In this episode, Joe and Raza speak with Firas Raouf, co-founder and general partner at Companyon Ventures, a Boston-based VC firm specializing in early stage B2B software and AI startups.

Firas shares insights from 25 years as a founder, operator, and venture investor—helping companies transition from founder-led sales to scalable, operationally disciplined organizations. The conversation focuses on how early-stage founders should think about creating their first board, the mistakes to avoid, and why great board dynamics depend heavily on execution.

Key takeaways

• Career beginnings

• • 25 years ago, Firas co-founded three startups — two were during the dot-com era and one that became VC-funded, giving him firsthand experience sitting on the receiving end of board advice and investor expectations.
  • Then, Firas was invited to join OpenView while working at Insight Venture Partners and was able to spend 10 years seeing OpenView and its portfolio companies grow.
  • Later he co-founded Companyon Ventures
• How Companyon Ventures supports the expansion stage investing
  • After early product-market fit, companies hit the “now we need to scale” moment.
  • Companyon Ventures specializes in this transition, helping founders build their first leadership team, operational discipline, KPIs and dashboards scalable go-to-market engines a plan for capital needs
• Early-stage boards are about support
  • Firas emphasizes that early boards are not oversight bodies like public-company boards. Their purpose is to surround the founder with people who can help them think strategically, navigate challenges, and build a scalable company.
  • A board can include a seat for common shareholders, lead investors and an independent board member, who is someone with whom the
    CEO is comfortable.
  • A lead investor becomes a long-term board member. Founders must evaluate who they are letting in, not just the valuation. Once someone is on the board, they’re not easy to remove.
• Boards must evolve as the company evolves
  • As companies grow, the expertise they need changes. Firas suggests cycling out board members after two years.
  • After 18–24 months, it’s common for a board member’s value to plateau, making board refreshes, new independent directors, or role rotations both healthy and necessary.

Quotes

• “A happy board tends to reflect great execution. An unhappy board tends to reflect poor execution.”
• “I do think that you should keep things fresh, so to speak, and so any board member really that has been there more than two years, it’s rare that you haven’t picked their brain dry.”
• “It’s not just about valuation, it’s also about who you’re going to let into your company, into your house, because once you let them in, you can’t get rid of them.”
• “The board of directors for an early-stage startup is the opportunity to have a number of people around the table that can help you navigate and scale your company.”

Links

Companyon Ventures- Boardroom Confidential

Guest Bio

Firas Raouf is the co-founder and general partner of Companyon Ventures, a Boston-based VC firm that invests in early-stage B2B software and AI startups. Before launching Companyon, Firas was part of the founding team at OpenView Venture Partners, where he helped pioneer the “expansion stage” investment model and partnered with dozens of software founders to scale their go-to-market operations. Today, he focuses on helping founders transition from founder-led sales to scalable growth by building leadership teams, operational discipline, and repeatable GTM engines. Firas is known for his hands-on, operator-turned-investor approach and his passion for guiding first-time founders through the challenges of building high-growth software companies.

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. Twice a month, On Boards is the place to learn about one of the most critically important aspects of any company or organization; it’s 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 we 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 in October sponsored our On Boards Summit again in their conference room in the Boston Seaport. Nutter has been an incredible partner with us in every way. We appreciate all they’ve done to support this [00:01:00] podcast.

Our guest today is Firas Rouf. Firas is the co-founder and general partner of Companion Ventures, a Boston-based VC firm that invests in early-stage B2B software and AI startups.

Raza: Before launching Companion, Firas was part of the founding team at OpenView Venture Partners, where he helped pioneer the expansion stage investment model and partnered with dozen of software founders to scale their go-to-market operations. Today he focuses on helping founders transitions from founder-led sales to scalable growth by building leadership teams’ operational discipline and repeatable go-to market engines.

Joe: Firas is known for his hands-on operator-turned investor approach and his passion for guiding first time founders through the challenges of building high-growth software companies. Welcome Firas. It’s [00:02:00] excellent to have you here today with us on On Boards.

