42. Startup Boards: A Field Guide to Building an Effective Board of Directors

June 17, 2022

In this episode, Brad Feld, Mahendra Ramsinghani and Matt Blumberg talk about their new book, it is an incredibly inciteful and comprehensive look at Startups and all boards.  An instruction manual for CEOs who are building and leading a board and a valuable reference for existing board members, aspiring board members and venture investors.

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Links

Startup Boards – Buy on Amazon

Quotes

Matt: It’s never too early to build a board and, as a CEO, if you get good board dynamic, you have created a secret weapon for your business – a strategic sounding board that you couldn’t go out and buy.

Brad ¨Jeff Lawson said: “I view the board as another team that I get, and why wouldn’t I take advantage of being able to create a great team at that level that can help me grow and develop both the business and me as a CEO?”  That summarized it as well as I’ve ever heard it said by an entrepreneurial CEO

The really interesting and important dynamic around board of directors are how they function as a team and how the individual participants engage with each other and how the CEO engages with the participant, and then how the management team fits into that, and that all of that is true if you’re aspiring any of those things; board member, investor, entrepreneur, or experienced.

Mahendra: The board can make it a safe place for the CEO to feel comfortable, feel confident and engaged as a team of equals.  It’s important for the CEO to build their inner self-confidence so that they can sit in the same table, to be in the same room with people who are 5 years, 10 years ahead in the journey and hold their hand or say, “I need help. How would you do this?” At the same time, being honest, and what they did in that time may not always be relevant, so there’s a fine line, but having the sense of confidence to surround yourself with giants is extremely important.

Matt: No Slides!  When there are slides on the wall, two things happen. Whoever is presenting reads the slide out loud, which drives me crazy. It drives everybody crazy, because you should assume your board members can read.  But the other thing that happens when you have a slide on the wall or a slide on the screen is that all eyes are on the slide. What you want to have in terms of a dynamic when you’re trying to have a meaningful discussion among people on a team is you want eyes on each other, not eyes on the wall.

Brad: The best boards: you fight, you argue, you challenge each other, you disagree, but you’re friends and you have respect for each other, and you carry each other with some amusement. Those are the best boards.

Big Ideas/Thoughts

New in the 2nd Edition of Book

  • Matt added a lot of new content from a CEO’s perspective
  • We made a very significant shift and replaced a lot of sidebars and quotes with new content specifically from women and from people of color, to allow the book to be more representative of what a board should look like for a startup in 2022 in terms both gender and racial equity.
  • We’ve written this book in such a way that it addresses the full spectrum from someone who is an aspiring entrepreneur, investor, board member, to someone who is a very experienced entrepreneur, investor, board member.

Lessons from the Boardroom

  • If nobody does the work to develop the board as a team  you have just a collection of people.  I see that a lot among startup boards where the CEO does not put energy into building a highly functioning team or the CEO doesn’t ask one of the board members to take a leadership role in helping her do that.
  • There a benefit of having a lead director or a board chair who is not the CEO, because then that person can take the leadership when all of a sudden things are not being constructive and to try to shift the tone and the narrative and the discussion dynamic from one that’s not constructive to one that is. 
  • In those situations, a strong, experienced, respected board member who might or might not be an investor can often play that role, and it’s a very, very valuable position to have an outside director that’s experienced, that’s well respected who in those moments can step in and basically say some version of, “Hey guys and girls, cut the bullshit. Let’s stop this. This is not being helpful. Let’s step back. Let’s calm down. Let’s talk about what the issue is and try to solve the problem.”  It’s important to have a lot of people that can play that role. 

More Important Board Meeting Practices

  • Prepare and circulate material in advance.  Then assume the board members can read, so start the board meeting and run the board meeting as though everybody has already read the material.
  • Have a clear objective of what is this meeting about. 
  • The best board meetings I’m in have a board package that goes out in advance that is separate from the board meeting presentation, and the board meeting presentation for each section has some version of a preamble, which is, “Here’s what we’re going to cover and here’s what I want to accomplish as CEO.
  • A lot of people think of their board or a way of thinking about the board is, ” I’ve got to have some investors in my board, and so anybody else I add to my board, I want to get the best networking I can from them because I want introductions.”  That’s really limited thinking. Especially if your business is young, you don’t really know what direction it’s going to go in, and so people that have very different frames of reference from you but experienced in things that are additive to what you’re doing can add another layer of diversity to the board.
  • There has to be a conscious effort to search for board members outside your zones of comfort. That is not easy. It takes time. There are no easy paths to build bridges into other domains, but that is a very essential function every entrepreneur should try and build upon.
  • No Slides!  When there are slides on the wall, two things happen. Whoever is presenting reads the slide out loud, which drives me crazy. It drives everybody crazy, because you should assume your board members can read.  But the other thing that happens when you have a slide on the wall or a slide on the screen is that all eyes are on the slide. What you want to have in terms of a dynamic when you’re trying to have a meaningful discussion among people on a team is you want eyes on each other, not eyes on the wall.

