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. Twice a month, On Boards is the place to learn about one of the most critically important aspects of any company or organization; its board of directors or advisors, with a focus on the 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 means to be an effective board member, and how to make your board one of the most valuable assets of your organization.

Joe: Before we introduce our guest today, we want to thank the law firm of Nutter McClennen & Fish who sponsored our On Board Summit recently in their beautiful conference center in the Boston [00:01:00] Seaport. They’ve been incredible partners with us in every way. We appreciate all they’ve done to support this podcast.

Our guest today is Chris Cuddy. Chris has spent over 25 years building and growing private and public technology enabled companies with an international focus. He is board chair of ezCater, the number one food tech platform for workplaces in the United States. Chris has also served as CEO of CheapFlights, an international travel search engine acquired by Priceline Kayak, CEO of Engage, a pioneering online advertising network, now NASDAQ listed, acquired by JDA Software, and Chief Commercial Officer at FarePortal, a leading online flight travel agency.

Raza: He has also held senior roles at CMGI, Computer Sciences Corporation, Lightbridge and [00:02:00] Goldman Sachs. Chris was an early team member at Blue Street Technology and Mecca Software. He has served on the boards of public, private, and non-profit organizations, and is an active angel investor and supporter of early-stage companies.

Joe: Welcome, Chris. Thanks so much for joining us today on On Boards.

Chris: Well, thank you, Joe and Raza, for having me. I admire the legacy of board members that you’re compiling in these podcasts.

Joe: Thanks.

Raza: Chris, let’s start with your background. Can you talk about your journey from Goldman Sachs to being the CEO of Cheapflights?

Chris: Yes, Raza. Well, it’s a long and winding journey, and it’s really included three different perspectives that have shaped how I view boards. First, I’ve been in the boardroom as a management consultant to [00:03:00] executive teams of large public companies for 10 years when I worked at Index, and this was with large public organizations; the Washington Post, Nielsen Media, Duke Power.

I’ve also been in the boardroom as an executive board member, and that was as the CEO of public and private technology companies in the US and Europe, including Engage, which was the online advertising pioneer, and Cheapflights, the online travel pioneer. I’ve also been in the boardroom representing investors when I worked at CMGI, which was the internet incubator, and as an independent investor with companies including ezCater, which is the only nationwide corporate catering marketplace. And this has been across public, private, for profit, charitable, and across all stages of a company’s life cycle.

Raza: That is a tremendous breadth of background, Chris. Maybe talk a little bit more about the early part of ezCater. Specifically, kind of the story of [00:04:00] how Launchpad, a group that you and I both are a member of as investors, invested in ezCater, and how did that journey start?

Chris: Yes. Well, as you know in 2012, ezCater was a five-year-old company with some incredible, really extraordinary co-founders, Stefania Mallett and Briscoe Rodgers, who had spent five years working at the kitchen table on a great idea to launch an online marketplace for corporate catering and a marketplace, you may know in many other forms, is when you bring together both customers and suppliers on the same platform.

 Actually, ezCater was calling itself the Expedia for corporate catering just so people could understand. And after five years, they were looking to raise capital beyond the friends-and-family rounds that they had done and they had a lot of eagerness [00:05:00] to learn what they didn’t know, a lot of eagerness to add some marketplace knowledge to the board, and the board at that time was Stefania and Briscoe and another early independent board member, Mike Masterson, who was very experienced in early stage CEOs in pharma and biotech.

Raza: Chris, was that the time when you actually joined the board post-investment, or did you join earlier than that?

Chris: So, when ezCater came to Launchpad, they were looking for their first organized angel group funding round, and they did come to the group early in their process, and we launched some diligence on the company and spent weeks looking over their vision, looking over their books.

Originally, Launchpad declined to invest because the business plan was not yet structured around the key drivers for an online marketplace, but to the co-founder’s credit, they really took the feedback, modified their [00:06:00] plan, and the results of that process were that Launchpad led the series, A&A, when Rick Fedorowich joined as a board observer from Launchpad and then I joined as the board chair, and that was a real milestone for the company because it was their first round of professional funding and the board changed composition. This was going from a board of two founders and one independent to now a board that had two founders, two independents and an independent observer.

Raza: Chris, that really came about because, in part, your operator experience in actually building marketplaces before, as you mentioned, for example, the cheapflights.com was also based on a marketplace model and that’s what led you to joining the board, bringing your experience to the table.

