So you’ve selected your investors, negotiated the financing documents, closed the funding round and deposited the check.  Now the real work begins.  You’ve sold your vision to investors who now expect you to deliver on the promise of your plan and to build a viable, growing and eventually, a profitable business.  The first steps you take with your new investment partners will set the tone for your future relationship and how you work together through the challenges that inevitably lie ahead.  The road from start-up concept through to your destination of a successful and viable business is akin to running through a mine field at night.   You will improve your odds of success (both as a business and as an executive) by making your investors and board members true partners – leveraging their experience and resources – and bringing them into your inner circle of trust.

To be fair, the board of directors, representing your investors and perhaps outside industry expertise, does not want to manage the business “for you” or even “with you.” Rather, they want to partner with you to achieve success.  As the company leader, your job is to set and manage the framework for that collaboration. In the first 90 days after the financing:

• Set a board meeting schedule for the next year.  As simple as it seems, taking the lead here sends a message about your desire to engage your board.  While busy schedules make this process a challenge, I usually advocate for monthly meetings early on.  If possible, schedule a board dinner prior to the board meeting so that the folks sitting around your table will get to know each other on a more casual footing.  This is a chance to build the bonds upon which your future relationships will be based.

• Schedule a full-day offsite meeting for your third board meeting.  This gives you an opportunity to learn your board’s interests and pressure points at the first two meetings and then incorporate that knowledge into your offsite session.  The goal of the offsite board meeting should be to 1) develop a common understanding of your business amongst the participants, 2) agree to the strategic framework around which you will develop and business the business, 3) identify and articulate the critical business metrics around which you will measure the progress of the business, and 4) agree to the level of reporting and the associated framework around which you and the board will discuss the progress of the business.  Bring your executive team in for key segments of this meeting – give them some face time with the board to reinforce access and accountability.  This is your opportunity to demonstrate mastery of the key business drivers while developing an atmosphere of “we” at the board level.  CEOs that are disconnected from their board often find themselves disconnected from their company.

The first 90 days is not the end of the process of building effective board relationships, it is the beginning of a process that requires continually cultivation:

• Meet with your board members on a regular basis outside of the board meeting.  Board meetings are great opportunities to “sync” management and the board, but many times critical questions are not asked in this environment.  You want those questions on the table and in the open so that they can be addressed.  One-on-one is a great way to do this.  These meetings also provide a great opportunity to ask for assistance and/or guidance from your board members or brainstorm.  Again, you are building relationships based upon trust and respect that you will need down the road.

• Organize your board meetings so that there is time to tackle one significant business or strategic issue as part of the agenda.  Use the directors as a sounding board for making better decisions around these issues.  Present the question/problem, the considerations and constraints, and potential alternative approaches.  This pulls the board into decision and develops a sense of shared ownership for the eventual outcome.  The guiding principle with these types of decisions is “no surprises”.

• When there is BAD NEWS (and there will be) – get ahead of it.  Effective leaders are proactive in acknowledging problems and attacking them.  Experienced board members understand there will be problems on the road to success – a good board will become part of the solution if you give them the opportunity.  What they don’t like are surprises.  Transparency engenders trust, and trust is the key to navigating through troubled waters.

• Incorporate your management team in board meetings.  This allows the board to calibrate your team while also developing a sense of accountability to the board for members of your executive team.  Experienced board members can often identify team members that may be challenged as a team and an enterprise grow.  Performance and scaling are about people – your board can be an “early warning” system if and when you begin to grow through the experience and capabilities of a member of your team.

Time is your most precious commodity – at least when you have money in the bank.  Developing a strong and supportive board relationship may not have the immediate payback and satisfaction that you get from extinguishing a fire within a critical account or jump starting a stalled product development process, but the time will come when your personal and business success are likely to come down to the relationship you have with your board.  If you delay in building the trust and confidence that underlie a strong partnership, you do so at the peril of your business and your career as an entrepreneur.  No one plans for failure, but they are a fact of life in startups. Should you join the legions of entrepreneurs that fail in one of your outings, strong relationships and recommendations from your board can often become the foundation for your next startup.

Bob Ackerman is the Founder and Managing Director of Allegis Capital and formerly a successful serial entrepreneur. In his spare time, Bob teaches New Venture Finance at the University of California, Berkeley in the MBA program and is active in the non-profit world, focusing on education and the arts.

Top photo credit: Shutterstock

Yahoo chairman Fred Amoroso has resigned from his post and will step down from the board on June 25, a move that should give CEO Marissa Mayer more power and a board she can trust.

Amoroso was appointed chairman in May 2012 following the resignation of then-CEO Scott Thompson and chairman Roy Bostock. That was a particularly painful moment for Yahoo because Thompson was only CEO for four months and the company desperately needed leadership. Amoroso was charged with getting the house back in order.

Business Insider reports Amoroso’s first choice for CEO was Ross Levinsohn, who became interim CEO following Thompson’s departure. But the board ended up choosing Mayer, a charismatic former Google executive. Amoroso went along with the decision, but his hard push to install Levinsohn created a trust gap.

So it’s time for Amoroso to move on.

“When I took the position as chairman, I told the board that my intention was to serve for one year, in order to help Yahoo during a critical time of transformation,” Amoroso said in a statement. “In that time, Yahoo hired a great new CEO, brought on a fantastic management team, revitalized the employee base, and has begun to release top notch new products. With Marissa at the helm and the leadership team in place, this is a natural time for me to transition off the board, consistent with what I said a year ago.”