Firas: Thank you so much, and thank you for having me, and thank you for the kind words. I’m wondering who this person that you’re describing is.

Joe: Well, we can let them know who this person is. Tell us a little bit about your operator background and how it helped shape your investment approach.

Firas: Yes. I mean, getting into business software startups, really the journey began back 25 years ago, and it started with being a co-founder of three startups, two of them in the dotcom days, and went through that experience of the ups and downs, which is somewhat what founders are walking through right now, hopefully no downs.

The third startup was one that became VC funded and so I got to experience being on the receiving end of VC investment and advice and being on a startup board and all of those [00:03:00] dynamics.

Then after leaving my last startup, I got invited to be part of the founding team of OpenView. In the process of doing that, I spent a year at Insight Venture Partners before we spun out of Insight to start OpenView, so that gave me exposure to how Insight operated, and then how we built OpenView and the experience of 10 years at OpenView, not only seeing OpenView grow, but also our portfolio companies grow.

That then led me to co-founding Companion. The theme in all of these initiatives and all of these firms and companies is early-stage software startups, and over 25 years being on the operator side as well as on the investing side in three different VC firms, it just built up sort of this pattern recognition that I think is somewhat valuable to our founders [00:04:00] because I can just sort of see ahead when they can’t because they just haven’t done it before and certainly not to that extent.

Joe: Exactly. That’s great. That’s very helpful. So, with that in mind, talk about what you mean by expansion stage investment and what the hands-on approach entails and how it differentiates you from what other early-stage investors are doing.

Firas: So, without getting into sort of the funding rounds, which is typically how people talk about evolution of a software startup, I think we should talk operationally about the operational evolution of a startup. You typically have the very early-stages where it’s pre-revenue to the first set of accounts and customers that you close, and that stage is on the one hand all about finding product market fit.

So, [00:05:00] you’re either starting with a problem and building a solution for it, or you start with some technology and you go looking for a problem, so it’s either the hammer or the nail. Either way, you are fumbling around for a year or two, three, perhaps pivoting to some extent one or two times to finally for something to click. Through that process as well, the founders are sort of figuring themselves out and whether they can work together and is this the right team and so on. There’s all kinds of dynamics at the very early-stage before you even have a business that can scale.

Then the next stage, which we refer to as the early expansion stage is when you feel like you have early product market fit, the founding team has settled in into a good rhythm, you understand who your customers are, how to reach them, how to message to them, how to sell to them, how to service them, and, and how to renew the [00:06:00] contracts a year later, you get this sort of aha moment or this moment of relief where you say, “Oh, we figured it out, now we’re ready to scale.” And that’s where the expansion stage comes in, which is starting to build some foundations for growth.

This is what we refer to as sort of going from being primarily a founder-led startup to actually building foundations of scalable company with the beginnings of a management team some functional expertise, finding go-to market fit, not just product market fit, and also understanding how to scale the company and what capital requirements you’d need to go forward.

Typically that’s somewhere in the one to five million in revenue, and then from there, you get into the other stages of growth, going from five to ten to twenty to a hundred. We could talk a long time about that, but it’s that critical transition from being [00:07:00] founder-led to actually building a scalable company. Beginnings of a scalable company is what we focus on.

Joe: That’s great. That really clarifies it so. Most early-stage investors are hands-on to some degree. How does your hands-on approach maybe differentiate you from how other investors get involved?

Firas: Yeah. So, I think the key for what we do is we have designed our support to be very stage specific. Well, you could start with angel investors. If you’re an angel investor, you’re an individual as a passion for helping founders, and you’re coming in pre-revenue probably and the support that you provide tends to be very personalized to someone you probably know as a founder.

Then you have seed stage VCs, and the key for seed stage investment is to bet on a large number of startups knowing that the [00:08:00] majority of them are going to not make it, and so it’s more of a numbers game and a game of elimination, and seed investors obviously try to be helpful, but when you spread yourself thin, it’s hard to be very helpful, and so they’ll tend to focus on the companies that have the best shot, but it’s all about product market fit, so industry expertise is necessary, or maybe technology product development expertise, or a geographic concentration to find the best founders in a certain market.

