Untold Secrets of Startup Boards

Practical FAQs for CEOs and founders of startups, on how to better manage their board and organize their board meetings

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Over the last 20 years, I had the privilege of leading teams ranging from a few people to many thousands, in multiple industries (SaaS, Publishing, Advertising, …), in B2C and B2B markets, and on 2 continents (US and EU). I also had the opportunity of serving on a number of boards, including the boards of the companies I was leading. I made many mistakes, and learnt a few things about boards along the way.

Boards and board meetings are an important element in the life of companies, in particular VC funded startups given the dependency these companies have on frequent injections of outside capital. There is surprisingly little content covering the topic of Boards, as if somehow this was something CEOs should all know intuitively. It is not.

So if questions like What is the role of the board? What are the needs of my board members? What are the signs that my board is not working well? How do I manage my credibility with my board? What NOT to expect from a board meeting? are relevant for you, then this post is worth your time.

This is only the point of view of one founder/CEO, and as such it may not be aligned with how others think about boards. I would love nothing more than a robust debate on this topic. Do not hesitate to comment.

What is the role of the board?

The role of the board is to Advise and Consent. These 2 words are straight from the US constitution (Article II) as a description of the respective roles of the US President and the US Senate.

He shall have Power, by and with the Advice and Consent of the Senate, to make Treaties, provided two thirds of the Senators present concur; and he shall nominate, and by and with the Advice and Consent of the Senate, shall appoint Ambassadors, other public Ministers and Consuls, Judges of the supreme Court, and all…… 

Hopefully the comparison with the US Senate stops here.

Advise: the board’s role is to advise the CEO and the leadership team of the company:

• Advising means that it is important to truly hear the opinions and suggestions of your board. They are smart people, they usually have exposure to lots of relevant companies and best practices; their interests are aligned with yours most of the time, they truly win only if your company succeeds.

• Advising does not mean the CEO should do simply what the board suggests, even when most/all board members agree. First because the larger the board, the more you will hear diverging opinions (that is a good thing). Second because if you follow the advice of the board and things do not work out, you will still have to own the decision. You should only follow a suggestion from the board if you are convinced it is the right thing to do.

Consent: the board has an approval right on important decisions, for example:

• Budget

• Financing Decisions (Equity or Debt)

• large investments or long term commitments

• M&A transactions

• All decisions impacting the capitalization table of the company including the grant of options

Who runs the board?

The CEO runs the board. In more mature companies or in specific circumstances, there can be a Chairman of the Board, separate from the CEO, but that is not typical and seldom desirable in a Startup especially at early stage.

This means that the CEO is in charge of setting the agenda (with potential input from board members) and running the meeting.

The board is there to help and support the company. In a sense, the board should work for you (the CEO, the company) more than you work for them. This means that as CEO, it is your job to ask for specific things from your board members, hold them accountable for coming prepared to board meetings, and for following through on the things they commit to doing to help the company.

What are the needs of your board members?

The best way to have effective board meetings is to understand the needs of your board members. They are probably all different but there are a few safe bets.

• Minimize work for your board members: Your board members (VCs in particular) may sit on many boards, sometimes too many. They may not spend a lot of time thinking about your company between board meetings. You need to make it easy for them to follow the story, the progress, and the setbacks, from board to board, and the goals of today’s meeting: minimize the amount of work they must do.

  Start your board with a quick recap of previous episodes (1 slide – always the same format)

  • Remind them of what was discussed and decided at the last board

  • Remind them of what you committed to at the last board and what progress has been accomplished against that.

  • Remind them of what they committed to at the last board and give an update to the entire board on how they have delivered on their commitment.

• Clearly state what your objectives as CEO are for today’s board meeting (“I want us to talk about the strategic directions for product in 2022 to collect your feedback as we iterate on this plan” “The meeting will be a success if we come out with a clear decision on whether we should invest in ….”). The objective of a board meeting should never be to simply report on metrics and progress.

• Enforce strict consistency in metrics reporting from board to board

  • As soon as possible agree with your board on a smallest set of metrics that is sufficient to fully track the progress of the company (less is more!) and do not change that framework more than once a year.

  • At every board prepare a separate section of the deck (standard metrics package) that always provides the same metrics, presented in the same structure and order, and with the same graphical representation.

