Highlights from the seminar on
Building Your Startup Board
with Lisa Calhoun, Tim Crow, Connie Mixon and Theia Smith
- CEO of MyCelx Technologies Corporation in Duluth, GA
- Joined MyCelx board in 2002. It was a private company.
- MyCelx IPO in 2011 on the AIM exchange of the London Stock Exchange
- Upgraded board based on public regs
- Also serves on large industry board
- CHRO for The Home Depot (former)
- Sourced board members
- Experienced at board nominating and governance committee
- Joined public company board, Milacron
- Active on 4 startup boards
- Chair of the Make-A-Wish Georgia board
- Board of Trustees for a college in Pennsylvania
- Developed a board to help her lead the first city-funded business incubator for women entrepreneurs
- Leads practice for PWC called innovative inclusion around helping boards.
- General Partner at Valor Ventures
- Startup board experience including Vital4, SmartCommerce, MyAgData, Physician360
- Nonprofit board experience including Woodruff Arts Center, C5 Georgia
- Forms 5-6 boards a year as an investor/VC
Is running a board an innate skill that some founders are just really good at, or is it a learned behavior?
- TIM CROW: For most of us, it’s a learned behavior. What you learn is highly dependent on how you think about, you’re going to use your board. The board certainly is a fiduciary to shareholders and investors. That’s one of their primary roles, but, I find that founders who think of their board as a critical part of their management structure, seem to get more out of the board. The question I’d ask, are you checking the box because your bylaws say you have to have a board. You put together, some people call it a board and you have meetings once a quarter and don’t really do much in between, or are you surrounding yourself with people who can bring real value to your point, diversity, gender and ethnicity, diversity of experience, diversity of geography, can all add to strengthen, your board and provide you with some real advantage.
- CONNIE: It was definitely a muscle that I had to build. One that I continue to build look through the lens of, starting again, coming, starting as a founder, and then really having to understand how to not only navigate just this incredible bandwidth and horsepower, if you will, that I had by way of these board members, but also really being able to understand and define what were my asks of them and being able to really think about them as being there to truly help. I love what Tim said to really think about them as a part of that management structure. Once I was able to do that was a bit of my aha moment.
Recognizing that they weren’t simply there to critique and look at every single thing I was doing and come to these board meetings from the perspective offering, just feedback on my leadership of the initiative, but it was really about how can we help you. Once I had that mindset shift to think about them as truly being there as this army of problem solvers with me, that for me, made it a much easier journey. That is a skill that certainly took time for me to recognize and strengthen and build upon.
- LISA: As a board director on a number of startup boards, I have a fiduciary duty to the shareholders, but that fiduciary duty is mediated through the operating docs. When I started rthe discipline of reading the operating docs and understanding exactly what they said about the company and how it should operate, I learned a lot more about some of the parameters that the governance side of my board role would need to facilitate and bring up. That sounds really technical, right? And it’s not technical, but it’s a discipline and it’s actually not hard to do. I, I think, the founder in me thought of operating docs as, ‘Oh, yeah, that’s just the paperwork, we filed it,’ but the investor in me says, ‘Nope, this is the engine of the business.’
Another aha moment for me is that the board is there to help. I didn’t always realize that was the case. I thought it was maybe more pure oversight. It is governance, but it’s also to help shareholder value. Each director has a real duty to make sure you, as the CEO and founder are moving as fast as possible in the right direction for the company. When I really embraced that, it made me more vulnerable and made me share more deeply about challenges. And I continue to embrace that.
What is one thing a founder should focus on as they build their startup board?
- THEIA: Knowing the individual strengths of your board members, and really being able to take the time to really get to understand what those individual strengths are and where they can truly help support you and where those needs, where your needs align with those strengths, is certainly something that also, again, just feels like a muscle that you consistently are strengthening, right? And then also being able to your point there, Lisa, about being intentionally vulnerable, once you realize, and once you really are in a space of understanding that board is really there to help support you is knowing when to pull that lever and ask for that help specifically of those board members.
I think about forming a board myself, there were very specific, super powers if you will, of my board members. I knew who to go to for what. So whether it was something specific to understanding, a technology or innovation space, I knew who to direct that conversation to as well as, conversations on other topics and interests areas of the entrepreneurs were supporting, but just really having that understanding so that I was able to target specifically where those strengths were.
- TIM: It’s like building your team. The most important thing you can do is invest an appropriate amount versus say a significant amount of time in picking your board members. I mean, I, I, I fall into situations where you look at the people sitting around the table and a couple of them just don’t fit and they just don’t add value. They actually destroy value. It’s like, how did they get on the board? And, somebody said, they’d be good. Suddenly, without any process, they’re on the board and I’d say, mistakes are hard to undo, and they can be life threatening certainly to a career. You’ve got to take an appropriate amount of time to define the right people. Don’t just look for nice directors who like you, and they’re not going to push back on you. The life threatening part is you fall into the abyss and you didn’t know it was there.The most important thing about a board is constructive discussion and it was Ray Dalio that said,’ effective board members are radically transparent.’ They’re not afraid to explore uncomfortable subjects. I mean, again, take your time, pick the right people, talk to people who know them, will they collaborate appropriately, but it’s the most important thing you can do.