Episode Transcript:

Joe: [00:00:00] Hello and welcome to On Boards, a deep dive at what drives business success. I’m Joe Ayoub, and I’m here with my co-host Raza Shaikh. On Boards is about boards of directors and advisors and all aspects of governance. Twice a month this is the place to learn about one of the most critically-important aspects of any company or organization: its board of directors or advisors as well as important issues that are facing boards, company leadership and stakeholders. 

Raza: Joe and I speak with a wide range of guests and talk about what makes a board successful or unsuccessful, what it takes to be an effective board member, what challenges boards are facing and how they’re assessing those things, and how to make your board one of the most valuable assets of your organization. 

Joe: Our guests today are Brad Feld, Mahendra Ramsinghani and Matt Blumberg. Brad has over 34 years’ experience investing in and running startups. He is co-founder [00:01:00] of Mobius Venture Capital, the Foundry Group, Intensity Ventures and Techstars. 

Raza: Mahendra is the founder of Secure Octane, a cybersecurity seed fund based in San Francisco Bay Area. He’s the author of The Business of Venture Capital. 

Joe: Matt is the CEO of Bolster, an on-demand talent marketplace that supports startup and scale up CEOs, and he is the author of Startup CEO: A Field Guide to Scaling Up Your Business. Together they have coauthored a book to be published on June 15th, 2022 entitled Startup Boards: A Field Guide to Building an Effective Board of Directors. 

Raza: It is already the number one new release in business the entrepreneurship category on Amazon.

Joe: Gentlemen, welcome. It’s great to have you with us on On Boards. The second edition of your 

book, Startup Boards, is going to be published in mid June, [00:02:00] very exciting. Now, I know Brad and Mahendra coauthored the first edition, and now you’re joined by Matt for this edition. First, congratulations, the book is terrific. We did get an early copy and I hear that it’s a bestseller even before it’s actually published, which I guess that’s good news. Who’s the primary audience for the book? Anyone. Brad?

Brad: Matt, go for it, man. Jump in.

Matt: The primary audience for the book is CEOs, especially first-time CEOs. Most CEOs have never built a board. Even CEOs who are managing or leading a board may only in their career hire one or two board members. It’s structured as a field guide, almost like an instruction manual for CEOs who are building and leading a board, but it’s also, we think, a valuable reference for existing board members. There’s a special section for aspiring board members and even for venture investors, particularly new venture investors as well.

Joe: What are some of the changes or new topics appear in the second edition that didn’t appear in the first edition? [00:03:00] Brad?

Brad: Yeah, I’ll start with a major thing that we did, and then sort of go from there. Matt added a lot of new content from a CEO’s perspective which I’ll let him go a little bit deeper into, but one of the things that we did was we refactored the book very significantly from the first edition.

There were really two dimensions that we put that effort in. One of them was just the sequencing and order of which we sort of unfolded all the aspects of the board, but more contemporaneously when we looked at the book and we got some early feedback from a couple of women friends of ours that basically told us that the first edition was pretty inaccessible to them.

It was inaccessible to them because we had a lot of sidebars which were typically two to eight paragraphs from an entrepreneur or an experienced board member to make a point, and we had a bunch of quotes that underscored specific things that came from a lot of interviews that Mahendra did as we were sort of putting together the [00:04:00] pieces for the first edition.

It turns out that almost all of them were from men, and in 2013, well, the gender equity discussion in tech and the gender equity discussion around boards is one that only in the last three or four years do I think there has been real change. There was a gender equity discussion going back in 2013, but I think like many others at the time who, by the way, also thought that they were involved in gender equity and the idea is a gender equity and entrepreneurship, it actually didn’t reflect that in the sidebars that we asked people to write and the quotes that we got. 

We made a very significant shift and systematically replaced a lot of sidebars with new content specifically from women and from people of color, and same thing with the quotes, we went back and we didn’t change the context of what was going on, but we got different quotes to allow the book to be more representative of what a board should look like for a startup in 2022 in [00:05:00] terms of having both gender and racial equity.

Joe: It’s amazing how much things have changed since 2013 so good for you guys.

Matt: Well, we should also just add to that. We asked someone that Brad and I both know fairly well, Jocelyn Mangan, to write a new forward for the book, and Jocelyn runs a nonprofit called Him For Her and another company called Illumin, which together are about both diversity in the boardroom, gender diversity in particular, but also effective boards and running effective boards. Jocelyn is also on the cover with us and has written a great forward to the book.