Chris: That’s right. And I think, in my experience, this is indicative of this early stage of a startup’s life in which the [00:07:00] distinction between a board member and an executive board member, a founder, can actually be very blurred, and I think oftentimes the board members become an extension of the executive team.

There are many things that in that early stage that I was involved in. It was everything from interviewing team members to working on the financial forecasts, to working on what the model actually was that was driving the company, and that all happened, I think, at a frequency that was quite intense.

We had board meetings once a month for several years, but probably more than half of the time I spent with the board was unscheduled and was outside of the board meetings. So, they were ad hoc as they came up, opportunities, problems, questions, that took the natural rhythm of whatever the co-founders were facing.

Joe: Yeah, it’s a great point. We talk a lot about boards and what board responsibilities are, and one of the things that we talk about, and pretty much all our guests talk about, is the [00:08:00] distinction between governance and management, but as you pointed out, that gets blurred in some instances.

So, it would be great to spend a few minutes, given your pretty unusual perspective, deep and broad, in for-profit, investment-backed boards to go through the stages of evolution of a board, because it really is different than a lot of other types of for profit and certainly non-profit companies, so let’s start with a little bit about your perspective on watching and observing the evolution of these boards.

Chris: Yes. I think in my experience, we can use kind of the classic five stages of a company’s development, and you can map that with what the focus of the board is in each one of those stages. If we go through them on the top level, the early seed stage for ezCater was when they were founders in the kitchen [00:09:00] table, and at that stage, they’re basically self-funding. They’re trying to get clarity on the idea and they may or may not have incorporated, they may or may not have a board. And if they do have a board, it’s usually heavy founder based, and as I said, even in this phase, it’s very hard to distinguish board member activities from founder activities sometimes. But the goal there is to basically get the idea crystallized so they can approach potential funding later on.

Joe: Yeah, I love the way you put it; idea stage, two founders and a PowerPoint. So, it is really down to the most basic beginning, and then it’s going to take a lot of time, effort, luck, perseverance, super talent to even get to the startup stage, which I think is the next stage, right?

Chris: That’s right.

Joe: After the seed and development stage, starting with two founders and a PowerPoint, what is the next stage that you’ve [00:10:00] observed in for-profit, investment-backed boards?

Chris: Yeah. So, hopefully the seed and development stage can get followed by an actual startup stage, because they’ve crystallized what their idea is, they’ve got a business plan or at least the first version of that, and they really want to go to a stage where they can focus on clarifying the early product market fit where they can make sure that they have a business that they could pitch to investors. At that stage, they might be looking to raise their first organized angel round, which is where we met ezCater.

Joe: And what does it take for them at this stage to validate their business model? What do they have to show the investors and maybe their board in order to actually succeed at that stage?

Chris: Their proof points that are super helpful at this stage are anything that they [00:11:00] can show that convinces an investor that they’ve got early product market fit and that they’ve got a repeatable model that’s actually going to scale. So, this means that they’ve got customer feedback, this means that they’ve got supplier feedback, and they can show that these are not just one offs, they can show that they’ve actually tapped into a vein of need and they’re uniquely providing some value for that.

Joe: And the board’s role is still kind of blurred between governance and management? I mean, you’re still working with management to get through the startup stage. Is that right?

Chris: Yes. And even to the point where in this stage I’ve been doing customer calls, going door to door with a sales rep to really try to sense if the model is getting traction. So, it can be wearing many hats. It can be actually working on financial forecasts. It can be actually coaching the CEO.

Many times when you’ve got co-founders, they [00:12:00] have worked together before and many times they have not, and very often the roles that they’re in are roles that they’re taking for the first time, and being the first time CEO, they could really use the guidance of someone who’s been in that role before, and that’s often one of the most helpful things that you’re doing because it’s really a grab bag of whatever is on the founder’s mind and whatever hurdles they’re coming across at any given day for you to be able to step in and either give them guidance, give them a hand or direct them to some resources that you know that can help.

Joe: So, it’s really all hands on deck as far as the board is concerned and helping them validate the model so they can get to the growth stage, which is the next stage, is that about right?

Chris: That’s right. And I would say that between the first two stages, the seed and the startup, it’s still a very fragile environment, and one of the things as a board member that I think it’s important to remember is that investors, board members are attracted to a company in these [00:13:00] first two stages, in large part, because of the founders themselves. They don’t yet have cash flow. They don’t yet have an idea that has been proven beyond a doubt. You’re really drawn to the individuals who are on that founding team, and it’s very important to remember that and to listen to them because that’s what attracted you in the first place.

