
- Finacial Overview
- Special Topics
- VP Department Reports
- Executive Session
Access to Rank-and-File Team Members
At the beginning of the meeting, I provide access to some of the rank-and-file members of the organization. Not only do the CEO and VPs attend every board meeting, but some employees do as well.
For the drone company, Insitu, we had walkabouts. Since the meetings were in locations close to the company’s facilities, it was easy for members to visit the sites. We chose five to eight employees, and each set up their area for a two-to-three-minute presentation. The board members then had about two minutes to ask questions. Even though we had to move around the location, we conducted the walkabouts in less than an hour.
We selected a broad range of individuals like technicians, software programmers, medical designers, and assemblers. The team members talked about something they were working on or invented. I found this was a great way for board members to meet the people. Incidentally, our employees were great at doing this because they were accustomed to the process. When Generals and key customers visited, we used a similar approach, so the presenters were not nervous.
It was also useful for building rapport with customers. When we won our first large contract, we conducted a walkabout to kick off the project. One of the key contract officials returned to the conference room after 30 minutes. I asked if everything was okay. And she said, “Yeah, I love it. I don’t know the technology, so that’s not important to me. But because your team is so transparent, it makes me feel like this is going to be a great partnership. And, I’m glad my technical members have the opportunity to walk around with you. Now, I’m going to use this time to get organized for this next meeting.”
At Seeq, we use something called Quick Highlights. Because we are a virtual company with no offices, we have many online meetings where people connect in. When we conduct the quarterly in-person meetings, sometimes people connect remotely, but they often attend in person. During the Quick Highlights, team members have about five minutes each to describe something they are working on or their background.
The senior team generally has a day or two of business meetings before the board meeting. As a virtual team, it is an opportunity for the officers and executives to get together. If we are all flying to meet, we think adding a day or two to the trip provides us a chance to get together. We also invite employees to sit in on these meetings.
This practice involves the routine business portion of the meeting. The items and approvals from the previous agenda became part of the minutes. This section approves those minutes and officially ratifies them when they are accepted.
Any needed motions are also addressed. We supply this information to the board members in advance so that we can move through this section quickly. Most of the time, those items include business operations like option grants or previously discussed approvals. Like many organizations, we list the topics and ask if anyone wants to pull one for further discussion. Most of the time, we take it up in the executive session. These topics may relate to personnel matters and are not appropriate for the general meeting.
This essential portion of the meeting is where I cover some of the highlights from the previous month. Occasionally, I steal the thunder of other groups, which is my prerogative! But usually, I include wins and losses, issues we are facing as well as the plan and any adjustments.
At this point, we discuss the finances of the organization. Sales presents the numbers from the previous month, the forecast for the upcoming months, and identifies risks and challenges. They may also discuss potential new customers.
The CFO reports the organization’s financial performance, along with an overview of how the company is tracking year-to-date.
Next, we address the assigned special topics that require a discussion or decision involving the board. We supply any analyses to support the issues, including background information, as many days in advance as possible.
VP Department Reports
Ideally, each VP reports on their department, but I have a general agreement with the officers that we keep to the schedule. If the meeting runs over due to a lengthy discussion or questions, then some reports may be deferred until the next meeting. I know that board members appreciate this.
The final item on the agenda is a private session for the board members. They sometimes invite additional people if necessary. During these sessions, topics that are not appropriate for the officers and employees are reviewed. In my experience, these only occur about 50% of the time, but they are always on the agenda.
I have a few observations for making board meetings inclusive, effective, and worthwhile.
Sometimes, investors are only entitled to an observer seat instead of a full board seat. My philosophy is that to the maximum extent possible ensure that the observers are decoupled enough from the competition such that they can participate in everything. I know some leaders have difficulties and must conduct a separate session, but I prefer to arrange it so that observers can attend all parts of the meeting. When possible, treat them like a board member in every way except counting their votes. Typically, they participate in the conversation and we know what their vote is, but it is not officially recorded.
We strive to make the meetings interactive. Members invest a significant amount of time to be on a board, traveling and spending their money if we do not pay for it. It is a substantial commitment on their part. Hence, they prefer not to attend meetings where they will be lectured. They are happy to be in touch with the business and want to feel like they are adding value.
Board members who are actively involved are more likely to be there when the organization needs them. A critical task is to find a way to leverage them. I stress to my officers that these meetings are not report outs. Instead, we listen very carefully to what the members have to say. We interact with them and create dialogue, drawing them out when possible. We try not to be defensive so that conversations happen. We provide short answers, try to understand their comments entirely, and ponder their input. We actively write down what they say and compliment them for their advice. We may not completely comprehend everything at the time, but we keep it for the future.
I have had several experiences where the extra bonding with boards has paid off in situations where a startup was having a challenging time due to budget issues. Because the board had been kept apprised all along the way, they bonded with the company and felt they were a part of it.
I have experienced times where board members gave me substantial encouragement. “Don’t worry. We’ll help you make payroll. It’s not a problem.” Even though I did not always use what they offered, it was great that they were there to support me. This made getting through the tough times easier.
One time, a board member and investor knew I was very stressed about covering payroll because we were working with slow-paying customers. He told me that he was traveling but had a signed blank check in the top drawer of his desk. He told me that if we ever had a problem to call his assistant, tell her the amount to make payroll, and she would make it happen. He said that we would work out the details of the arrangement later, whether it be a loan or preferred stock, and not to worry about it. I did not have to use it, but because we had such a close working relationship, this opportunity was available.
I have had board members go on customer calls when it was critical. Since they have such a good understanding of our situation, it makes it easy for them to participate. Board members are also involved in financing when bringing in new people. They need to feel comfortable defending your corporate agenda and projects.
Building a strong rapport with your board of directions from the early days of a startup provides significant opportunities. It vastly improves your chances of receiving excellent advice, continuity of board members, and the support you need when times are tough.