Posted: July 02, 2013
Your board: Two views
It's a he-said, he-said situationBy Brad Feld
At TechStars, we talk often about “mentor whiplash” – the thing that happens when you get seemingly conflicting advice from multiple mentors. Talk to five mentors; get seven different opinions! This is normal, as there is no right or absolute answer in many cases, people have different perspectives and experiences, and they are responding to different inputs (based on their own context), even if the data they are presented with looks the same on the surface.
Yesterday, Steve Blank and I both put up articles on the WSJ Accelerators site. The question for the week was “When should you have a board of directors or a board of advisors?” My answer was Start Building Your Board Early. Steve’s was Don’t Give Away Your Board Seats. I just went back and read each of them. On the surface they seem to be opposite views. But upon reading them carefully, I think they are both right, and a great example of mentor whiplash.
For context, I have enormous respect for Steve and I learn a lot from him. We are on the UP Global board together but have never served on a for-profit board together. We both started out as entrepreneurs and have spent a lot of time participating in, learning about, and teaching how to create and scale startups. I’ve been on lots of boards – ranging from great to terrible; I expect Steve has as well. While we haven’t spent a lot of physical time together, all of our virtual time has been stimulating to me, even when we disagree (which is possibly unsettling but hopefully entertaining to those observing). And while we are both very busy in our separate universes, my sense is they overlap nicely and probably converge in some galaxy far far away.
So – when you read Steve’s article and hear “Steve says don’t add a board member until after you raise a VC round” and then read my article and conclude “Brad says add a board member before you raise a VC round” it’s easy to say “Wow – okay – that sort of – well – doesn’t really help – I guess I have to pick sides.” You can line up paragraphs and have an amusing “but Brad said, but Steve said” kind of thing. I considered making a Madlib out of this, but had too many other things to do this morning.
But if you go one level deeper, we are both saying, “Be careful who you add to your board.” I’m taking a positive view – assuming that you are doing this – and adding someone you trust and has a philosophy of helping support the entrepreneur. From my perspective:
“… Early stage board of directors should be focused on being an extension of the team, helping the entrepreneurs get out of the gate, and get the business up and running. Often, entrepreneurs don’t build a board until they are forced to by their VCs when they raise their first financing round. This is dumb, as you are missing the opportunity to add at least one person to the team who — as a board member — can help you navigate the early process of building your company and raising that first round. In some cases, this can be transformative.”
Steve takes the opposite view – concerned that anyone who wants to be on an early stage board is resume padding, potentially a control freak or the enemy of the founders.
“At the end of the day, your board is not your friend. You may like them and they might like you, but they have a fiduciary duty to the shareholders, not the founders. And they have a fiduciary responsibility to their own limited partners. That means the board is your boss, and they have an obligation to optimize results for the company. You may be the ex-employees one day if they think you’re holding the company back.”
Totally valid. And it reinforces the point we both are making, which Maynard Webb makes more clearly in his Accelerator post ‘Date’ Advisers, ‘Marry’ Board Members. When I reflect on my post, I didn’t state this very well. Anytime you add an outside board member, you should be reaching high and adding someone you think will really be helpful. You are not looking for a “boss” or someone who is going to hide behind their abstract fiduciary responsibilities to all shareholders (which they probably don’t actually understand) – you are looking for an early teammate who is going to help you win. Sure – there will be cases where they have to consider their fiduciary responsibilities, but their perspective should be that of helping support the entrepreneurs in whatever way the entrepreneurs need.
The power of a great entrepreneur is to collect a lot of data and make a decision based on their own point of view and conviction. You’ve got a lot of info – including some different perspectives from the WSJ Accelerators segment this week. That’s their goal – now I encourage you to read the articles carefully, think about what you want your board to be like, and take action on it.
Brad has been an early stage investor and entrepreneur for more than 20 years. Prior to co-founding the Boulder-based Foundry Group, he co-founded Mobius Venture Capital and Intensity Ventures, a company that helped launch and operate software companies. Brad is a nationally recognized speaker on the topics of venture capital investing and entrepreneurship and writes widely read and well respected blogs at www.feld.com and www.askthevc.com. He holds bachelor's and master's of science degrees from from MIT. Contact him at firstname.lastname@example.org