So, I think I consider myself a fast follower and maybe anticipating what’s going on, but that’s a difference between putting a hand on the steering wheel, and I think if you get to that situation, then you have to step back and question whether this is the right opportunity for you as a board member.

Joe: Yeah, that is a great point, that you really still have to keep the focus on the fact that you’re there because of the founder or founders, and that listening to them is important if you’re going to help them.

Chris: Yes.

Joe: Yeah. So, the next stage is the growth stage. What does that entail? What does it look like, and what’s the money aspect that [00:14:00] have you now grown? Is it out of angel into VC? Is it something else?

Chris: Yes. That the characteristics of the growth stage are when the founders and the founding team has some early customer and financial success with some increased predictability now and they’ve really proven that they have the potential to accelerate growth. So, at this stage, they’re looking to ramp up operations, and that very often requires additional funding.

I’ll continue on the ezCater example. They had been chasing a huge opportunity in the first two stages of their growth, but they didn’t feel like they were moving fast enough, even though as the founder says their growth rates had growth rates at that time. They didn’t feel like they were doing everything they could. They thought it would be a very long journey to actually go state by state and caterer by caterer on the angel group funding levels that they’ve raised so far.

So, at that point, the board was asking, how can they accelerate growth? What would be the [00:15:00]fastest way to offer catering in all 50 states, and what if capital wasn’t a constraint? And the answer that they reached is, I think, very typical for the growth stage, which is that the ambition and the timeframes that they were talking about required venture capital, and that was a big conversation because the founders had prided themselves up to this point on frugality.

So, the board went through some real soul searching about would this change the DNA of the company? Would we lose control? Or can we take on more partners and satisfy everyone? So, I think that’s a very emblematic, dynamic of this stage, and for ezCater at least, the board did approve this ambitious path that was venture funding enabled, and basically kicked off a process of reaching out to VCs, which winds up being a heavy lift for some co-founders who are managing the business in the daytime and at night, they’re getting introduced to [00:16:00] VCs, they’re exploring them, they’re reaching out, interviewing, and the whole process of that entails.

Joe: Is the board composition still pretty similar to the way it was in the startup stage? It hasn’t really shifted until the VCs come on or new investors come on. Is that right? Or is it already changing?

Chris: That’s my experience. I think the board at this stage was co-founders when they were in the seed stage. They maybe brought on some angels when they were in the startup stage, but it’s still a board that is maybe four or five people and you’re still wearing multiple hats. I think the growth stage is really when you’re injecting a degree of formality.

Now, this is when you need to formalize an audit committee. If you haven’t had a comp committee already, you need to put that in place. Because the venture model has a rhythm to it, and it has some standards to it, and it’s going to require reporting levels that you may be as a co-founder haven’t been delivering to your investors [00:17:00] as frequently with the same rigor.

Joe: From the growth stage to the next stage which you call maturity, what is happening, and what would define what gets you to the so-called mature stage?

Chris: Yeah. In the growth stage, one of the things I think to remember every time you’ve added people to the board is that these are life changing decisions for the founders and these are multi-year relationships that you’re reaching out to create. Before you leave the growth stage, it’s very important to build the board intentionally with that long-term view and really make sure that you’re building a board where people have not only a domain experience that they can bring, not only a cultural fit, but also people who have the same intention, and that will very much help you to get through the growth phase.

By the time you get to maturity, this is for most businesses many, many years out, and this is when you’ve got predictable and stable revenue and a strong brand, [00:18:00] and at this point, the board structure should be humming along and this is really all about execution.

Joe: Is this board at maturity now, more reflective of what we think of as the kind of board roles that are most common? In other words, you’re not sitting down late at night with the founders anymore, or maybe you are. Is it more governance and less day-to-day kind of work that is very much part of what management is doing.

Chris: Yes, maturity level for companies is when the board gets into the rhythm, they get into the cadence, you have committees, you’ve got responsibilities, you’ve got succession planning going on. So, the structure of the company now is well understood, and as far as the board’s going, it feels more like a maintenance mode than a putting out fires and running around supporting every founder’s activity.

Joe: Are the founders still on the [00:19:00] board, number one, and number two, are you able to look around at this point for independents who are not necessarily investors that can come in because they have something in their background; it may be domain experience, may be operational, it may be something else that is critical to the success of this company at a mature stage?