We come in when those seed investors have helped us call out the non-winners or the non-survivors, and we look at all the survivors that come out of that seed stage and we pick three to four of them a year, so it’s a highly concentrated portfolio and what that does, it allows us to spend a pretty good [00:09:00] time with each company for about a year to a year and a half, well, really six to twelve months is where we spend most of our time, helping them with that transition from being founder-led to what we call operationalizing for scale, which is building the foundations that will allow you to build a big company over time.

So, it’s all about talent and hiring the right resources at the right time. It’s about go to market fit, figuring out your sales model on how to transition from founder evangelism to a professional sales team and marketing team. And then building out your KPI dashboards, your instrument panel, how do you fly, how do you transition from flying a plane, looking out the window in a sunny day to flying a Learjet with an instrument panel at night in the fog, and then capital, like how do you make sure you don’t run out of money. So, those are the [00:10:00] things we focus on very specifically, so that by the time we’re helping them raise their next round, they already have all those foundations in place.

Raza: Firas, one of the additional, very, very important thing that you also help with is forming or improving or bringing in the first board for the organization. I recently saw the series of video resources that you and Companion calls Boardroom Confidential, and that provided a really great set of education and enablement for founders for how to think about and how to build their first board. So, talk a little bit about that series. What inspired you to create that, and what is it providing the founders?

Firas: It’s one of a list of sort of necessary initiatives or foundational pieces that companies need to sort of make that transition from being a [00:11:00] founder-led startup to a professionally-run organization, and so typically in a Series A, which is where we invest, that it tends to be the time that investors ask the company to either build their first board or build the first organized real board, so to speak.

The thing I always tell founders, this is not about governance. You’re not a public company, you’re not a large company. The board of directors for an early-stage startup is the opportunity to have a number of people around the table that can help you navigate and scale your company, and so it is an important group to have, just as important as building your management team, it gives you a different perspective, it gives you a more strategic perspective and it allows you to have a set of people that can bring [00:12:00] that strategic perspective and take you out of the day-to-day sort of operational tactical execution.

Raza: What are the kind of biggest governance mistakes? I know it’s not really governance, but board-related mistakes that you’ve seen early founders make, and that’s where you want to be able to help them.

Firas: I don’t know if I’d call this a mistake or just more of a symptom, but it is the founder’s anxiety, fear, or reticence about even having a board of directors, and I think that tends to be a symptom of just not understanding what an early-stage board is really all about. As I said, if you think of it as governance, if you think of it as this group is going to tell me what to do or this is the group that can fire me or any of those negativities, they tend to mostly reflect a bit of insecurity [00:13:00] on the part of the founder.

As a first-time young founder, it’s understandable if that’s the emotion, but I think that’s the first place I would start. A, to have the confidence that you’re the right leader for the company, and B, that a board of director is not there to be your boss. The board of directors is, as I said, a group of people that can help you run the company.

Raza: I think it includes kind of educating and ensuring them that the people on the board that you will get should be the one that are best suited to help the company with their experience, skills, and kind of actually problem solving with you. We go sometimes as far as saying them, “Hey, view this as free labor for you to help your company rather than viewing it as an encumbrance, an impediment, or slowing you down and so on.”

I think often it is kind of that education [00:14:00] and I do think that the resource that you’ve provided, the Boardroom Confidential, which I think is available on the Companion website, goes a long way in providing kind of that education and putting them at ease of like, “Oh, okay, that’s what a board is and that’s how it is supposed to help me as a founder.”

Firas: Right, right.

Joe: So, it’s available to anyone on your website?

Firas: Yes. It’s publicly available, and you can link to it through our LinkedIn posts as well.

