Boreds
Or, why your startup should resist holding board meetings for as long as possible
The conventional wisdom is that as soon as your startup raises money from “real investors,” you should have a real board of directors that meets regularly. Many investors insist on it as a condition of investing, even at the earliest stages–including before product-market fit.
A “real board” could just mean the founders, plus one outside investor, or it could be something more elaborate with five or so people. (Of course, legally you’ll always have a board. It might just be one person.) You’d meet in person every month or every 2–3 months, with some materials you prepare. Boards promise to give you, the founder, guidance, while protecting the investor’s interest in the company — and some note that being a board member elevates expectations of investors.
This is a convention we should all challenge. The mere choice to have board meetings too early in a company’s life can destroy value. It frustrates me endlessly:
Boards are probably the most consistent time sink for venture-backed companies. Founders tell me they may spend a day preparing for their board meeting — an enormous tax on a time-starved team. Let alone the mental cycles founders inevitably go through: “how do I balance telling a good story to keep them positive with getting real input from them?” (But “my boards aren’t like that,” thinks the well-meaning investor.) I saw a CEO once make the mistake of truly opening the kimono. “These people invested, they’re now on my team, I can be honest with them.” The feedback? “Why is this presentation so unpolished.” Board members often claim they want a meaty substantive discussion — and when they get it they realize they really wanted a lullaby and some time to check email. (Of course, there are many investors with whom time is always well spent, even if it is in a board meeting — their greatness shines through.)
The cadence of a day-zero company is a mismatch with that of a board. You are on daily, or maybe weekly time scales for important decisions. The true board meeting for a day-zero company might be: “Ran some more product-market fit experiments. Have yet to achieve product-market fit.”
Boards encourage “playing house.” Have a board? Maybe you need some financial projections. Are you pre-product-market fit? Or yet to earn any revenue? Well, still, try your best.
The investors in VC funds (LPs) often want to see their VCs on boards and see “ability to get a board seat” as a positive signal — maybe that explains why so many VCs argue boards are important?
One of the best reasons I’ve heard for boards at the earliest stages of a company is that it’s good practice for your future board meetings, after you raise that big Series A. This is true — and who cares. You have better things to do with your time than practice running a board.
The corporate board as we know it is an antiquated institution. It’s a descendant of the British and Dutch East India Companies and other similar early corporations — from the 17th century. I called the author of a terrific history of boards, law professor Frank Gevurtz, and he reinforced that boards were created originally for one purpose (representing shareholders in the way that we have a Congress instead of direct democracy) and later evolved to serve others (e.g., providing advice). Professor Gevurtz even said the right question is less whether a startup should have a board, and more whether a startup should be a corporation at all… (That’s a subject for another post.)
Today, there are better alternatives. An email update, followed by a conversation. Being on Slack together (where our fund, Bloomberg Beta, built a channel we share with all our founders). The decisions that surface this way are often closer to what the business really cares about than the “told stories” prepared for inevitably-too-formal board meetings. I’ve seen founders assume they need a meeting for option grant approvals or somesuch. Nope, you can do it all by email.
Of course you want committed investors who put in time to help you — and you need to set that expectation regardless of whether you have a board. Without the schedule tax of board meetings, committed investors like us at Bloomberg Beta have even more time to help you win: introduce you to customers, close your recruits, use your new product version so we understand it, give you ideas on how to go to market, and respond to the emergency bat signals you put up.
Some people say, in effect, “I can make a board less bad.” Why start with a broken institution when you can just skip having it at all? If you want to find ways to get input, great. Find other forcing functions. And, if you call your regular update email followed by a chat on the phone a “board meeting” then of course that’s fine. (There is a whole other issue here: eventually, the company’s kitchen cabinet might be different from its legal board members.)
So, when should you start having real board meetings? Only when you must.
Eventually, the pain will be too great. You’ll have a Series A investor who requires a board. By that time, hope the cadence of your business looks more like a board’s — deeply important decisions every few months. In later-stage companies, boards can be terrific — a mechanism for ensuring discussion (and, more important, building personal relationships and trust) among a diverse set of owners, a way to vet big choices.
To check my gut on all this, I asked people involved in some of the best startups ever if they had good boards at the earliest stages. The answer, more often than not, is their boards were a mess. Some of the best-known founders in the world boast about how they texted under the table while their legendary investors debated the finer points of company strategy.
For Bloomberg Beta, do we avoid investing if there’s a board? If the members are great, we understand others see the world differently and we’re fine to invest (though we avoid sitting on the board ourselves). If it looks like a dysfunctional board, that’s an issue. And, if asked, we always suggest the startup consider skip having a board at all (at least at our so-early investing stage). Despite this, we may devote as much time, or more, to a startup as its actual board members (and we recognize our usefulness might come in waves, a fact that’s easier to see without board meetings).
The coda: we just agreed to serve on our first board. Why? The founder asked. I resisted, several times, and gave him a version of the above plus our public view on boards in our open sourced operating manual. He insisted, and made a case. He’s my customer and I respect his views, so I agreed. We’ll try to make it as “unboard like” as possible.
Thank you to Professor Frank Gevurtz, Ivan Kirigin, Ted Wang, Hunter Walk, Itzik Ben-Bassat, Justin Wohlstadter, Leo Meyerovich, and the Bloomberg Beta gang for your comments (and many disagreements!).