Joe: Terrific. Let me ask you a specific about the audience again, though. The book has in its name startups, is it focused on the startup ecosystem or is it really have broader applicability to the board world?

Matt: My perspective on that is it is focused on the startup ecosystem and there are certainly chapters that are very unique to private venture-backed companies, but 60 to 80% of the book is probably useful for any board.

Joe: Great. That’s what I thought [00:06:00] and I just wanted people to not be misled by the title. Brad, you started off by talking about how things have changed from a diversity point of view in the last eight years. What are some of the most important messages that you would think people might take away from this book? And we can go around the room for this.

Brad: As a lead into that, I would say in all the books that I’ve written, and this book is no exception, the audience, while there’s a focus on the entrepreneur and the voice in a lot of cases, maybe a mix of a voice that’s an entrepreneur and a VC, it’s worth noting that before I was an investor, I was an entrepreneur, we’ve tried to write these books in such a way that they address the full spectrum from someone who is an aspiring fill-in-the-blank entrepreneur, investor, board member, to someone who is a very experienced fill-in-the-blank entrepreneur, investor, board member. 

It’s really trying to be comprehensive in terms of the audience. [00:07:00] As part of that, when you think about what we would hope somebody takes away from this on that spectrum from aspiring to experienced, there are, for sure, a bunch of sort of fundamental, structural, legal things that play into this and play into how board of directors work. But the really interesting and important dynamic around board of directors are how they function as a team and how the individual participants engage with each other and how the CEO engages with the participant, and then how the management team fits into that, and that all of that is true if you’re aspiring any of those things; board member, investor, entrepreneur, or experienced. 

We’ve tried to give a comprehensive landscape in a very accessible way, not in a legal turgid, here’s all your legal rules and requirements, but very much a practitioner’s guide. Hence, the [00:08:00] subtitle “field guide” and we’ve tried to do it so that you don’t have to read it from page one to the end. You can, but there’s lots of stuff that you can dip in and dip out of that are sort of consumable based on different scenarios that you find yourself in. Again, whether you’re aspiring or extremely experienced and whether you’re an entrepreneur, investor or board member

Joe: What about the value of building a board? What’s the message there?

Matt: My perspective is it’s never too early to build a board and that as a CEO, if you get the board dynamic, you have created a secret weapon for your business, a strategic sounding board that you couldn’t go out and buy.

Mahendra: When we started off, the first chapter was about the art of proactively building your board, and as you look at the second edition, having Matt as a founder, entrepreneur joined sort of this thought process of encouraging founders proactively go build a board because most of the founders, [00:09:00] they start up by raising money first, and then the board members are default based on who has invested. I mean, this process could be turned upside down, of course, in an idealistic way.

Brad: Just a quick, additional comment to that. There’s a great line from Jeff Lawson. Jeff is the founder and still CEO of Twilio, which is now a very large, I don’t know what their market cap is, $20 billion, something like that, public company, and he and I were having a conversation. I think it was actually an interview that we did together or a fireside chat that we did together somewhere a while ago. This topic came up and he said, “One of the powerful things is I view my board as another team I get to build a CEO. As CEO I get to build a leadership team and my job is to build and manage that leadership team. Now I worked for the board, the board can fire me, but I view the board as another team that I get, and why wouldn’t I take advantage of being able to create a great team at that level that can help me grow and develop both the [00:10:00] business and myself as a CEO?” 

That summarized it as well as I’ve ever heard it said by an entrepreneurial CEO, which is they’ve got a leadership team and they’ve got a board team, and those are the two teams the CEO has a unique relationship with in the context of the business.

Joe: Great perspective. I really love that, that’s excellent. 

Raza: Let’s talk about challenges in the boardroom, and this question is going to be for each one of you. What are the spectacular mistakes to avoid based on your experience for the boardroom? Mahendra, maybe we can start with you and Brad next, then Matt right after that.

Mahendra: I’ll share a couple of examples that I’ve experienced or heard, and this sort of speaks to the motivation for us coming together to write this book. One of the examples that I recall was a first-time founder walking into a board meeting with zero preparation, and the best way I would describe it, with his pockets in his [00:11:00] hands saying, “So, what do you guys want to talk about today?” And you could look around the table and say, “Oh-oh, somebody should have worked with the founder to help him think about what we expect.” I’d say the fault lies on both sides of the table. It’s not just pointing a finger to the first-time founder.

 That was one. I’d say somebody who doesn’t know what to expect, and this book does touch on what is your first board meeting about. How should you prepare? What should you do before the meeting? And what you should do in the meetings? So, that was one spectacular mistake. 

