Board of Directors

What the greatest technology investors say about Boards of Directors


The following is a list of the post titles by author under this topic.  Scroll further down this page to find the actual blog post by your selected author.   Author’s posts appear in reverse alphabetical order.  For example, following this list, Fred Wilson’s posts appear towards the beginning of the blog page, and Brad Feld’s post appears towards the end of the blog page.   

BRAD FELD (1 post)

Brad Feld:  Brad Feld:  Tips for Productive Board Meetings


Jason Mendelson:  Investors Only Care About Returns & Control

BABAK NIVI  (1 post)

Babak Nivi:  The Biggest Mistake Entrepreneurs make when Raising Money

FRED WILSON  (8 posts)

Fred Wilson:  Fred Wilson: Never Seen VC Board Control in Early Stage Deals

Fred Wilson: Options have Board Oversight

Fred Wilson:   Fred Wilson: Board Chair Responsibilities

Fred Wilson:  Fred Wilson: Thoughts on Well-Functioning Boards

Fred Wilson: Fred Wilson:  Board’s Role & Responsibilities

Fred Wilson: Fred Wilson: Board’s Main Job is Providing Strategic Advice  

Fred Wilson: Fred Wilson: The Reality of Founder Control

Fred Wilson: Board Member Chemistry is Critical

Board Member Chemistry is Critical

Fred Wilson venture capitalist and Co-Founder Union Square Ventures

“[] Chemistry among the Board members [] is critical to a well-functioning Board [] [just as it is among team members.]  [] Chemistry [] must be strong [] [with mutual respect and reliance] on each other's strengths to [make] right decisions.”  Investing in chemistry should be for the long term including participating in activities outside the Board room.

“Unless [a] Director has a contractual [Board seat or a unique skill], [Wilson recommends removing that director who doesn't fit in and] replace[d] [] with someone with similar skills who will in fit better.

[][A] company needs a strong Board and [the CEO] must do everything [to ensure getting one including getting input from other entrepreneurs and CEOs to improve the Board]. [] [If certain directors can’t be replaced, Wilson advises adding independent directors] to balance them out [] [to] build chemistry between the independents and the investors.” Changing 1 or 2 directors can change chemistry.

“[] [A well-constructed, well-managed Board with strong chemistry functioning effectively] [] is a tremendous asset to a company.”  Fred Wilson, The Board Of Directors: Board Chemistry,  Mar. 26, 2012;

Fred Wilson: The Reality of Founder Control

Fred Wilson venture capitalist and Co-Founder Union Square Ventures

Wilson discusses company control.  “In theory, [company control] rests with the ownership split between the founder and the investors and how the Board [] is set up. If the founder/entrepreneur owns more than 50% of the company and controls more than half of the board seats, then he or she has “control” [].  But in reality [Wilson has] found things are very different than that.  And it all comes down to two things:  1) How well the Company is performing;  2) Whether the Company needs more investment capital and where it’s coming from.

[] An entrepreneur or hired CEO can own as little as 5-10% [] but [have control]” if the company is performing well with substantial cash flow and no need for additional capital.

“An entrepreneur can control 95% [] and all [board seats] but [] easily lose control” if the company is struggling, needs more cash and only existing investors would consider putting up cash. 

“[] VCs have control when things don't work. Entrepreneurs have control when they do.”  If a founder wants to keep control, the company must perform well, have plenty of cash and not risk running out of cash.     Fred Wilson Entrepreneurs Have Control When Things Work, VCs Have Control When They Don't, July 25, 2012;

Fred Wilson: Board’s Main Job is Providing Strategic Advice

Fred Wilson venture capitalist and Co-Founder Union Square Ventures

The Board’s primary job “is providing strategic advice, accountability and feedback to the CEO and the management team. [] [It also] provide[s] oversight on [] financial statements, [] compensation plans and [ongoing Board maintenance].

[] A [key question] is “when is a Board big enough to need committees?” [for these responsibilities].  A three person Board should not have committees. [] A five person Board could have committees and should [if there’s much audit and compensation work].  A [seven+ person Board] should [] have committees.”

The 3 most common committees are:  audit, providing CFO function oversight and related issues; compensation, providing oversight creating and managing compensation plans, especially for the CEO and senior management.  Its goals are “to attract and retain the best talent [possible yet insure compensation isn’t so generous it results in a loss of shareholder value to management and employees]”; and governance, which oversees Board composition and other “self-governing” matters.

“[Wilson likes] three person Board committees with one chair and 2 other[s], [believing it most efficient]. [] Strong, well led [engaged] committees [] make for better Boards” because they handle necessary logistical work.  That frees the Board to offer substantive strategic guidance “where Boards can add the most value”.  Fred Wilson The Board Of Directors: Board Committees, Apr 9, 2012;

Fred Wilson: Board’s Role & Responsibilities

Fred Wilson venture capitalist and Co-Founder Union Square Ventures

“The Board of Directors is the [company’s governing body].  All major decisions [require Board ratification, including approval to sell, hire or fire a CEO, make major acquisitions and do major financings, including an IPO].”  All strategically significant issues need Board involvement and support.    

“[][The] Board should not run a company [][but ensure] the right team is at the helm []. [Boards] must always act in the best interests of the company and its major stakeholders:  [] employees,[] customers, []shareholders, [] debtholders, [etc.]   [] The company works for the market [] and the Board and the management team work for the company.” 

