July 27, 2016

Ideal Startup Board Meetings

One of the most painful experiences of being an advisor to startups is suffering through the monthly Board of Advisors meeting.  Most startup CEOs have no experience with board meetings, and if they do, they learned how to do them from someone else who had no idea how to do them right.

The whole concept of a Board of Advisors meeting is formal two-way communication among top level team members (the startup management and the advisors), for the purpose of moving the startup forward according to the Plan.  This includes decision making, and strategic discussions.
Startups make many mistakes when having board meetings.  Here are the top 3 mistakes startups make with Board of Advisor meetings:

1.  Not having board meetings.
2.  Canceling, postponing, rescheduling due to an imagined crisis or shiny object du jour.
3.  Lack of preparation.

When the rare startup has finally overcome mistakes 1 and 2, they almost never deal with mistake number 3.  So let's deal with it now.  What does proper preparation look like?

Getting back to the purpose of the meeting: two-way communication. Management (CEO) responsibility is to communicate to the advisors the current state of the startup.  This is done in the form of reports on the various key aspects of the business.  These may include, in no particular order:
  a. Financial (Profit and Loss Statement, Balance Sheet, Source and Use of Funds, etc),
  b. Sales (various sales reports including source of the sale, by salesperson, by customer, new vs. repeat, by product, competitive losses, etc),
  c. Personnel (new hires by job function, salary, terminations, quits and reasons, etc.),
  d. Legal (status of lawsuits, patent and copyright, privacy, stock options, etc),
  e. Technology (status of programming projects showing priorities, challenges, deadlines, etc)
  f. Key Ratios (performance indicators such as sales vs. target, average age of receivables, headcount vs. target, and many others that are specific to the type of business)
  g. Executive Summary (state of the company and issues to be addressed, decisions to be made, etc)
  h.  etc, etc, etc...

But so much more important than sharing information on recent performance, which is essentially looking in the rear view mirror, the management team should be looking forward and discussing strategic plans. This is the area where the outside advisors are of the most help. Management should choose, let's say, no more than 3 very important plans, and list them in advance in the board info packet.

Much could be said about each item on the list, but for now let's just address the format of how this information is communicated.  Most startups are surprisingly Old School, and use paper as the form of reports that are distributed at the meeting.  This is a huge mistake.

The most effective way to get the best from your Board of Advisors is to distribute these reports well in advance of the meetings (at least 2 days, preferably more) so that your advisors will have plenty of time to review them before the meeting, to ask for clarification or more information, and to have the time to think clearly and do research, etc.  The worst thing you can do is to surprise advisors with reports in the meeting itself and waste everyone's time by going line-by-line through all the reports.  I can not stress strongly enough how unproductive this is.

The best solution I have heard for effective reporting is this post by Brad Feld.  Highly recommended.

After the board meeting it is essential to close the loop with follow up notes on Action Items (Who does What, by When) and suggestions for improvement for future meetings.

For more on effective board meetings, read Brad Feld's new book "Startup Boards: Getting the most out of your board of directors".

Mark Suster, VC and entrepreneur, did a good job of defining how board meetings should be run to stay in control. Read it Here.