The other mistake was somebody who had the prepared a hundred slide deck. A hundred slides, Raza, I feel for the poor soul who had to agonize over a hundred slides, and this was a startup. It wasn’t like, as Brad pointed out, it wasn’t a company like Twilio with a $20 billion market cap. And so you see these extremes that say there’s something wrong and we want to try and fix it. 

Brad: I’ll give two that are from a people perspective. 

First, I think to some degree it links back to Jeff Lawson’s comment. There are many [00:12:00]boards that do not develop as effective teams. They’re collections of individuals who each have their own motivation and priority. Those motivations may be different. Theoretically, they all have a fiduciary responsibility to the company so very sort of well-defined legal responsibilities, but their individual motivations may be different, their economic characteristics and motivations may be different, and their behavioral norms may be very different. Because one of the things that you get with a collection people is you tend to get very different individual behaviors, but you can, as you’re building a team, you set an established norms that as a team everybody is expected to conform to.

Well if nobody does any of that work, you have just a collection of people, and I see that a lot amongst startup boards where the CEO does not put energy into building a highly functioning team or the CEO doesn’t ask one of the board members to [00:13:00] take a leadership role in helping her do that, so that’s one.

The second one I think is really more true in stressful situations than in non-stressful situations, you can define stressful any way you want, but it’s also true in situations where you’ve got people who are inexperienced on your board. You’re dealing with exogenous forces that are challenging for your business, things that you don’t have any control over, but they’re starting to impact your business negatively, like macro economy, like the one we find ourselves in right now where all of a sudden, I think the language people are using over and over and over again is we’ve had a 13-year bull market that’s now over. 

It’s undeniable that the environment that we’re going to be in for startups for some period of time could be a short period of time. It probably will be at least a medium period of time, it could be a long period of time. It will be a lot harder and more stressful from the standpoint of valuation, fundraising, what’s more important, growth or fundamental unique economics that makes sense or profitability and how much cash do you need to have to be in a safe position and [00:14:00] what’s your hiring environment like.

In situations like that where there’s more stress, you tend to find behavior with different labels. Passive avoidant is, in some ways, maybe the best of the worst behaviors that you’ll get, where you just get people who become passive avoidant, but you also have people who become actively antagonistic or actively hostile or board members who become self-justifying or they start looking backwards and have a revisionist history based on decisions that they were complicit in participating and making and how those things are not now working out. 

That kind of dysfunction in the more stressful environment is the one that I think is insidious, and it’s one of the things that I think a lot of even experienced board members continually fall victim to especially when the board itself is not a well-functioning team.

Joe: Question, when that is happening, that kind of behavior [00:15:00] you’ve described, whose role is it to address it and how should they do it? Is it the CEO? Is that the board chair? Is that the lead director? Who is it that should be jumping in and addressing that problem?

Brad: Well, generally speaking, there are two people who could be the logical ones to do it, even though you don’t necessarily have one of those two designated. The CEO of course can do that, but that’s difficult a lot of times because of the power dynamics between the various participants on the board, and including in the notion that the board members are in a position where they can decide, or a board member can decide to try to fire or replace a CEO. Usually an individual board member can’t do it, but you can create even more negative feedback loops if you don’t have that functional team. 

That’s the benefit of having a lead director or a board chair who is not the CEO, because then that person can take the leadership role on for that, and ideally not in concert with the CEO to try to [00:16:00] censor people or govern behavior a certain way, but to recognize when all of a sudden things are not being constructive and to try to shift the tone and the narrative and the discussion dynamic from one that’s not constructive to construct it.

A lot of times there isn’t explicitly a director. In many cases there isn’t a separate chair, the CEO might be the chair or the founder/CEO might be the chair as well, or there might not be a named chair. In those situations, a strong, experienced, respected board member who might or might not be an investor can often play that role, and it’s a very, very valuable position to have an outside director that’s experienced, that’s well respected who in those moments can step in and basically say some version of, “Hey guys and girls, cut the bullshit. Let’s stop this. This is not being helpful. Let’s step back. Let’s calm down. Let’s talk about what the issue is and try to solve the problem.”

Joe: Important to have someone that could play that role.

Raza: Yeah.

Matt: It’s actually important to have a lot of people [00:17:00] that can play that role. If I think about our experience, Brad and I have sat on four boards together, one of which was my last company, Return Path, where we were on the board together for like 18 years or something. I was the chair and the CEO. I didn’t have an independent director or lead outside director, but I can think of two or three different circumstances where I needed one, but I used different board members at different times, depending on what the circumstance was. If you have a board with great people on it, you have a bench to draw in.

Raza: In your book, you have dedicated three chapters to preparing and running board meetings. What is one best practice advice that each one of you would give to founders and to board members for preparing and running board meetings. May I start with you first, Brad? 