Joe: Oh, terrific. So, you and your partners and others at Companion are really the ones responsible for helping guide the founders to understand why the board is important and kind of the basics of boards, which they may not even know because I remember what we were talking, you were saying as an example, there should be an odd number.

Yeah, I know, but maybe if you’ve never been on a board or really thought about a board, you might not think about things like that. So, what are the things if you are [00:15:00] taking this job on, how do you work with the founder, or you and your partners work with the founder to help build that kind of understanding of what a good board is? It’s not the same for startups as it is, as you said, for a later-stage company or certainly for a public company, but still plays a really important role.

Firas: Yes, obviously, the number of formal seats and then observer seats and the composition of those is a place to start. And while you do have some control, there are some constraints. One or two seats tend to be for common shareholders, which typically is the founding CEO, and maybe a co-founder, and having those seats occupied by qualified founders or the CEO and someone else who is on the common shareholder or the employees that is qualified to be in that [00:16:00] second seat, so to speak. So, there’s a conversation to be had around that.

The other one or two seats tend to be the lead investor seats, and you might have more than one or two investors, but typically, the investors would agree on the one or two investors that would sit in the investor seats. You might think you’re limited in the choice, but where your choice comes in for those seats starts with the investors you choose to raise money from, who is the lead partner and is that lead partner going to have a board seat?

In qualifying the investment opportunity, I would also qualify that person, is this a person I want on my board or not? And hopefully you have a choice of multiple options so you can actually pick the best overall option for yourself. It’s not just about valuation, it’s also about who you’re going to let into your company, into your house, because once you let [00:17:00] them in, you can’t get rid of them. So, that’s another consideration.

Then there’s the fifth seat, potentially the odd seat, which is an independent board member, that could be one or two seats as well. An independent board member is someone that you should pick as the CEO. Your board might require you to run it by them, but typically you are picking that person and that’s a golden opportunity to pick someone that can be exceptionally helpful. It could be someone who’s really good at being a founding CEO advisor. It could be someone who could help you manage the board and the dynamics of the board, whether you call them chairman or not. It could be someone that brings market expertise. It could be someone that brings execution expertise. So, that is a canvas that you get to paint.

Joe: So, [00:18:00] obviously, the choice of that independent, especially if there’s only one, is important, and these CEO founders haven’t done this before. Assuming they have some good choices to make, how do you guide them on who to choose. In a normal board recruiting process, you’ll have a number of board members, there’ll be a search committee, they’ll meet with them, you’ll pick one or whatever number you’re seeking. That process I don’t think goes on in the early, early-stage companies obviously you’re talking about. So, how do you make sure as an investor that the choice they’re making really gets value for that scene, that the person that’s sitting there is going to add as much as that seat really needs to add.

Firas: Well, I think the key word you said was recruiting, so I think you should approach it as you are recruiting a board member and just like you’re recruiting a senior executive for your company, you have to start with what’s your strategy, what are your goals, what are you trying to achieve in the next two to three [00:19:00] years, what are some key resources or expertise you need to have to be able to achieve your goals.

Then that sort of percolates up to, “Alright, so for the independent board member, based on our goals and objectives, what would be the ideal profile? Do we need industry expertise? Do we need someone who can open doors for us? Do I as the CEO need some mentorship? Is that appropriate as a board member or as a CEO advisor separate from the board? Do I need someone to help me manage the board?

So, literally you start with what am I trying to achieve by adding this persona and then figuring out what does the persona look like, and then putting together a pretty typical recruiting process to go find that person. 

Joe: And you help the founders through that process? 

Firas: [00:20:00] Yes. It’s pretty typical for any investor to do that. We also have a talent management function and we do some recruiting for our portfolio companies. So, sometimes we actually help not just defining the persona, but also we help in recruiting the persona, but typically the entire board sort of tries to help in that process.

Joe: How do you, since it’s one, maybe one independent seat, how do you make sure that the CEO is not picking someone because they want someone that will support them, because they want some measure of control over the board versus the real value that that board seat can add. Is it a conversation? Is it something to you look at the people that they’re considering, what, what is it you do to make sure they’re really getting the most value as opposed to just wanting about trying to control the board?

