I am coming up on four years in venture. That is nearly sixteen quarters, and across them I have sat through somewhere between 75 and 100 board meetings.
I was new to venture but not new to working with leadership teams, and much of what I saw in those early meetings bewildered me. They had the polish of a Hollywood production and the ritual of corporate kabuki, often in the same hour. I use “kabuki” here as a literary metaphor for how presentation and ritual can heighten some realities and soften others, even when everyone around the table is acting in good faith.
Since then I have dealt with HR issues, IP disputes, financings, governance problems, government shutdowns, up rounds and down rounds. That experience has given me a sense of what separates a good board meeting from a bad one.
I am by no means an expert. I have never sat on a public company board, though some of the boards I serve on are headed that way. This post is for the new venture investor I once was. Watch the kabuki closely, and then work to fix it.
“The report card comes later”
You will not know whether a board meeting was good or subpar until one or two quarters later. In the moment you are shown a window-dressed version of the past overlaid on a rosy version of the future. There is nothing wrong with that, and anyone who has worked in corporate finance knows it is the entire job. What matters is that you know, with eyes wide open, what you are observing.
“This meeting could have been an email”
In a well-run board meeting the materials go out at least a day ahead, and ideally three. Board members have other obligations, and context switching is costly. Give them time to sit with the material, even if a few exhibits are still being adjusted up to the last minute.
No new fact should surface for the first time at a board meeting. That holds for missed revenue and a delayed schedule, and it holds for a newly signed customer as well.
Once the facts have traveled ahead of the meeting, the meeting itself has to be for something else. Pay attention to the board meeting that could have been an email. A meeting built around reporting may leave you feeling secure in the moment, but such meetings kill companies. I am being only somewhat dramatic.
“Only the paranoid survive”
Andrew Grove, 1996
The best board meetings I have attended open with the bad news, stated early and stated loudly. It is not buried on slide 27 of a 30-slide deck. The directors already know the headline, and the meeting is where it gets the time it deserves. I welcome good news, and I welcome bad news more.
A good board meeting also makes room for worries, the real ones and the imagined ones alike. If revenue was missed, that belongs on the agenda. If the CEO fears a competitor is about to poach the company’s best engineers, that belongs there too.
A board is, at its best, a sounding board. Tell me what keeps you up at night. I would rather spend an afternoon on a worry that turns out to be imagined than on a victory lap for something already accomplished.
“Contentious board meetings are a gift”
A good board meeting is often contentious. Here again you will not know it in the moment, but months later you may trace a breakthrough to a conversation that was uncomfortable when it happened.
The contention can sit between management and the board, when the CEO wants to do something the directors will not support. It can sit inside the management team, when one executive does not believe another will deliver on time. It can even sit inside the board, when an early-stage director votes for a proposal that hurts the later-stage money.
I relish these conversations. As long as everyone at the table is a rational economic actor who wants the company to grow, they are a gift. Company building is rarely linear, and these dislocations are where the group works out the path forward. Concessions will be made, and those concessions are the seed of growth.
If all you did was eat a steak dinner and sit through a presentation the next morning before flying home, you missed an opportunity.
“Read the room”
Look around the room and note who is present and who is absent. If the CTO was not invited and the CMO was, that tells you something about where the company’s attention sits. Study the other investors as well. Know who came in early and is sitting on a 200x markup, and who came in late and still needs a win.
None of this is in the deck, and it takes time to learn. No slide will tell you that an early investor shared a dorm room with the founder thirty years ago. You might think that should not matter among rational economic actors. It does. When a hard question comes, that investor will give his old roommate the benefit of every doubt, and no spreadsheet will have predicted it. The cap table tells you what each person owns, but not whom each person owes. We are rational economic actors, and we are also social primates who stay close to our own people. Learn both, and very little that happens in the room will surprise you.
“Know why you are there”
When all is going well, this question never comes up. There will be times, though, when you have to remind yourself why you are in the room and whom you represent, and a great deal of friction can be avoided if you know the answer with full clarity. Are you there for the company whose board you sit on, or for the fund that sent you? A third possibility is admitted less often, which is that you are there for your own reputation. None of this matters while everything is up and to the right, because everyone is winning. It starts to matter when the waters get choppy.
Everyone will have their own answer. Mine is that I serve the company and its mission first. After that, and in deference to it, I represent my fund as a fiduciary of the capital we deployed. My own standing comes last, so far down the list that it barely registers. That ranking is easy to recite and hard to keep. It is tested when a company runs into serious trouble, because that is when a board seat begins to cost its holder something in reputation and in hours. Some investors step back at that point. I think it is when a director is needed most, and I try to behave accordingly.
“Go and see”
Genchi genbutsu, a principle of the Toyota Production System
The most instructive part of a board trip often happens outside the boardroom. Reserve two hours to walk the factory floor and talk to an engineer, someone well removed from the C-suite. Ask how they feel about their project and about the company’s prospects, and ask about their lives as well. Those two hours may teach you more than four in the conference room.
“Shake things up”
Every now and then there is a board meeting with nothing wrong in it. The metrics were beaten, the cash runway is long, and life is good. Savor it, because it means you had a good board meeting 90 to 180 days ago.
Then use a trick I learned from the late Owen Van Natta. At the end of one such meeting he said, “Everything looks fine. So tell me, what’s it going to take for you to go out there and wipe the competition off the floor with your technology?”
He was talking about disrupting multi-billion dollar companies. None of us at the time, myself included, had dared to dream so audaciously, and we sat in stunned silence for a few minutes. Then the responses began to trickle out. They ranged from hiring very specific people to calling the sitting President, and from slowing one project while running another at full throttle to raising a pre-emptive round. That one question energized the room and did more in minutes than a year of board meetings and strategy sessions would have done.
Be the director who asks it.
Remember that even after our best efforts, a board meeting remains corporate kabuki. Our job is to make it useful, and ultimately to help the company grow. You will find out whether you managed it one or two quarters from now.