Brad: Assume your board members can read. Consequently, do a couple of things, prepare the materials in advance, get the materials out to board members a couple of days before the board meeting, if [00:18:00] possible. There are some instances where it’s not, but in most instances it should be, but then assume they can read, so start the board meeting and run the board meeting as though everybody has already read the material.

Raza: Very good, plus one on that. Mahendra, what would be your best practice advice for running and preparing for board meetings? 

Mahendra: I have an eye to follow that fundamental position that I make an assumption that all board members being able to read and being engaged. But the one thing I’d add is have a clear objective of what is this meeting about. It could be just a quarterly update, which is, here are the numbers, or it could be an active decision-making session in which you need to present data and get consensus or show that you want to move in a certain direction based on the research you’ve done. Is it informational session? Is it a decision-making session? Be very clear about that part.

Raza: It’s intentional crafting of agenda and having a goal for the meeting. [00:19:00] Brad, do you want to add? 

Brad: I want to add something just to back up what Mahendra said. The best board meetings I’m in have a separate board package that goes out in advance that is separate from the board meeting presentation, whatever it is, and the board meeting presentation for each section has some version of a preamble, which is, “Here’s what we’re going to cover and here’s what I want to accomplish as CEO,” where to Mahendra’s specific point, “I just want to inform you, or I don’t know what the answer is, and I don’t want to have an answer. I just want to have a robust discussion so I can get some more thoughts around it or we need to decide A, B or C.” Trying to not come into each conversation open-ended or ambiguous about what you want as the outcome and the input and outcome from the [00:20:00] board, but to be specific about what you’re doing at each step of the board meeting. 

Raza: For information, for discussion and for decision as a framework for setting the agenda.

Joe: I think you’re more likely to get from your board what you want if you tell them in advance and give them a chance to prepare for it. I mean, that’s what you’re saying. Don’t come into the room and people don’t know what you want. I mean, partly that’s building on what you were saying, Mahendra, what is it you want to do here? If you want to get the most, give them as much in advance by way of guidance of where you want to take it, so I think that’s great. 

Mahendra: The one thing I might add, Joe, and of course, Matt is the quintessential CEO amongst the three of us and he should share his thoughts. I think to Brad’s very earlier comment about how the board can make it a safe place for the CEO to feel comfortable, feel confident and engaged as a team of equals, not this lordship that he or she are looking up to. 

I think with that dynamic, I find that boards don’t do a good job, and I sort of point to my busy [00:21:00] peers and friends in the business who are short on time, they’re always on a rush, and so that feeling of safety does not quite arise, and hence you find that many times CEOs walk in, there may be some conferences that they should be, and I feel like there’s work to be done on both sides.

Joe: Thanks

Raza: Matt 

Matt: My best practice is simple, it builds a little bit on Brad’s point, but it’s no slides. Create board book ahead of time, all the details that people need. If in the course of the meeting, there’s a visual you need to show, of course, it’s okay to put a slide up. This is true of an in-person meeting as well as the Zoom meeting.

When there are slides on the wall, two things happen. Whoever is presenting reads the slide out loud, which drives me crazy. It drives Brad crazy. It drives everybody crazy, because you should assume your board members can read. But the other thing that happens when you have a slide on the wall or a slide on the screen is that all eyes are on the slide. What you want to have in terms of a dynamic when you’re trying to have a meaningful discussion among [00:22:00] people on a team is you want eyes on each other, not eyes on the wall. 

The day we started, we probably had slides on the wall like every company for 10 years at my last company, and the day we decided to stop doing that was the day our board meetings got 10 times better.

Joe: Great. Love it. 

One of the things that you’ve emphasized is certainly when we talked last week, we talked a lot about diversity, and Brad, you refer to it again this morning. First of all, what is diversity from a board perspective in your view, and talk a little bit about why you think it’s important, and I’ll start with Brad.

Brad: Sure. Look, I think that you have several different attributes that you’re focused on. I think, first is that you want to have a diversity of experience. In the context of that, I think you want to have very clear gender and racial diversity on the board. In the context of that, you can have ranges [00:23:00] of experience, but if your board consists literally of middle-aged white men, you’re almost by definition, not going to get diversity of experience.

Second, each individual is going to bring different strengths, weaknesses and their own experiences, whether it’s in business or with the product that you have, or the business model that you have, or that in your own frame of reference or their own lived experience to the board and having different characteristics on those dimensions are quite important.

Interestingly again, the diversity dimensions that would be, I guess, classically described as identity diversity, whether it’s gender or race, add a lot to that because people have very different lived experiences and very different experiences in companies with products or as consumers. 