Firas: Well, if that’s the problem they are solving for, they [00:21:00] would include with that some characteristics in that person that would actually be helpful, so you could still prioritize independence equals beyond my side, but still find a value-adding persona, so try to do both if you’re going to do that.

Raza: So, for us, this event is very unique in the cosmos that a new board or a new proper formal board is getting formed and it is a really, really important opportunity to set the board culture or the board’s function, actual day-to-day, it may involve a lot of tactical, but do you give them kind of like a checklist of things to do, like, “Okay, schedule your board meetings, get a D&O insurance, do this, this, this, when a board is getting formed and getting put into motion, so to [00:22:00] speak?

Firas: So, what we see is usually the Series A transition and in the deal itself, you’ll have a requirement for either formation or expansion or changes in the board. With that, there’ll be the request for D&O insurance and stuff like that. Those are the basics. Then once you get into the point of actually preparing for a board meeting, yes, we do have a checklist of things. We have a sample board deck. We have a sample KPI dashboard. We have a sample set of financials and stuff like that.

That’s a whole conversation around what is that checklist and how to prepare for it and all that. But there’s definitely sort of a basic set of tools and items that we provide to help them prepare.

Joe: At this early-stage, what’s the primary importance of the observers that you might invite into the room?

Firas: It just gives you an opportunity to have more [00:23:00] voices and perhaps more qualified voices. If, as you mentioned earlier, the fifth seat as an independent, the CEO wants to have an ally, and so they didn’t really hire or recruit the best persona, well, you can use the observer board seat to get the real value-adding independent investors.

The investors that don’t get a board seat sometimes ask for an observer seat because they want to be in the room and then I would say the observer seats tend to be for that subject matter experts, and then the other investors.

Raza: Yeah, at the early-stages I’ve always viewed it as, again, additional help, pair of hands, understudies and so on. It’s basically a startup could use all the help they could get.

Firas: Right. 

Joe: The role of the observer change as the company becomes more mature? Do you look for different characteristics, I guess, in a board observer, or does that [00:24:00] pretty stays the same? 

Firas: Not necessarily from a governance standpoint. These companies are still young enough and private that we don’t tend to get into those issues. I do think that you should sort of keep things fresh, so to speak, and so any board member really that has been there more than two years, it’s rare that you haven’t picked their brain dry. I think it’s good to kind of cycle people out.

So, one thing we do at Companion, if we still have a formal board seat after 18 to 24 months, we tend to have one of our venture partners basically take our seat, and in doing that, we’re also looking for some expertise that this person could bring that we are not bringing anymore.

I had a case of one company. It’s in the payments industry and supply chain industry. One of our board members is an expert on payments technology [00:25:00] and so I presented the idea to the CEO. She connected with him, loved him, and he took my seat basically and brought a wealth of information and expertise around the market that they’re in. It was a step function in being helpful because my help was all about early operational support and his help was all about market expansion.

Raza: I think it is refreshing to recognize and be self-aware that the board needs to be evolved, and I think in startup- and VC-backed boards over time they do for a number of different reasons. But Joe and I often talk that off-boarding is one of the hardest things, but being for you, for us, for example, to be aware, saying, “I think I need to add real different skills here at this moment,” is really, really great.

Joe: I echo that, that is not the typical attitude of [00:26:00] most board members, including investor board members, so I think that’s fantastic. Your actions are reflecting what your theory is because you’re saying we are going to put people in the room that are most likely to help this company at this stage. After a couple years, probably everything that maybe a board member has to offer to that company has been done. Now, you got to keep moving. What a valuable perspective, I think that is.

So, along those lines, how do you teach founders about how to keep a board healthy, if you will, and how to use a board in the most effective way it can be used?

