Three Things You Can Do That Will Change The Way You Run Your Board
At Renegade, we identify and invest in companies about to go through a critical inflection point - we’ve coined this phase the Supercritical stage. We think it’s a term that distinctly captures the challenges companies must meet during that stage and the importance of managing that stage with skill.
Our team helps companies to reach the growth stage and beyond, in an intentional and constructive way. We believe people are a startup’s biggest competitive advantage because they drive the business forward. That’s why we advise our portfolio on comprehensive organizational development, including everything from developing processes on how teams work together; hiring an effective executive team; designing a founder’s own role, and building a cap table for long-term success.
Additionally, establishing a strong board of directors is a crucial element to developing a breakout business.
In the Fall of 2021, we anonymously surveyed dozens of CEOs ranging from Series A to Series D, across multiple sectors, to pull insights on their experiences with their own boards. We wove together this data along with insights shared from our team’s own experiences (a combined 36+ years in venture and human capital in Silicon Valley’s top funds and startups), and now present to you the 3 key components that will change the way you assemble and run your board of directors forever.
1. Assembling the Board
Getting to know, building trust, and diligencing investors is more important than ever. The wrong investor can create huge costs to you and your business. You will work with your board members for the life of your company. Borrowing from another VC colleague, Renegade’s co-founder Roseanne Wincek often jokes that it’s much easier to get divorced in the state of California than to get someone off your board.
Second, the highest price is not always the best price. One CEO surveyed noted that it is best to bring on board members whose judgment you trust, rather than “bigger names (and potentially bigger checks).”
Another CEO surveyed advised it is best to actively continue to craft your board by hiring, and if necessary, firing board members over time. Members should be added around areas you're weak or want further support in.
Of those surveyed, board sizes ranged in size from 0 to 7 members with 3-4 board members being the most common size. Overall board size is highly variable, irrespective of stage.
As far as who should be attending board meetings, 40% of CEOs surveyed said they do not include their lawyer on their executive board. We at Renegade would note that, from a governance perspective, having your attorney attend every meeting; having an exec session, and having a closed investor session every board meeting are best practices to incorporate as soon as possible. We will also note that many of the comments from survey respondents encourage executives to attend all board meetings.
In addition to including legal counsel on your board, focusing on DEI efforts to bring on well-rounded insights from a variety of voices and experiences. Of those surveyed, 20% of respondents have zero female board members and 34% of respondents have zero BIPOC board members. Organizations such as Black Women on Boards; the Athena Alliance; and Him for Her may be helpful in ensuring you build a diverse board.
2. Setting Expectations
Once the board is established, setting the tone for what you expect is a crucial next step. A CEO surveyed said that best practice is to make specific and explicit asks of board members, “don't expect that they will automatically add value if you don't direct them.”
With all board members, it’s important to establish general norms. For example, all board members can be expected to have read the board materials in advance of the meeting, provided the CEO shares it at least 48 hours beforehand. Additionally, there can be norms around phones being off and no distractions, which is especially important for board meetings conducted over Zoom.
On an individual front, it’s instrumental that the CEO is very clear, both with themselves and with each board member on areas where they specifically want help. For example, a CEO may want one board member to help especially with go-to-market strategy, pricing, and customer introductions, whereas another board member may have been chosen because of their insights and experiences helping companies get to the next stage of growth. Being explicit will help engage board members at the right time, and can dramatically accelerate the company’s progress.
3. Running The Board Meetings
One CEO surveyed suggested a high level of transparency at board meetings. “This is the space for real conversation. It can be terrifying to reveal struggles and failure, but the sooner you start those difficult conversations, the better,” they said.
While ensuring the board has a baseline understanding of the state of the business is critical, board meetings are also a space for your board to problem solve with you. One CEO offered advice to focus on three key conversation topics per meeting. Another CEO surveyed shared that their best practice is to not “ask the board for open ended advice,” instead, “tell them your strategy and then ask for feedback on your stated strategy,” or to problem solve around specific challenges.
As you work with your board, one experienced CEO’s word of thumb is to “do a written pulse check with your board.” This action will “put them on the record for how they really feel" and ultimately hold them accountable as your relationship grows.
Ultimately, our research found that far too many CEOs report their boards’ impact to be neutral or only slightly accretive to their business. However, we found that being highly intentional about board composition, board expectations, and board operations goes a long way to driving board and organizational success.