• Help board members help you: the job / the responsibility of your board members is to help guide the company. They do their job primarily by advising you. They need to see that you are genuinely listening to their advice. This does not mean that you are going to do what they say, it means that they need to see you are truly considering their input and, when you decide against what they recommend, you follow-up by explaining your decision. They should never have the impression that you forgot to investigate it because you did not care or forgot.

What are the signs that your board is not functioning well?

The reality is that your board meetings and the functioning of your board will oscillate. At times not productive, at times super helpful. There are things you should watch for as a sign that you need to work on the dynamics of the board:

• The board is getting more and more involved in the execution and the day-to-day issues (always ends poorly)

• You and / or your team come out of board meetings not just exhausted, but also demotivated. You should strive to have more and more boards that are actually motivating for your team

• You only achieve a small percentage of your goals for the board meeting or cannot get through a large part of the agenda

• Most of the material you prepare is prepared solely for the board

• your board members are passive and not engaged

• You hate going to board meetings

As CEO, if you see signs that your board is not working well, it is your direct responsibility to attack the problem, hopefully with your board’s help.

Think about the following scenario:

you just come out of a tough board meeting where your board has been beating you and your team on the head about progress or performance on a specific topic. You are doing a debrief of the board meeting with your senior leadership team. There are 2 ways to look at this situation:

• If you and your team actually feel that the board has a valid point, the issue is real and action is needed to solve the problem, then that was a productive board even though it was tough. The board has helped you and your team accelerate towards a solution to a real problem

• If you and your team feel that the board simply does not understand the issue or that their suggestions make no sense, then it was an unproductive board. But action is needed nonetheless, this time from you, the CEO, to get the board to the appropriate level understanding of the challenges and realistic solutions

What NOT to expect from a board meeting?

You should not expect board meetings to be the moment where you have the deepest and most important discussions with your board members. The board is more the place where these discussions are concluded and where big decisions are finalized but a lot of the key discussions must have happened before the board meeting in 1:1 discussions between the CEO and each board member.

Your role as CEO is to gather input and, when possible, build a consensus with board members in advance of the actual board meeting so that the meeting is successful. This is also how you build your awareness of the point of view and the potential objections of each board member on a given topic in advance of discussing it at the full board.

The board meeting is usually not the moment where you will get the most direct, unfiltered feedback from your board members. It is a high stakes meeting where everyone is careful about what they say and, as such, much less suited to frank and open discussions than a 1:1 interaction.

Who should attend board meetings?

As with any meeting, the effectiveness is inversely proportional to the number of attendees:

• Company: The CEO (and other co-founders for as long as it makes sense). The CFO as soon as there is one. As the company matures and more people in the leadership team have the seniority to attend board meetings, other senior leaders will be invited to (portions of) the meeting.

• Board members and observers: All appointed directors have a right to attend. Investors may request to have an observer, but it is key to keep the numbers of observers under control especially at early stage.

At first, early in the life of the company, most if not all the presentation will be done by the CEO (and other co-founders) and the CFO when there is one. As the company matures, it is good for the CEO to leave space for their senior leaders and at times take a back seat during the meeting:

• If you have hired the right leaders, they should be able to shine in front of the board without you providing air-cover.

• If you have more time to observe and listen, you will be able to see more, understand more about the dynamics of your board, and your involvement in the discussion will be more effective and less emotional.

At some point, you will split the meetings into open sessions where members of your leadership team are invited, and closed sessions where only the members of the board (CEO included) will be present.

How frequent should board meetings be?

Ideally boards should be used to support a cadence / a rhythm in the company. The best way to do that is to align board meetings with key milestones in the strategic planning cycle of your company. In a typical year, things could look like (illustrative only!)

• February board to review and debrief on the prior year’s performance.

• April Board Focus on Strategic Product Topics

• June Board Focus on Strategic People Topics

• September board: Strategic 3-year plan (qualitative, no budget) review and feedback

• November board: budget & 3-year projections (based on Strategic 3-year plan) review and approval.

Having a clear idea of that cadence, and communicating it to your entire team allows important work inside the company to be organized and anticipated a long time in advance. These milestones allow you to mobilize resources and ensure delivery of key components of your strategic planning.

Based on this, 5 to 6 boards a year is probably a good number to start with.

What material should you prepare for a board?

Board meetings are about 3 things:

1. The company reporting on its progress since the previous board,

2. The company asking the board to approve something (a budget, a new equity plan, an M&A transaction, ….),

3. Discussing a strategic business topic (Market, Growth, Product Strategy, Long term vision…).

All 3 topics require preparing materials in advance for the board to review, which can take different forms. In an ideal world, 90% of the content you prepare for your board should come from things you already create inside the company to manage the business. If most of the content you prepare for the board needs to be created from scratch, something is not working.