Often, as director a right answer isn’t straightforward.  “There are no formulas [][nor “right answer”].  Only time will tell if the right decision was made [which can be debatable].” 

A good board is engaged, debates openly and honestly and tries reaching consensus.  The Chairman should drive the Board.

CEOs shouldn’t manage the Board. “A great Board manages itself, [] treats the CEO as a peer, [and considers the CEO's opinion,][but isn’t] a rubber stamp.  [It] pushes the CEO and the company to make the most of [presented opportunities and asks necessary hard questions]. 

[] [Boards] should evolve [with members changing occasionally, and some but not too much churn is good.] [] Boards should always be looking for new blood.”  Fred Wilson, The Board Of Directors: Role and Responsibilities, Mar 5 2012;

Fred Wilson: Thoughts on Well-Functioning Boards

Fred Wilson venture capitalist and Co-Founder Union Square Ventures

“Every company should have a Board of Directors. []  [Benefits] include [] advice, counsel, relationships, experience, and accountability.

[Shareholders] elect the [Board] [] [usually via] a nominating entity that puts directors up for election by the shareholders. []

[Wilson likes] a three person Board early on in a company's life [including the founder with two others he trusts and respects].

[] [Investors sometimes negotiate a Board seat - less common for angels, moreso for VC’s].”

A founder can still control a three or five person Board.  “As a company moves from founder control to investor control, [an independent director is considered]. [] [Wilson likes] independent directors [].  The more independent minded the Board [], [usually the better].

[][Wilson argues] that an investor controlled Board is the worst possible situation” since an investor’s interest is narrowly his financial return, not a broader company perspective. “[Investor directors should not control the board.] The founder should control the board in a company he [] controls and independent directors should control a board where the founder does not control the company.

[] [Boards should evolve, recruit new members regularly and have term limits]”, preferably 4 years. 

“Most importantly, build a great board.”  Fred Wilson, The Board Of Directors - Selecting, Electing & Evolving, Mar 12, 2012;

Fred Wilson: Board Chair Responsibilities

Fred Wilson venture capitalist and Co-Founder Union Square Ventures

“The Board Chair runs the Board of Directors [and] is a Board member with the same [] responsibilities as the other Board members. [He also ensures the Board functions:] [meeting regularly], [getting the CEO what he needs from the Board],[ensuring all members contribute], [and giving the CEO a single contact on various issues]. []

Small boards (three or less) don't really need Board Chairs. [] At [seven +], [Wilson] believe[s] it is critical to have a Board Chair.”

Although common, Wilson doesn’t believe the founder/CEO should also be Chair. “[] [Wilson] think[s] the Chair should be an independent director who [helps] the CEO manage the Board.

[] When it works, the Board Chair role is hugely impactful.  It allows the CEO to spend [his] time [] running the business and not worrying about the Board.” Fred Wilson, The Board Of Directors - The Board Chair, Mar 19, 2012;

The Biggest Mistake Entrepreneurs make when Raising Money

Babak Nivi Co-Founder AngelList and Venture Hacks and angel investor

Nivi says “the biggest mistake entrepreneurs make when [] raising money” is that “[they] focus on valuation when they should be focusing on controlling the company through board control and limited protective provisions.   (Protective provisions let preferred shareholders veto certain actions, such as selling the company or raising capital.)

Valuation is temporary, control is forever.  For example, the valuation of [a] company is irrelevant if the board terminates [the founder] and [he] [loses his] unvested stock.

The easiest way to maintain control of a startup is to create good alternatives while [] raising money. If [the founder is] not willing to walk away from a deal, [he] won’t get a good deal.  Great alternatives make it easy to walk away.

Create alternatives by focusing on fund-raising: pitch and negotiate with all [] prospective investors at once. This may seem obvious but entrepreneurs often meet investors one-after-another, instead of all-at-once.

Focusing on fund-raising creates the scarcity and social proof that close deals.  Focus also yields a quick yes or no from investors so entrepreneurs can avoid perpetually raising capital.”  Babak Nivi, What’s the biggest mistake entrepreneurs make? , October 14th, 2007; Why do investors want protective provisions? August 2nd, 2007;

Investors Only Care About Returns & Control

Jason Mendelson venture capitalist and Managing Director Foundry Group

Generally investors only care about returns and control when making investments.

“[Entrepreneurs] should focus on terms like pre-money valuation, liquidation preferences, board of director elections, drag-along rights and protective provisions.   Most [other standard term sheet terms] aren’t really all that important.  [] Many of these terms have interdependencies and it’s important [to] understand how terms such as option pools, warrant grants and  the election of independent board members will affect returns and control.” Jason Mendelson, Do More Faster  by David Cohen & Brad Feld  copyrt 2011, Get Help with your Term Sheet  pg 238

Brad Feld: Tips for Productive Board Meetings

Brad Feld venture capitalist and Managing Director Foundry Group

“I’m a huge believer in distributing the board material a few days in advance, having all the board members comment on it in advance of the meeting, and then having the meeting without going through the board material page by page. [] My favorite board meetings are the “one slide board meeting” where the only piece of paper allowed in the room is the agenda []”.  Brad Feld Categories: Board Meetings  Tags: board, Board of Directors, Google Doc, January 16, 2013;