In this episode, Christopher Mirabile, Executive Chair of Launchpad Venture Group, explores the pivotal role of boards in startup companies and discusses how boards can be both a critical support system as well as a driver of success.
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Big Ideas/Thoughts/Quotes
“Life is too short to suffer with the wrong people in your boardroom.”
Startup Boards are different, but still vitally important
“Boards have featured prominently in my entire professional life.”
“When I was a consultant with the strategy group at Pricewaterhouse, ultimately our work was commissioned by boards and delivered to boards, and those board presentations when I was lucky enough to be in the room as a young person on the team were some of the most high-pressure situations that I ever was in professionally and left a real impression on me.”
“When I got into the startup world, I sort of had to unlearn a certain amount of what I’d learned about boards and moved to the end of the spectrum where boards provide as much mentoring and business value as they do governance.”
“Startup boards tend to be a little smaller, a little bit more nimble and often the membrane between shareholders and directors is much thinner because you often see meaningful representation direct from the shareholder base on the board.”
“When you run into resistance from a founder [about a board], it's often really more of an educational journey than a negotiating journey to try to get them to understand the value of a board.”
Why is a board important for a startup?
Your investors want it and you're not going to be able to raise money without it and why would you reinvent the wheel when you can have people who made those mistakes before and can help you avoid wasted time and wasted resources.
“A big part of what [we] do is help CEOs understand that …if you go into a relationship with your board, it's sort of like an intellectual partnership where you bring the courage to admit you don't have all the answers and you really seek to draw the wisdom out…”
…If you show me a CEO that's failing, I'll show you a board that's failing to support that CEO properly …
Attitude of Startup board members
“I don't want to be anywhere near the blast radius of a startup that fails, so I want to make sure that this company is going to succeed…”
Feedback to CEO after a Board Executive Session
A great way to give feedback after an executive session is: "Hey, let's just do a little case study here. In the meeting, you said this, here's what they heard..." and then it's not an in-your-face criticism, it's just helping them understand how they're being perceived and how their choice of words and their manner of speaking and their style affects the impact of their communications…I think that can be a very effective non-confrontational way to give quick feedback to a CEO.
The Independent Member of a Startup Board
“What we're looking for is two things. One is the avoidance of some negatives and the other is certain positives. I'll start with the avoidance of the negatives.
We don't want an inexperienced blowhard who has a lot of ego involved in telling people what to do and insisting that their advice be followed, and someone who contributes to a board meeting in a manner which sucks all the oxygen out of the room and makes it super awkward to disagree with them.
We're looking for someone who has a little bit of experience, understands boards are a working thing and that startups are an imperfect science and they're not going to be a disruptive or difficult board member. That's the kind of the key negatives that we're looking to avoid.
In terms of the positives, really, we want someone who understands the industry dynamics, understands the players, knows who the company and the CEO should be talking to, and has that bigger perspective, who can put the day-to-day operational challenges of the company into a broader industry context, and then ultimately make introductions when it's time to find additional investors or exit the company.
So, all we need is a well-behaved genius. It's easy.”
Training Board Members
“Launchpad now has at least 50 portfolio companies and 40 Launchpad members are either in the boardroom as a director or an observer. That's a pretty large portfolio of board members and observers that the group is adding as human value to the companies.”
Our training consists of three things.
· One is expectation setting and accountability,
· The second is we tend to give the newer investors in our group an opportunity to serve as an observer under an experienced board member for at least a year so they get a little bit of a sense of what it’s about.
· The third piece is really traditional training and that consists of training we do before they serve on the board and then ongoing training after they've begun. The training we do before is basically making them read the director's guidebook that Ham and I wrote, which really covers all of the basics, and we go to great pains to say, "No, we really mean it when we say we want you to read this. Don't come to the class if you haven't read it because we'll know."
· Then we do a class where we give them an opportunity to discuss questions and things that weren't clear from the book and we take them through a whole layer of sort of pragmatic suggestions on how to get that first meeting successful and how to run a good board
Overboarding
“It's really an issue in the VC world … I think a lot of people draw some measure of professional pride out of being on a board and they can tend to get a little carried away and take on too many board assignments.”
“In our experience doing a startup board well, even in a year where it goes pretty well, it's about a 200-hour-a-year commitment.”
“We do go out of our way to keep them [people with too many board seats] off the board, and one of the reasons we really prefer to lead rounds is because we want to have a hand in building the board and making sure that we're giving our CEO all the resources she or he needs to succeed and putting the right people around our management team.”
Responsibilities of Boards have expanded dramatically
“The basics sort of used to constitute most of what a board did, and now a board has so many other jobs, it's really overwhelming a number of things that we expect boards to do and I think that it not only takes away from some of the time that could be spent on the basics, but it creates a ‘whack a mole’ kind of a mindset in terms of directors.”
Links
linkedin.com/in/christophermirabile
Bio
Christopher Mirabile is the Chair Emeritus of the Angel Capital Association and the immediate past Chair of the U.S. Securities And Exchange Commission’s Investor Advisory Committee. He is also the Executive Chair of Launchpad Venture Group, a Boston-based venture investment group focused on seed and early-stage investments in technology-oriented companies. Launchpad is top-three ranked group in the U.S. As a full-time angel investor and an active member of the Boston-area angel investing community, in addition to his Launchpad work, Christopher has personally invested in over 65 start-up companies. He was named one of the "Top Angel Investors in New England" by Xconomy, one of "Boston's Most Helpful Investors" in an entrepreneur survey by Companyon Ventures and is the recipient of the Angel Capital Association's Hans Severiens Award for his contribution to the advancement of angel investing. Christopher has co-authored six books on early stage investing, been a columnist on entrepreneurship for Inc. Magazine, is a co-founder of portfolio management tool www.seraf-investor.com and co-author of the Seraf Compass, a comprehensive web catalog of educational materials about early stage investing, an adjunct lecturer in the MBA program at Babson's Olin School of Business, a regular advisor and mentor to start-ups, and a frequent panelist and speaker. He is a member of the Board of Directors or Board of Advisors of numerous start-up companies and non-profits. Christopher has served as a public company CFO and General Counsel with enterprise software provider IONA Technologies PLC, a corporate and securities lawyer with Testa Hurwitz & Thibeault and as a management consultant with Price Waterhouse's Strategic Consulting Group.