Why do startup boards matter?
CONNIE: Boards they’re absolutely necessary because as a founder or CEO, you live you’re in the weeds. You almost can’t help it. You live and breathe that everything so much of what you do, revolves around it. Therefore you lose some at times you lose perspective.
You need perspective, you need experience outside of yours and you need expertise outside of yours, your expertise.
LISA: That’s why diversity on boards matters so much because it’s interesting when you build a company these days. I don’t know if you guys have touched on the demographics of the United States recently, but when you look at the population under 40, it’s just over 50% of the U S population today and it’s over half racially diverse. That minority majority country that we hear about that will click into place in 2040, it’s really already in place for the majority of the buying public and the professional public. You look at things like that, you want your board to give you those perspectives from those different places that there may not be part of your experience so that you can ingest it in your company, because that is the only way to build a sustaining value.
TIM: One of the most important things that a board can do for a startup and in particularly for that founder is really create that opportunity for an objective opportunity to evaluate that performance and to really give you that effective feedback that can really help you grow. Having that, growth mindset as a founder and looking to those board members to really be able to assist you and those opportunities for you to be able to perform at your best and grow at your best is something that I think is really fundamental. Having a board be able to do that is quite frankly something friends and family and employees cannot. That’s one of the things I would offer in terms of the value of an effective board.
How frequently do boards need materials?
TIM: I got some boards that you get the material as you’re rolling into the meeting. There’s no way you can digest that material. What happens is the CEO tends to read the material, which, it feels like a check the box. “Meeting’s done, met the bylaw requirement of a board.”
Certainly at Home Depot, we aimed for getting materials out seven days before a board meeting. Well run startups that I work with today send materials 3 or 4 days in advance. The material actually serves as a foundation. It gets everybody caught up on, how are we doing on product development in our tech roadmap, financing issues, whatever. When you get into the meeting, everybody’s got a requisite knowledge, prerequisite knowledge of the business today. We can focus on strategy and leadership, kind of the big rocks, the experience for the table. Again, I think it’s just important to stay informed another, experienced in mind that works really well is where you don’t just get materials before the meeting, but there’s a cadence of reporting. Maybe it’s once a week or maybe it’s every two weeks, but here’s a little scorecard if you will, of our KPIs and what’s working and what’s not, you can just see the colors. So, you’re constantly in the loop on how the business is performing, but yeah, I mean, if you’re sending a lot of materials and we’re just reading decks, I mean, don’t waste my time.
CONNIE: We sent our board material out at least a week in advance so that they have plenty of time to review and get their, questions in place. That way it saves an enormous amount of time, within the board meeting.
When you’re thinly staffed and wearing many hats because you’re new and you’re on a, certainly on a budget, that was very time consuming doing that every other mom. We went to a more visual format, and basically what we did is went to the board and said, ‘okay, this is taking us an enormous amount of time to get ready. I asked the board, ‘I want your feedback on what it is that you want, so that we can get you the information in a very concise, direct way. We don’t have to spend hours and hours putting together this board pack every other month and they gave it to us. Now we have five slides.
How do you evolve your board?
TIM: Carefully. I’ll borrow a comment from Arthur Blank, one of the founders of The Home Depot, “the hardest thing I ever had to do is to upgrade the people who helped build the company.” Sometimes the skills that you brought these board members on to fill in the first place, you’ve kind of grown past that. For instance, you brought on people who maybe had some great skills in getting investment from, for private companies, venture capital investment, and now you’re moving into the IPO space and it’s a very different.
I’m a fan of term limits. You see them more in the public company world, maybe there’s an age limit also
Don’t embarrass people, remove people from the board with dignity and also use, other people on the board chair, the lead director, lead investor who already can to kind of help you with that. Again, I, my concern is I see people just avoid the obvious need to change your board.
LISA: I could not agree more. I think that each director should be in their seat because they add distinctive value to the founder’s journey.. The best functioning boards in my experience have a culture where every director is competing with every other director to bring a win back to the business, whether it be an inside win, like we’ve recruited the best data, or it’s an outside win, like, look at this partnership we got going now. No matter what, if your directors are trying to one up each other, and they’re trying to bring the business forward, you’re in a great position as a founder and that culture changes the company very rapidly. Directors who sit back and feel themselves in the role of relax and read, you put yourself in trouble to contribute.
For us it’s three years. It takes one year for them to really get into the business.
THEIA: I have the privilege of helping advising Atlanta Technology Village. I challenge founders, think about building a board that’s willing to fire you. Like you really should almost be constantly, back to that idea of strengthening that muscle, thinking about people who are truly there to help you grow as a founder and to really help you on your journey as a founder. You have to really be willing to go into it with the mindset that the people who are on that board are really, truly there to offer you again, that objective assessment of your performance and to grow this venture and to hopefully take it to the next level.
You really want to be trying to choose people both as you’re beginning, and as you’re upgrading, who quite frankly are willing, who you’re willing to fire you and leading with that mindset of knowing you’re constantly evolving your performance and your ability to grow. I think it’s one of the guides I would give to how to think about selecting those board members.
For more detail, please see the video above.