Firas: Well, it’s very easy for the founder to know when things are not going well, so then it’s more trying to analyze and help that founder understand why they might not be going very well. I would say the number one reason for the board dynamics not feeling [00:27:00] very good tends to start with the company’s performance is not going well. A happy board tends to reflect great execution. An unhappy board tends to reflect poor execution. So, it’s trying to understand what is it about the execution that’s not satisfactory and then how to address that.

Sometimes the issue is board dynamics. You might be doing very well, but the people around the table are either have conflicting priorities, maybe some voices are louder than others, maybe there’s some egos in the room and so on, so forth, and that’s more people dynamics, and so you have to sort of coach a founder through how to handle people dynamics.

On the people dynamics, sometimes what we’ve had to do is to designate a board member to kind of help the CEO manage the dynamics, the [00:28:00] personalities, and the communication from the board to the founder and to management, and that tends to be extremely helpful when you’ve got three or four board members and board observers all throwing ideas at you and the priorities might be different. It might be a bit unclear and you sort of get dizzy with it, and so what we’ve done in some cases is designate one board member that would take all the input from all the non-management board members, package it in a way where it’s understandable and it gives clear direction rather than having four different pieces of direction. So, those are some of the ways that we try to manage that.

Joe: Is that person designated as the lead board member or chair, or does that not really happen?

Firas: It depends on how bad things are, like I’m on a board right now. One of our companies where [00:29:00] the Series B investor we sort of asked to be the primary feedback channel to the CEO, and so we use the executive meeting right after the board meeting to have a discussion among ourselves and then that investor board member then can communicate back to the CEO.

In some cases where it’s the investors that are causing the issue, you would have the independent be the designated person, and sometimes recruiting an independent for that function is necessary, but hopefully you already have one, and those are the approaches we’ve taken in the past.

Joe: I was interested to hear that even at this very early stage, your proponent of having executive sessions at every meeting, which I have felt for every board that I’ve ever been involved with or recruited before, I thought that was a fundamentally sound practice. I was a little surprised that you did it [00:30:00] for this early stage, but now that you’ve explained what you’ve just said, it makes even more sense because it does give potentially disparate group of board members who are just coming together a chance to talk to each other without the CEO in the room and that may be even more important at that stage than a later stage company.

Firas: It’s interesting to see some founders’ reaction to first hearing about this, and you get the, “What do you mean I’m not going to be in the room, you are going to talk about me behind my back?” And it’s like, “No, that’s not the point. The point is, Mr. Founder, if there’s a reason to talk about you behind your back, it’s going to happen.”

Joe: Right. 

Firas: That’s point number one. Point number two is, board members are very busy. They’re not going to try to find a different time to get together. The worst is when they have ad hoc [00:31:00] conversations, one-on-one, and they never have the opportunity to speak together as a group without you in the room to form a common point of view that can be communicated back to you, and what’s the best time to do that is when they’re already in the room, whether virtually or physically. So, just schedule it at the end of every board meeting and it’s so valuable because if things are not going well, it’s going to happen anyway and it might not happen the best way. It would be ad hoc, but if you provide them structure to do it, you’re actually helping yourself. 

Joe: Amen. I couldn’t agree more.

Raza: We are switching gears a little. AI is hot, but how is AI kind of creeping into the boardroom? Have you seen anything where either board members or founders and everybody is using AI to facilitate or make the board more effective?[00:32:00] 

Firas: Not really from a board member standpoint. I mean, obviously, all of our new companies are all getting formed as AI-first startups, and so preparing for board meetings, just like running the operation, tends to be somewhat AI enabled. Our board material is not that extensive where we need to get lazy and put it through chat to see like, “Tell me what the most important points are for this company.” It’s like, “Come on, it’s a 20-slide presentation with a spreadsheet. Read the damn thing.”

So, no, the only thing that we do at Companion is when we’re putting together our internal summaries for the team, or if we’re doing summaries for our investors, we use AI extensively to pull that stuff together, and yes, we’re being lazy in doing that, but it’s so much easier.

