Board meetings are a key part of the founder-investor relationship, and it is up to founders to … [+]
Venture investors and prolific angels sit on various boards, so attending board meetings is part of their daily life. For founders, their company’s board is often the first board they have ever been involved with. This makes it fertile territory for mistakes and misunderstandings.
Most founders, myself included, do not start with a clear idea on how to manage their relationships with their investors, what to include in an update and how to run a board meeting. Building a business is inevitably a learning journey, and unfortunately, we tend to learn best by making mistakes.
Nish Kukadia, co-founder of SecretSales, a flash sales company that was recently sold to The Lifestyle Retail Group, says “the best relationships I’ve had with investors are those where I’ve been comfortable asking and receiving hard questions, not being afraid to disagree, and then using the information to make my own informed decision about how to lead the organization. This balance took me a while to understand and there were many times – particularly at the early stages – where I was in respectful gratitude that these investors, who met with a vast array of businesses, chose to invest in our company.”
Nish Kukadia, co-founder of flash sales site, SecretSales
Board meetings are a key part of the founder-investor relationship, and it is up to founders to learn how to lead them to benefit the business.
Send out materials in advance
Kukadia advises to send out your core board pack and background reading in advance, and asking your investors to come prepared with views and questions. He adds “be demanding of them and call them out if they haven’t done their homework.”
What to include in your update
The preparation of investor information can become a living organism that grows and grows, eating up the young company’s time and energy. It is important for founders to keep their investors updated with relevant information, but not to aspire to the level of SEC filings of Fortune 500 companies.
There is a balance between keeping investors informed and doing unnecessary work. Oksana Stowe, Head of True Seed Fund, a London based venture fund investing in the retail and consumer sectors, says “the last thing you want to do as an investor is to take the founder away from the business.”
Kukadia advises sharing the following information:
- A CEO introduction that summarizes highs, lows, opportunities and challenges;
- A Financial summary – often centered around revenue, burn and runway;
- Marketing, Commercial, Operations and Technology summaries in an order most appropriate for your business;
- General matters, such as hires.
Stowe says that if the company is pre-revenue, it should report on costs, how much runway the company has and what it needs to reach the next milestone.
However, she says metrics are not the only thing to focus on. “I strongly encourage our founders not to get hung up on numbers because they only tell part of the story. It’s much more important to hear what’s happening in hiring, what the customer feedback is, and what’s happening with product development.”
Oksana Stowe, Head of True Seed Fund, an early stage venture investor
Stick to an agenda and do not take all day
A good board meeting is split into two sections: the review of the board pack and a discussion of key strategic points.
The best use of the collective intelligence of the board is a discussion of what moves the business forward, rather than a detailed review of the past. Kukadia suggests the following agenda:
- Review of last Board meeting’s minutes
- Board pack Q&A (30 minutes)
- Discussion of two to three strategic points (60 minutes)
- Any Other Business matters (15 minutes)
Some board meetings take longer than others, depending on their frequency and if there is an important new issue to discuss, such as an acquisition or a pivot. Boards that meet every month should stick to shorter discussions, while quarterly meetings might take longer. However, no startup board meeting should take more than three hours if everyone has done their homework.
Kukadia suggests including an informal interaction like lunch or drinks after the board meeting to cultivate the human relationship on top of the business one.
Reflect and adjust
Startups can change dramatically very quickly, and KPIs evolve with time. Stowe says “founders shouldn’t be afraid to change the KPIs.” For example, an app company might focus on engagement as its main focus when it is pre-revenue, then launch a freemium feature and thus revenue growth becomes the main KPI to track. As the company matures, it might move to subscription revenue, making recurring revenue the main KPI.
Kukadia says “by consistently explaining the drivers and KPIs in your core board pack, you will cultivate an understanding of the short- and long-term levers you can pull to affect outcomes, all of which builds confidence when you are off-plan.”
Stowe says that “it’s very important for investors to remember is that they are not there to police, but to be helpful.” Both Kukadia and Stowe agree that the best board meetings are a dialogue between the entrepreneur and the investor, where investors add value.
As in any long term relationship, constant harmony between investors and entrepreneurs is impossible. Board meetings are the milestones with which the relationship develops, grows, and hopefully enriches both the founders and the investors.