Building better boards
Part Two: Board management
In my last blog, I drew on some of my experience and research to explore the basics of board composition and its purpose. While common wisdom might hold that boards are just a compliance box to be ticked, I argued that a well-composed board should bring a competitive edge to your startup.
In part two we’re going to take a look at board management and its evolution. It’s worth remembering that, like companies, all boards are different. When and how it meets will depend as much on people’s preferences and context as anything else. Still, it’s important to think about, to ensure that as a founder you’re maximising the advantages a great board can offer.
Matching your board to your needs
In Part One, we established that UK companies hold a legal obligation to have a board from the outset. But while a board needs to be set-up from the get-go, it’s important to bear in mind that a board should offer different things in line with what companies need at different stages across their growth journey.
For a pre-revenue startup, with a handful of employees but ambitions to create a business that fundamentally disrupts how things are done in its industry, board members need to be extremely active, and expertise will be more critical in certain areas. During a company’s early stages, a board with a deep understanding of product development or customer discovery, for example, will be more useful than one made up of specialists in operational controls or HR.
Later on, when the business has achieved product-market fit and is ready to scale, growth-oriented activities become more important. For companies at this stage, a board will be critical in fine-tuning its go-to-market strategy, advising on expansion plans in a new geography, or helping hire the top talent needed to scale. Fundraising rounds offer a good opportunity to re-assess your board composition and re-calibrate what’s needed going forward.
Founders need to think about these changing needs well in advance. It’s yet another good reason to cultivate a strong network. Individuals who have already scaled their business can offer unique expertise to companies at an earlier stage.
ValueBlue, one of my first investments at Octopus Ventures, offers a great example of good practice in this regard. I’ve watched first-hand as their Chairperson, Bob Potter, has supported the company’s plans of bringing their enterprise business transformation software across the Atlantic well in advance. His knowledge of the US ecosystem, and track record of successfully scaling tech firms in the US, has made him an invaluable figure in ValueBlue’s across-the-pond expansion.
How to run them
With the right people onboard at the right time, the next thing to consider is the practical question of how board meetings should be structured, and how often the board should meet. While researching, I was amazed by the level and diversity of thought given to these two simple questions.
Some boards meet every month, others every quarter. Some meet for one hour via Zoom, others have in-person deep-dives for four hours. Some combine all these options. Ultimately though it boils down to the boards’ preference (especially the founders’), the context, and the stage of the business.
For many companies, the covid pandemic was instrumental in re-calibrating the CEO’s relationship with the board. In a state of uncertainty, board meetings became more frequent. The pooled expertise of its members helped steer many businesses through rocky waters.
In less challenging times, an early stage startup is going to undergo considerable change over a shorter period than a more established enterprise. Unexpected obstacles will force sudden, and potentially dramatic, shifts in strategy. In moments like this, the collective input of a board will be more valuable than ever, which is why at a pre-Series A stage, board meetings are usually held monthly and communication is frequent. Typically, as a company scales, board meetings become less frequent. I’ve seen the most success with short monthly calls, and longer sessions once every quarter.
But besides the cadence of meetings or calls, or how short or long your board deck is, what’s most important is to get the best out of the bounty of expertise the collective board members can bring to the company. Linked with the central purpose of a board, having a profound discussion that helps the CEO make the best decision will be far more generative than looking at a detailed deck, reporting line by line how the PnL has evolved month over month. Your board members can do that in advance on their own. The real utility of board meetings — and boards themselves — lies in the sharing of expertise, to drive your pioneering company’s growth to the scale it demands.
A valuable resource
After a little under a year as a board observer, I’ve seen first-hand that the narrative of an oppositional relationship between a company’s CEO and its board just isn’t correct. A board is best understood as a valuable resource, and if well set can offer a strong advantage in a crowded and competitive ecosystem.
To discuss any thoughts about the set-up or evolution of your board, please do get in touch. You can reach me on [email protected].