Raza: Joe and I came up with this fun imagined plot [00:33:00] experiment where the point where legally AI is allowed to vote as a board member at some point in the future because boards will start using AI as assistants and then it’ll creep up from there, and ultimately, you’ll have an independent director that is AI and that independent director then gets a vote. You know where that’s headed, then ultimately you need one human and one dog to keep the human busy in that type of situation.

But that was just a thought experiment. It’s way in the future. And I agree with you that for startup wars, it’s the summarization and all that is not real, like you really know what’s going on and you ought to know.

Firas: That’s okay. By that time, the founder will be a bot too, and then we can go on vacation.

Raza: It’s AI versus AI. 

Firas: Right.

Raza: Firas, we earlier alluded a little bit of that conflict and misalignment of different board members as, over time, we know that there will be different classes of shares [00:34:00] represented by different board members, and common as well, and so on. Now, the board is fiduciary to all shareholders and the company. How have you seen those misalignment conflicts, and especially, for example, if there’s a M&A offer and one series is going to make less money or no money in that deal versus the other. How have you seen mechanics or ways of resolving these misalignments and conflicts in early-stage boards?

Firas: I think almost by definition when board dynamics start to get shaky or people are not aligned, it tends to be when things are not going exceptionally well and then it’s different degrees of what’s the definition of things not going well. I think that if you get to the point where you’re actually thinking about the rights of different shareholders and who’s blocking who and all that, why are you [00:35:00] even thinking that? Because things might not be going well. And so it’s trying to understand how do we address that fundamentally, so that’s just getting at the core of the issue.

So, some examples of that would be different stages of investors, the angel investors and seed investors are more inclined to be pushing for an earlier exit because they have the longest tenure and typically the lowest valuation. Then the later stage investors that have come in last have the least tenure and the highest valuation. Their multiple expectations is a little lower than the early investors, but still it kind of works out to be where the latest investors tend to be the most patient. And then you’ve got some investors in between.

There are ways to address that, potentially through secondary sale of shares, and you should always, in [00:36:00] every round of funding, try to provide your investors an opportunity to sell some of their shares. Founders don’t think about that because all they’re thinking about is, “I’m raising money for the company, I don’t care about anything else.” Unless it’s secondary for them, and then it’s very important, so always be thinking about that.

The other thing is, with every round of funding, you get an opportunity to clean up your board, and one of you guys mentioned earlier, it’s like a bit awkward to ask a board member to get off the board. Well, the best time to do it is when you’re raising a round of funding and you go ask the investor who’s giving you the term sheet, say, “Hey, do you mind putting in something in there about changing the board composition and be the bad cop?” And most of them would be happy to do that.

Then I think when it comes to M&A, this is something I’m very passionate about, and it’s this concept that most startups don’t [00:37:00] IPO. So, by definition, you are going to get acquired, accept that and get over it. It’s just a question of when and how big.

Really, to control your destiny, you might as well start an M&A process yourself and let it take a year or two to happen. So, getting your board aligned around that concept will help bring out any priorities that board members have when it comes to that topic and it gives you the opportunity to suss it out a little bit and have a discussion about it and to understand, “All right, what are the different priorities here? And if I have some investors that are looking for some liquidity, let’s try to figure that out. Let’s try to find some funding that would do that.”

Raza: Yeah, I think often we say that maybe every other board meeting there should be a slight topic even if not too deep about exit, so that you have that conversation kind of always in the [00:38:00] mind also because you have to prepare with the end in mind.

Firas: Right.

Joe: Terrific conversation. Thank you so much for joining us today.

Firas: My pleasure. Thank you for asking me. This was fun.

Joe: I’m glad you enjoyed it, and thank you all for listening to On Boards with our guest, Firas Rouf.

Raza: Please visit our website at OnBoardsPodcast.com. That’s OnBoardsPodcast.com. We would love to hear your comment, suggestions and feedback. If you’re not already a subscriber, please be sure to subscribe at Apple Podcast, Spotify or wherever you get your podcast, and remember to leave us a five-star review.

Joe: And please tune in for the next episode of On Boards. Thanks.