As a venture capitalist (or startup/expansion stage executive for that matter), there’s no escaping board meetings. We have to embrace them.
After all, they provide an opportunity to actively review a company’s performance, analyze business processes, and strategize for the future. But board meetings can also be frustratingly disorganized at times, too frequent (or infrequent, depending on the company), and a waste of everyone’s time if they’re not run properly.
That’s why I read Brad Feld’s recent post for Fast Company with great interest. Feld says that most of the 100 board meetings he attends each year are excruciatingly inefficient and painfully executed.
So, he suggests, it’s time for the traditional board meeting concept to be reinvented.
As I reflected on his post, one item from it suddenly jumped out at me. Brad attends 100 board meetings a year? Are you kidding me?
That’s unbelievable. Assuming four meetings per company per year, that works out to 25 companies that he’s invested in and currently covering. I cover five expansion stage businesses and have capacity for a couple more…but not 20 more.
And then I realized that Brad and I invest at different stages of a software company’s evolution. He invests in startup companies (including pre-revenue), while we at OpenView target software businesses no earlier than the expansion stage (minimum revenue run-rate of $2 million).
That’s the key distinction and it explains the differences in our approach. Board meeting protocol and frequency largely depends on the size, stage, and type of company.
Spread thin with startups
As we all know, investing at the startup phase means you’re betting on a portfolio of ideas, knowing that the majority of them will fail.
That, of course, means that investors need to spread their money and time across several companies and work as hard as possible to get them to the next stage. With that in mind, it’s no wonder that Feld has to cover that many companies and attend that many board meetings.
The common problem, however, is that startups often attempt to imitate the board meeting structure of much larger and more mature businesses. But as entrepreneur Steve Blank writes in a great post for Venture Beat, that’s a big mistake. Why? Blank provides several good reasons, all of which point to one common theme: Startups, expansion stage businesses, and major corporations have different goals, needs, issues, and capabilities, and their board meeting structure should reflect them.
Why reinvention requires context
While I agree with Brad that early stage board meetings need reinventing, that reinvention should reflect the stage of the company.
Startup companies don’t need formal board meetings. They need more frequent (and shorter) meetings that focus mostly on agile iterations of the idea, business, product, and market that their founders are trying to nail down.
For example, here are a few things that make startup boards unique:
- At the startup phase, quarterly cycles are way too long. Weekly or monthly cycles are key and do a much better job of addressing real-time problems. Even with my expansion stage companies, I schedule weekly calls with every CEO.
- Board members need to be hands-on mentors. The board should help a company’s founders invent the business in a highly agile manner. Board members need to be tuned in to the challenges of inventing a business and operate in a highly agile mode.
- The ideal startup board member is very different from more advanced businesses. A startup board member’s ideal profile is one with an entrepreneurial persona. On the other hand, the antithesis of that profile would be a senior executive of a large company.
Now, at the expansion stage the board’s role begins to transform.
During the transition from startup to expansion stage, a company moves from being a highly dynamic, ever-morphing business to one that is establishing itself as a scalable enterprise. That evolution, of course, requires the institution of management hierarchies, repeatable business processes, and associated business systems.
At the expansion stage, the role of the board also begins to formalize. Corporate governance needs to take shape, compensation plans need to be established, and longer-term strategic planning needs to be adopted. And as the role of the board evolves, the profile of the board’s director and the formality of meetings need to change with it.
Now, I’m not suggesting that expansion stage companies need to suddenly look to SAP’s board for best practices. It’s a maturity phase and the transition takes time. But the changes I described above illustrate why there’s no blanket approach to board meeting reinvention.
Company stage should dictate how these meetings evolve. And if that context isn’t taken into consideration, any changes that are made will do very little to make meetings more efficient and effective.