Les’ definition of a board is a group of people who meet together in a group at one time to discuss the vision of where the company is going, what the CEO/MD is doing to bring the company there and whether it is correct.
1. you want a balance of skills
2. Can have friends on the board in the initial phases – but that’s only a step and will likely be done after two years
After that, what skills are you looking for on the board? You want outsiders with specific skills.
3. A board appointment is not a life-time appointment. When Les is a board member, he gives the CEO/MD an unsigned letter of resignation to put that power in their hands. Les feels that 4 years is long enough – first year learning about the business. Middle two years, giving a lot of value. Last year, Les is getting bored and ready to move on.
4. How many people? In the beginning – you and two others. Because if you have people on your board, you have to give them air time. Avoid people who don’t talk. Then 4 and you. 7 is the max when you have investors.
5. Compensation – early stage companies don’t pay. If the possible board member is interested in the person and company, then they should go on for free (+/- dinner) – especially if quite successful in their own right. Once you get outside investment, in the USA there is a set of standards for venture backed companies – then there is payment, which is quite standard.
Regarding the dinner – it is about learning. You can learn a lot at the dinner if you LISTEN.
6. If an organisation doesn’t have quarterly numbers, that’s a red flag!
7. The other side of the coin is us being on a board – it is a fantastic laboratory for learning and seeing how a company runs and how different people deal with different problems.
8. Recommends that during startup phase, should meet every 6 weeks, because the rate of change is so great. Then 2 months. But in $10+ million revenue range, more like quarterly.
Disadvantages of the Board
- Takes time
- Legally liable
Things to watch out for
- Watch out for people who won’t stop talking – make sure everybody has a chance to speak during the meeting. The agenda should be:
- Issues that concern the CEO (don’t expect the board members to read loads prior to the meeting)
- Issues that the board think are important
- Senior management team rotate in throughout the year – they come in, introduce themselves, discuss issues, so that by the end of the year, everyone has been seen/heard.
- Need to be able to run a meeting – and the CEO must be organised and be able to answer questions
- The more time spent on financial statements, the less the meeting accomplishes, because this is looking backwards rather than forwards. So send these out beforehand with some comments, and get questions ahead of time.
- The more the board understands the metrics of prediction, the better the discussion
- The board needs to be involved in strategy decisions early.
Les recommended that we write down our personal strategy to get on somebody else’s board.
- Decide the area of business in which I want to be on a board
- Likely a medical device or medical software company, at a later stage of development eg revenue – generating or about to be
- Identify my key skill set offerings
- Clinical knowledge
- Technical knowledge
- New business model / marketing knowledge
- Identify companies that fit both these
- Design a strategy for reaching out to these and sell my skills