Chris: Yes. especially from mature companies that have gone to the public markets at this stage, you’re definitely going to be looking at a full-fledged board. You’re going to have independents in the appropriate ratios and this is a real now stable, kind of reliable component of the organization that is distinct from the management team. I think it’s at this mature stage where for the first time you see the clear delineation of those two roles.

Joe: And the last stage that you have, I love the way it is, it says renewal decline, which makes me think you can go either way, and it also [00:20:00] makes me think that these five stages is part of a cycle that can now repeat itself. Because if there’s a decline, then I would guess there are things you do to get back to growth or get back to some other stage. Can you just talk a bit once there’s maturity, how do you keep it going? How do you either address the decline or make sure that you’re renewing it, energizing it, making sure it’s well funded, well governed, et cetera.

Chris: They fall into this renewal and decline. For some, they’re able to rejuvenate themselves and for some, they’re not. I can actually give a story of one that that was not able to do it. This is a company that was very high growth that had intense competition. This company was called Engage. It was a public company on the NASDAQ, and it was one of the high flying pioneers of the online advertising space. They had an incredible product where they could do anonymous profiling. They could serve you an ad specifically targeted [00:21:00] to you without having any personally identifiable information. It was great and things were going well when they ran into the Internet bubble bursting. So, this was not of their own making as much as they got caught up in really economic headwinds that turned into a downturn.

So, the board was really faced with what felt like a five-alarm fire. So, this is a dramatic example. They had customers calling or going under. They had creditors calling or going under. There were board members who were resigning and the challenges for the board were really at the core of their fiduciary responsibility, they had to preserve the value and protect the assets and the individuals and we had lawyers having a heyday filing claims at that point. But these were big board decisions weekly; what’s the fate of the business, can we pivot, can we actually address new markets with these products?

So, what they did is they did raise [00:22:00] cash from the largest investor. They were able to extend their runway a bit, but they also had to reduce the team dramatically and slash expenses, and what they decided was that the core business at the time, which was advertising, was not going to take them to the next stage.

Actually, this company had been built through acquisitions, so a secondary business that was embedded in the company around digital asset management, helping companies launch e-commerce websites. That actually became the core of the asset that they decided to sell, and that was the landing for this company so they were acquired by JDA Software at that time.

I think one of the lessons from this decline example was that you always need to prepare for a downside, whether it’s disaster plans, whether it’s D&O insurance and for many companies, cash is still king. One of Engage’s top competitors, DoubleClick, had enough cash to survive the downturn to ultimately be acquired by Google.

Joe: You’ve had [00:23:00] the opportunity to observe these boards in every stage. How has all of this helped you be a better board member and, I would say at this point, a better board chair?

Chris: I think experience in each one of these stages helps me as a board member, helps me as an investor to calibrate my support of a company to the stage they’re in and helps me to emphasize to co-founders not only where they are, but what stage is coming next, what the demands are going to be next and what their priorities are going to be.

I think that type of long-term view is very helpful. These five stages here are presented sequentially for the ease of discussion. Technology is changing dramatically, not only the sequence, but the timing of these stages. Actually, what can be done with one engineer sitting in a cafe somewhere, but having the whole life cycle in mind, [00:24:00] I think helps me to appreciate what the dependencies are in whatever order it’s going to work out for a company.

Raza: Chris, you used the analogy earlier in our conversation of the gear shifting of a car and I was struck by it that it rings true. These five stages that you mentioned, there are various dimensions of board’s character that change with each of these stage; the size, for example, changes, the composition changes, the hands on to a more formal nature of responsibilities, changes, the underlying business and it’s where it is in the cycle is what the board is then governing and has to adapt to that.

You joined the ezCrater board actually as an executive chair, and you have a really unique perspective and you’re still the chair of the board, and with that, you have a really unique perspective on these [00:25:00] stages.

I want to talk a little bit more about the role of the chair first. How do you see it in a board, and then your perspective on that continuity of the board chair in navigating through all of those stages and how a board chair may need to evolve their own role and thinking and work through these stages. Talk about that a little bit.

Chris: Yes. So, over the course of the 12 years that I’ve been on the ezCater board, some things have been the same and many things have changed. But things that have been the same is that I view the chair role as really a bridge between all the constituents that are on the board and the founders.

So, one of the things that’s essential I found through all the stages is to make sure that there’s always regular and [00:26:00] transparent communications so that everyone on the board has a picture of what’s going on. I think the balance of information is very important.

