My friend Jim Gray was on an HPA panel recently and offered up some advice on how to interact with your board.
If you don’t know Jim, he was a trader who grew up in a trading family. He started OptionsExpress and sold it to Charles Schwab. That was part of the capital markets revolution that happened in Chicago back at the turn of the century. My partner Kenny and I see another revolution happening. The entire backbone of finance is going to get revolutionized similarly to how the capital markets were revolutionized. The guts and glue of that revolution is likely to be built in the Midwest.
The most important thing to your board members is their time. Never waste it. Offering up a snapshot of the business on one slide gives them a chance to see the strengths and weaknesses in the business. I blogged about how to run a productive board meeting here.
Board members aren’t a judge and jury. They are your partners.
Brad Feld recently wrote a post about board seats being “for sale”. I think this is the wrong way for entrepreneurs to frame putting together the board. Certainly, a lead investor is going to want to be on the board. But, hopefully at seed stages the investor will add more value than simply money.
At seed stage, a 3-5 person board is probably best. At Series A, a 5 person board is a good size.
As the company grows and evolves, the board of the company should reflect that. Board members change. Board members that were on the board at seed might not need to be there at Series B. Hopefully, the board member is self aware enough to take the CEO aside and tell them that it’s time for them to roll off and a new board member put on. The transition can be sticky because ego’s get involved.
When Kenny and I were figuring out the finer points of our fund, one thing we wanted to do was make sure entrepreneurs knew we were rolling off the board after Series A. Our role is seed and Series A. Hopefully, we will have developed a good relationship with the business so that we can still add value post Series B, but we don’t need a board seat to do it.