Decks of slides are often well suited to topics in categories 1 and 2 as there is a fair amount of quantitative information to present in the form of charts or tables, for which slides work well.

For category 3, where it is more about painting a vision to drive an important decision, and where your goal is to foster a robust discussion, the “Amazon style 6-page memo” format is often ideal. Board members should read it in advance so that the meeting can be used productively to discuss, instead of passively listening to someone going over a long set of slides. It also means that the memo is truly self-standing.

What is the optimal allocation of time at a board meeting?

Your goal should always be to minimize the amount of time spent on reporting and maximize the amount of time spent discussing strategic topics. (Unfortunately, that is the opposite of what happens at many boards).

Reporting on progress to the board (which is more about execution), while necessary, is not what is going to help the company the most. Discussing and deciding on strategic topics is the area where you board can be the most helpful. Besides, listening to reporting is a passive exercise for your board members, whereas a strategic discussion leading to a decision is a way to have truly engaged board members which is better for everyone.

Guidelines to build your agenda (You are the timekeeper)

• 10%-20% for approvals and administrative matters (may start at less but will grow over time)

• 30% for reporting/calibration and discussions around performance of the business vs. plan and prior year (will often be slides). If you are requesting help from the board on a specific operational topic, you should mention it there but have the discussion outside of the board meeting

• 50%-60% for strategic discussion topics. (If you use the Amazon style memo format, this time is really to be used for discussion and decision, as all board members are supposed to have read the memo in advance)

You should structure the agenda and manage time during the meeting to align with these targets as much as possible. Explicitly separating these 3 sections in the agenda of your board is a good first step.

How early in advance should board materials be sent?

It is in your interest to send the materials one full week ahead of the board meeting:

• It does not take more work to send materials early in advance, it just means shifting when you do the work. It is only hard the first time. It can be tempting to wait to have the latest data but in the grand scheme of things it is not worth the wait.

• It gives a chance to your board members to really absorb the material you have prepared and increases the chance of having a productive meeting.

• It also means you can hold your board members accountable for coming to the board fully prepared because they have no excuse.

How to effectively manage time during a board meeting?

The 2 most precious currencies you spend at board meetings are credibility (more on this later) and time. There is always too much to discuss at a board meeting and nothing creates more frustration for board members, you and your team than when an important discussion cannot get to conclusion because there is no time left. You can act on this in 3 ways:

1. Ruthless prioritization of the agenda: Limit the number of strategic topics to 1 or 2 per board. If the board finishes early everyone will feel better for it. The implication is that in a given year you can have at most 10 or 12 important discussions with your board. Use these slots wisely.

2. Limit the length of the material you prepare: The Amazon style memo is limited to 6 pages and, as it relates to a board, should be read in advance ideally. For slide decks, cut as much as you can to focus on the most important points and assume that each slide will take more time that you think because of questions and discussions. The meeting is a success only if it is truly interactive so questions and discussions should be welcome.

3. Train yourself and your team to make short answers when answering questions from the board: Any question has a 60 second answer. If the person asking the question needs more details, they will ask a follow-up question. “Yes” and “No” are perfectly good answers. “I do not have the answer and I will get back to you on this” is also a really good answer. Lengthy explanations are a recipe for disaster. You should only invite someone from your team to join a board meeting if you are confident they can adhere to that discipline.

What is the benefit of appointing board committees?

Board Committees are a subset of the board focused on specific issues (Compensation Committee, Audit Committee, M&A Committee…). The goal of having committees is to simplify the life of the CEO as the board delegates authority to the committee to make or prepare decisions so less people are involved.

Most boards, when companies reach a later stage, have several committees to facilitate the work of the board. You may not feel you need them at first but, they can actually make your life easier. For instance, instead of discussing the compensation package for a senior direct report you are hiring with your entire board, the board delegates this authority to a subset of its members (the Compensation Committee) and you only need to talk to them to get approval to make an offer. You gain time and you have less people to convince.

How do you manage your political capital / credibility with your board?

Whether you like it or not, a board is always, to some extent, a political exercise. If you have raised tens or hundreds of millions from investors, the stakes are high and there is a lot riding on you, the CEO of the company.