I also think it’s very important that everyone on the board has a voice. It’s not just that people have earned it through their investment, it’s that you’ve selected people for their experience, and it’s really critical that they be sharing that. Those kinds of themes, I think, are consistent throughout.

I think what’s changed is that the composition of the board itself has changed. In the early days, there were two founders and an independent, and that was a very different dynamic than when we raised venture money and now a third or more of the people who are sitting on the board are investors. And then it was a different dynamic when we brought in independents to help on a compensation committee, independents to help on audit committee.

So, while the complexion of the board changes, I think I still go by some of those guiding principles, which is to make sure that everyone has visibility, everyone [00:27:00] has a say, and we’re actively relying on board members, because they’ve got an incredible experience that they can bring.

Raza: One other thing that you had mentioned earlier, Chris, is that if the board has a choice of which investor to take the money from, one important consideration is who would you get as a board member added to the board and kind of confirming and vetting that so that you have the most effective, most prudent board that you can have for that company. Did you also find it that way for this journey in various fundraising rounds?

Chris: Yes. So, I’ve been on boards that I would say are highly-functional and I would consider ezCater a highly-functional board, and I’ve been on boards that were less than highly-functional, and I think some of the hallmarks of the highly-functional boards, they have at least three dimensions that I think actually make them stand out.

They’re selecting the individuals who join the [00:28:00] board for three qualities. One of them is their specific relevant experience and knowledge, so that can be functional, that can be domain. But the second is a cultural fit, they need to actually be able to participate on kind of a loving playing field with the people that are on the board. And the third, finally, is the motivation, and that’s a tricky one because certainly as you move through the stages, you have different participants who came with different motivations, but there needs to be an overlapping motivation to support the founders and to make decisions that are in the best interest of the company and the shareholders.

I think that is kind of a consistency, no matter what board I’ve been on that’s been functional. I think when I look at boards that have been less than functional, a lot of boards that are built through acquisitions, when you’re rolling up companies, you wind up, if you will, kind of going for a fit with the company you’re acquiring, but not specifically the board member that would come along with that [00:29:00] acquisition.

I think that can be very challenging at times because you’re coming from very different DNAs and maybe very different cultures through acquisition, and that’s something that often the board inherits and that’s maybe not the primary decision that’s being made when the company is looking to do an acquisition, but that certainly does affect the complexion and that effectiveness of the board.

Joe: In a lot of ways, those three things are what you look for in a board member at almost any stage of any company because you want the expertise, you certainly want cultural fit. Expertise without the fit is not good for board composition, and why is someone joining the board, and part of what I would say, not so much maybe in the startup, because there’s some different aspects there.

But do you understand what the requirements of your job as a board member are, because if you don’t understand it, you’re not likely to be a great board member. At certain stages, what it [00:30:00] requires is infinite patience. At another stage, it may not require that. It may require difficult conversations that may require something else. But it’s funny, you’re talking about this particular kind of company, and yet I think those three things apply to almost every kind of board.

Raza: Chris, final question, that longevity of the chair that you have that super unique perspective, any tips on how people can achieve that? Why would they keep you as the board chair, even though the stages of the companies varied. How did you achieve that?

Chris: I think you’d have to ask the board themselves and the founders. But if I were to guess, I would say the experience that I mentioned early on and having participated in many of these stages before, both as a board member, as an investor and as a CEO, I think that gave me the ability to have empathy for what the founders were going [00:31:00] through and to balance that with the requirements of what the board’s responsibilities as a fiduciary and to do a little bit of translation between the different skill sets that are needed on a board.

I think that experience was very helpful. It’s not something that we genuinely focused on 12 years ago, because 12 years ago you’re focused on the here and now and just getting to the next stage, but that could be a reason why it’s worked so well. The company ezCater continues to do great.

Joe: Chris, this was a great conversation. Thanks so much for joining us today. Really appreciate it.

Chris: Thank you, Joe and Raza.

Joe: And thank you all for listening to On Boards with our guest, Chris Cuddy.

Raza: Please visit our website at OnBoardsPodcast.com. That’s OnBoardsPodcast.com. We’d love to hear your comments, suggestions, and feedback. And if you’re not already a subscriber, please be sure to subscribe at Apple Podcasts, Spotify, or wherever you get your podcasts. And remember to leave us a [00:32:00] five-star review.

Joe: Please stay safe, take care of yourselves, your families, and your communities as best you can. We hope you’ll tune in for the next episode of On Boards. Thanks.