Then I think the last is to recognize one of the challenges of boards historically [00:24:00] is that a CEO says, “Well, I want to get experienced people on my board,” and the problem with that is, I’ve been on many, many boards now, so I would be considered an experienced board member, but when I was on my first board, I was not an experienced board member. If you go back to my early boards based on my own work experience and you talk to the entrepreneurs whose boards I was on, they would probably say that I was really additive. No, I was not the person who was the expert at this or that I had done the most financings and understood all the governance issues here, but that I was able to add these things to the mix.

I think that’s an important thing for the CEO to be looking for is people that are adding different elements to the board, and then the CEO using that board as a team. 

Last comment I’d make on that, a lot of people think of their board or a way of thinking about the board is, ” I’ve got to have some investors in my board, and so anybody else I add to my board, I [00:25:00] want to get the best networking I can from them because I want introductions.” 

That’s really limited thinking. Especially if your business is young, you don’t really know what direction it’s going to go in, and so people that have very different frames of reference from you but experienced in things that are additive to what you’re doing can add another layer of diversity to the board.

Joe: Okay, thanks. Mahendra, thoughts about board diversity.

Mahendra: Absolutely. I have a little anecdote I want to share about, of course, that issue. It goes to what I respect and admire and in Brad’s thinking and how he operates. I very clearly remember that the cover design had already sort of been shared by our publisher, Wiley, and Brad pointed out that, “Look, the outlines of these six members of the board on this table are all men. Can we fix it?”

Then I’ve decided to go back and think about all the different instances where Brad had identified. Now, this was 2013, 2014, [00:26:00] before this wave of diversity and awakening had occurred. We had Heidi Roizen. There was this lady from Natural Women in Computing that Brad had suggested I interview. We did start going down the path of adding a lot of good context from women. 

Now, as I look at what’s going on today, I think as we become older, we become aware of our own subconscious biases that exist. If I look at my portfolio, half of the CEOs are Indians, so I say, “Okay, there’s my bias at work right there.”

When I look at the boards of those CEOs, guess what? There are more Indians, and so some of the default position is we reach out for the lowest hanging fruit, “Hey, this is the guy I know. This is the gal that I know,” and those become our network, those become our board members, and I feel like there has to be a conscious effort to search for people outside our zones of comfort. That is not easy. It takes time. There are no easy paths to build bridges into other domains, but that is a very essential function every entrepreneur should try and build upon.[00:27:00]

Joe: One of the things I think you said when we talked last week was, don’t be afraid to go get a big name or a heavy hitter or something like that, someone that is going to challenge you. Don’t be afraid to do that, and I think you’ve talked about it in the context of something that Matt has done building his board. Thoughts about that? 

Mahendra: Absolutely. I admire CEOs who can go and reach for giants. Mac has Brad and Fred Wilson on his board. I can tell you that those board meetings are not board meetings that Matt can walk in with his hands in his pocket and say, “Hey, what do you guys want to talk about?” No. I think those meetings are on a very different kind.

I feel like it’s important for the CEO to build their inner self-confidence so that they can sit in the same table, to be in the same room with people who are five years, 10 years ahead in the journey and hold their hand or say, “I need help. How would you do this?” At the same time, being honest, and what they did in that time may not always be relevant, so there’s a fine line, but having [00:28:00] the sense of confidence to surround yourself with giants is extremely important. 

Joe: Matt, how does Bolster help CEOs and others identify and recruit diverse board members? 

Matt: Bolster’s mission is to help CEOs and founders scale up their leadership teams, scale up their boards, and even scale up themselves as leaders, and we have built a very diverse talent network or marketplace that’s got many, many thousands of senior executives. We help our clients do searches for full-time executives, part-time executives, even project-based executives and also board members.

When we do a board search with a client, we typically do a little bit of bespoke work. We don’t just sort of send someone off to the UI on the platform. Part of the reason we do that is that board building is a little bit of an art or a lot of an art, and it’s one that most of CEOs have never done before. First time CEOs obviously haven’t, but even experienced CEOs, sometimes they’ve only hired one board member in their lifetime or two board members in their lifetime. 

We [00:29:00] spend a lot of time with our clients working through with them what it is that they really want, and Mahendra, while I agree with you that I always admire people who want to reach high and get a big name, sometimes the big names actually aren’t great board members, or they’re not great board members for an early stage company that needs someone who’s prepared to roll up their sleeves and do some work as opposed to come to board meetings and pontificate, which is sometimes what you get with the big name.