As the CEO, you may have just raised a fresh round of funding, new investors are joining your board, and your credibility at that point is high because you have just passed this material fundraising milestone: you start with a meaningful amount of political capital and the more political capital you have the more you are able to convince your board when you need to. Sometimes you have to expend political capital, but you can also gain more. It all depends on your actions.

There are things that tend to erode your political capital and you should be aware of them so you can navigate that dynamic. Typical examples in no particular order:

• Over Promise, Under Deliver: Hyper ambitious plans which you have no chance of achieving and from which you start drifting after a few weeks. Then every board becomes a painful exercise where most of the time is spent explaining a gap with a plan that means nothing

• Lack of transparency: Hiding or minimizing bad news or failed initiatives.

• No command of the numbers: You (and more importantly your CFO) need to fully master the numbers you are presenting and there should never be any doubt in the mind of your board that things are “under control.”

• Lack of Delivery / Predictability: Projects are always late, milestones are always missed, roadmaps are always scrapped. Misses are ok, taking risks is necessary, but if misses become the norm, that is bad for the board and worse for the culture of the company.

• Inefficient use of Capital: It is ok to spend a lot of money, but only if that produces a level of growth that makes sense, especially if this is going to happen for a long period of time.

• No sense of Urgency: Startups are all about speed. They operate in highly dynamic markets where competition can change from one quarter to the next. If you act as if you have years ahead of you to achieve the goals you had set for the company, it will worry any board because they have seen too many times how quickly markets can turn. Having a lot of money in the bank is not a reason to go slower, it is an imperative to go faster.

Conversely, there are things that increase your political capital, and you should strive to make them happen more and more.

• Efficient Growth: if you are growing fast (relative to scale and industry), and especially if that growth is capital-efficient, you have a lot of political capital. Efficient growth cures so many issues (internal and external), guarantees that you are creating value for your shareholders and employees, and that subsequent funding rounds will be much easier. The one thing efficient growth does not guarantee is a great Culture. But that is for another post.

• Under Promise, Over Deliver: Much better to have that reputation than the opposite. This is also much better for the internal culture of your company

• Predictability: Most of the time you do what you say, you say what you do, and you are dependable. It does not mean every initiative is a success (if that is the case you are not taking enough risks), it means that you know how to fail fast. Also, the expected level of predictability varies with the stage of the company: being less predictable at early stage is normal, within reason.

• Transparency, both about successes and failures. Bad news should always travel faster than good news, both inside the company and with the board

• Sense of Urgency: Ideally, the board should feel that nobody around the table is more impatient about the pace of progress than you are.

What is the connection between the Culture of the company and the functioning of the board?

My favorite definition of Culture is derived from Ben Horowitz’s book on Culture What you do is who you are. In essence, the idea is that

Culture is best expressed through the actions of employees and managers when there’s little supervision.

Boards play an important role in the life of startups, and can impact their Culture. That role can be positive, but in certain situations detrimental to the success of the company. As CEO, you are accountable for how well your board functions, but also for how you manage internal communication around the topic of the board and board meetings, which can be impactful for your company’s Culture.

A few ways to think about the issue

• Providing the right level of Transparency

  • Everyone in your company knows when board meetings are happening. If you do not talk about them, people will wonder what you are hiding. A simple way to create a culture of trust is to present a relevant selection of unedited board materials at the next townhall following the board

  • Transparency cannot be absolute because there will be board discussions that are not meant to be shared with the entire team. And you team can understand these limits as long as you are transparent about them

• Being clear about the role of the board

  • For most employees in your company, the board is a mysterious (and sometimes scary) entity whose role is unclear at best

  • It is in you interest as CEO to clarify what the role of the board is, and what it is not. You can share the Advise and Consent framework to reinforce the idea that as CEO you run the company, that the board is here to help but not to operate the company. And you cannot do that just once. If your company is growing fast most people are new and have not heard you talk about this. Consider also including it in your onboarding sessions with new employees

  • The signals you send when talking about board discussions inside the company are important: you can never give the impression that you are doing something only because the board is asking you to do it. It immediately undermines you as CEO

• Aligning the functioning of the board with the Culture of the company

  • If there are unique aspects that define the Culture of your company, your board should be aware of them

  • Conversely, if the way the board functions is completely misaligned with the Culture of your company, at some point this will have a negative impact

  • There is a limit to what you can achieve on this front but being aware of the risks is already a great first step