It’s an interesting process we go through with our clients. It almost always starts off with them saying two things. One, “I need diversity in the boardroom,” and two, “I only want to look at board members who have served on boards before,” to Brad’s point earlier, and we have to kind of wind things back a little bit and say, “Look, if diversity is a priority, we can help find you tremendous board members with great experience who can be very additive to your business, but it might be the first corporate board they’ve sat on before.”

We do a lot of work to define what board ready means. It doesn’t mean you have been a [00:30:00]corporate board member before. There’s a bunch of stuff that goes into that, and then we do a lot of work with our clients to really help them think through what are the different characteristics they’re looking for in this board member, not just, I need a good board member, but what’s missing, what’s the missing puzzle piece from your team? If you think of your team as both your management team and your board, where are you short of expertise? Is it a particular function? Is it an industry? Is it a customer site? You need someone to represent small businesses. Or is it a stage? You’re about to go through an IPO and no one around the table has been through an IPO before. 

We have a process we take clients through to identify what they’re looking for and then really coach them on what board ready means.

Joe: I love the term “board ready.” It’s something that you talked about when you’re a guest, whenever that was, last year, and I think that is a great way to look at what you’re really looking for. 

Raza: Brad, Matt and Mahendra, I want to pose a few specific situations and circumstances that board members and boardrooms may see, and one of you could pick up and answer that, [00:31:00] and we can go through maybe one or two of those from there. 

One particular situation that actually Brad alluded earlier while he was speaking that boards generally have fiduciary duty to all the shareholders, yet different directors may end up having different economic or individual priorities. How does the board, or how should the board deal with that situation in the boardroom? Matt, do you want to take that one? 

Matt: Yeah. I mean, the board members wear two hats. They come into a board meeting, they’re a representative of their firm who owns some piece of the company and they are a board member. Usually under Delaware law where there’s a fiduciary responsibility to look out for the value of common stock and they may not own any, and I think it’s very important as the leader of a board in a tough conversation like that. First of all, they probably have counsel in the room, but second, to remind directors that they wear two hats, 

Brad will remember this story, and I actually think this is in the book, we had one such board meeting at my [00:32:00] company and that Brad was on the board of many years ago, probably 15 years ago now. It’s a really meeting and we knew it was going to be tough going into it for this exact reason.

We actually made two sets of hats for the board members, like a white hat and a gray hat, they both had the company’s logo on them, and I just handed them out to everyone before the meeting and I said, “Make sure you put on the white hat if you’re talking as a board member and the gray hat, if you’re talking about your opinion as a director.” It was a little goofy and corny.

Brad: Not as director, as an investor.

Matt: As an investor, sorry, yeah. It was a little goofy, but I think it made the point and it kind of broke down some of the barriers, like it gave everyone a chuckle, but then people were pretty good about actually doing that during the meeting and I think it helped us make a better decision at that point.

Brad: Just a quick thing to add too I think Matt did that really, really well in that meeting, and I’ve used some flavor of that many times since. 

There is a flip of that, which is that you have a lot of investor board members who hide behind [00:33:00] that fiduciary duty language, and my own view is whenever somebody leads off a sentence with, “Well, I have a fiduciary duty to blah, blah, blah,” it means they’re probably avoiding dealing with whatever issue is in front of them. 

 As a CEO or as a lead director, sort of recognizing when someone is actually being either avoidant or disingenuous, because they have conflicting interests, nothing wrong with the conflicting interests, that happens all the time. You have to be able to, as a board member, talk about what’s going on in the context of those things, and the best board members to Matt’s point, the best boards, when they’re in those situations, acknowledge them and then work through whatever the problem is, recognizing that there may be conflicting issues.

Mahendra: I think is very unique to startup boards is that very few first time CEOs understand that the board members’ responsibility is to all the shareholders. The default position if you ask any [00:34:00] plus 10 founder who has a venture-backed board, the default assumption they make is the board members are only looking out for themselves.

This is something that I’ve corrected hundreds of times in very basic conversation, so knowing that which hat is being worn, what do they represent and how do they care for the entire stack, as we call it, is extremely important, and I think that also is something a CEO should be not only aware of, but know how to engage properly.

Raza: I think that the metaphor of the two hats and making it explicit and clear is like such a wonderful suggestion. Conflicts are going to come up, but at least you then know which side at that moment you’re talking about. 

Joe: By popular demand, the last question is, what’s the funniest or most outrageous, or maybe most embarrassing board experience you’ve ever had? Matt, why don’t you start?

Matt: I’m going to tell a very funny one that happened when I was not in the room, but I heard about the story and I heard the same account from enough people that I’m going to take it as fact. I always did 360 review. We did them for [00:35:00] executives in the 

company and we always did one for me, and when we did mine, it was the management team and the board together. Our style of doing reviews is not that it’s written on paper or in a system, but it’s a facilitated conversation. 

One year during my 360 review, so I stepped out of the boardroom and it was in person. This was back when everything was in person, it was my board and my executive team and then my coach that was facilitating this conversation, and Fred Wilson, a member of the board for a long time with me and Brad made some comment in the presence of my whole management team to the effect of, “You know, Matt’s biggest problem is he doesn’t move fast enough to fire under-performing executives.” Brad, you were there, but supposedly you could just hear a pin drop in the room.

Brad: I was there. It was awesome.

Raza: Awkward. 

Matt: I heard about that quite a bit afterwards.

Brad: I have so many funny stories on board meetings, and one of the things I’ve always tried to do as a board member is not take myself too seriously and have a sense of humor. Even in situations when things start to get heavy, I [00:36:00] just try to carry that throughout life. And yeah, I have bad days, and yeah, I lose my shit and all that stuff. I’m normal, I’m human. But generally speaking, I try to live life tongue-in-cheek,

Here’s the one I remember with humor whenever I think of Matt and his long-time partner Jack Sinclair who has been COO and CFO in many iterations of things. We were having a long board meeting. It was in New York. It was tiresome. I’m a vegetarian and the number of board meetings I’ve gone to where the food sucked for me is legendary. I mean, just the number of times that a plate of ham sandwiches showed up and my lunch was like two slices of bread and a piece of cheese with a mayonnaise scraped off. It just goes on and on. 

This particular lunch wasn’t a bad one. It was a Shake Shack lunch. We’re in New York and they asked us in advance what we wanted and I think I got a sandwich from Shake Shack because they didn’t have a veggie burger at the time. They probably do now, but then they didn’t, and so I just got a grilled cheese sandwich and they ordered a bunch of the Shake Shack [00:37:00] shakes. If anybody’s ever been to Shake Shack, they’re these delicious, awesome, incredible shakes. I’m a huge hot chocoholic. 

We all get our things and we eat and we’re talking and we all have our shakes and I have my shake and then there’s a shake leftover and it’s a chocolate shake and it’s just leftover, like somebody didn’t have their shake, so I have another chocolate shake. If anybody has ever had two Shake Shack chocolate shakes in quick succession, you will understand what happened next.

Joe: Yeah.

Brad: As the board meeting is going. I have to lay down on the floor

Because I am so wiped out, like it’s time for a nap, like there is no way I can stay sitting in this chair and pay attention to this board meeting anymore.

 I don’t know, 15 minutes, I just laid down and took a nap on the floor while the meeting was going They thought nothing of it and everybody sort of had their amusement with it and off we went. In the next board meeting, when we’re starting the board meeting off, we go through the board [00:38:00]minutes to approve and a couple of other formalities and Jack has put in the board minutes, “Barry, Dana, we did this, we did that. We did this. Mr. Feld has a second Shake Shack and takes a nap.. We If did this, we did that.” 

It just sticks with me. It is like just so perfect, like we were friends and the best boards, I would just sort of end with the best boards, you fight, you argue, you challenge each other, you disagree, but you’re friends and you have respect for each other and you carry each other with some amusement. Those are the best boards.

Joe: Yeah, I agree. 

Raza: Mahendra, your funny story. 

Mahendra: Yeah, this is one of those strange board calls. It was not a meeting, it was a call and there were different time zones. It was like a half an hour call to approve something very important to the transaction that was going to occur. Different people are dialing in from 11:00 PM in the night, somewhere it was different times zone, et cetera. As the call starts, within a few minutes, we hear this heavy breathing [00:39:00] and it’s starting to get awkward and then it would stop and then suddenly it will start again and then it will stop. Until finally the CEO says, “Okay, I’m going to call out each one of you. Whatever the fuck you’re doing, please stop.” This board member says, “Okay, that is me. It’s my dog standing behind my shoulder and panting very heavily into the call and there’s nothing more to that.”

Joe: Yeah, sure.

Mahendra: The various assumptions people have made about what was going on completely wrong. It was just an animal panting into the microphone.

Joe: A lot more exciting to think about what it might’ve been, right?

Mahendra: Exactly.

Joe: Brad, Mahendra and Matt, it’s been great speaking with you today. Thanks for joining us. And thank you all for listening to On Boards with our special guests, Brad Feld, Mahendra Ramsinghaniand Matt Blumberg. 

Raza: We have a request for our listeners. Please take a moment to rate and review On Boards on Apple Podcast app if you enjoyed listening to it. It really helps others [00:40:00] discover our podcast. 

Joe: This is the last episode of our fifth season. We’ll be back for season six in the fall. In the meantime, please take care of yourselves, your families, and your communities as best you can. Raza, you take care, too. 

Raza: You too, Joe. 

Joe: Thanks 

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