Mayer has an awfully tough job. She’s trying to turn Yahoo around and make it an influential product and services company again. So far, she’s succeeding. Yahoo’s latest earnings report looked good, and the company recently released several flashy new mobile apps that show how serious it is about owning mobile. She also just helped steal away classic Saturday Night Live content from Hulu.

With Amoroso gone from the board, Mayer can continue her quest to turn Yahoo around with people she trusts. LiveOps board member Maynard Webb will serve as interim chairman while the company decides how to fill Amoroso’s vacancy; Business Insider says Webb probably will not become the permanent chairman.

The most likely choice to replace Amoroso? Marissa Mayer.

Corrected 4/30: Maynard Webb is a board member with LiveOps, not its CEO. 

Marissa Mayer photo via Eduardo Arcos/Flickr

This is a guest post by Eran Laniado, the managing director of BMN!.

Has this happened to you? You needed to consult with a friend about an important matter, but when you finally met, you realized that he was hardly interested in your problem. Even worse, he half-heartedly gave you vague and remotely related advice. Could it get more frustrating?

Similarly, a CEO may feel that the board of directors does not help the company. She may be right — board meetings could be a waste of time; board members may be unproductive or burdensome; in the worst cases, lack of board cooperation may prevent a successful exit. Kevin Rose got an offer to sell Digg for $60 million a few years ago, but his board rejected it. Digg was sold for mere $500,000 back in July 2012.

Board ineffectiveness often stems from board nomination mistakes. Here are five big mistakes that are often made when choosing board members — and, maybe more importantly, tips on avoiding them.

1. Wrong People on the Board

Board members can be great resources who provide support, knowledge, and access to unique professional networks. Unfortunately, not all board members offer such value.

For example, some board members prioritize the interests of the investors or founders whom they represent far above those of the startup.

Scott Kurnik, an experienced entrepreneur and investor, advises not to nominate to the board anyone reporting to the CEO. Interestingly enough, he also suggests putting the founder’s best friend on the board.

Additionally, one should be careful of five types of dysfunctional board members as defined by Jack and Suzy Welch: The Do-Nothing; The White Flag (will do anything to avoid confrontation); The Cabalist (driven by personal agenda); The Meddler (dwells incessantly on details); and The Pontificator (only enjoys hearing himself speak).

How to avoid this mistake:

• Carefully consider board nominees and ask for feedback from people who have worked with them.
• Appoint at least one independent director, loyal to the company only.

2. Misalignment Regarding the Board’s Role

Boards of directors have many fiduciary and legal responsibilities. Still, boards often have additional roles, correlated with the venture’s stage.

At early-stage startups, members should support the management (without micro-managing it). For example, they may help guide product decisions or provide access to recruits, customers, and investors. Ideally, board members could also mentor founders. More established startups, however, may need a different type of assistance related to scaling sales, engineering, logistics, and other functions that no longer fit into a garage.

The above roles differ from those at publicly traded companies, where board members extensively monitor the firm’s performance and confirm that the management does not put its interests before the company’s (“the agent problem”).

Matt Blumberg, the CEO of Return Path, provides a useful summary of what makes awesome board members.

How to avoid this mistake:

• Check whether the candidate has board experience with firms of similar stages and needs.
• Discuss with the candidate expectations of the board’s role and responsibilities.

3. A Homogeneous Board

It is important not to form a board of too similar profiles (e.g., all are engineers or all have similar VC backgrounds) and to diversify your startup to confirm that the various required skills are in place.

David Roth, the co-founder of AppFirst, described recently how the need to balance the board guided his startup’s decisions.

Aileen Lee of Kleiner Perkins Caufield & Byers has an interesting argument, that the next board member should be a woman, especially if women compose a significant portion of the venture’s users.

How to avoid this mistake:

• List the skills and experience needed from the board (Product design? Customer acquisition? Partnerships? User experience? A great rolodex?).
• Consider rejecting solid candidates whose skills and experience are common within the board in favor of candidates who possess the missing skills and attributes.

4. Too Many Board Members

An entrepreneur once complained, “My board keeps on growing.” VC-backed startups often encounter this problem when a new round of financing entitles investors to board seats. Sometimes, “observer rights” increase the number of attendants even more.

At some point, a board’s growth has diminishing returns. For a startup, a ten-person board will rarely be as engaged and helpful as a smaller one will. Further, the logistics (assembling everyone, arranging one-on-one time with the CEO before board meetings, etc.) become exponentially more complex. Fred Wilson from Union Square Ventures thinks a board of five members is ideal. He recommends no more than 7 board members (two founders, one to three VCs, and one to two other industry professionals).

How to avoid this mistake:

• Negotiate the number of future board seats entitled with investors in the shareholders agreement.
• Prefer nominees who will agree to leave the board when it grows or when their skill sets become less relevant.
• Consider building a board of advisors to access additional experience without increasing the size of the board of directors.

5. Poor Organizational Fit

Some board relationship problems can harm the company severely. For example, board members who get involved in day-to-day decisions instead of supporting the management (or replacing the CEO, when necessary) can inhibit the CEO’s ability to lead.

Another problem occurs when board members accustomed to aggressive corporate cultures meet a CEO for whom “aggressive” equals “rude.”

Furthermore, pushy board members can cause CEOs to commit to unrealistic plans. It’s true that CEOs are responsible for their own decisions, but they can still be unduly pressured, especially when the board member is an investor (whom an inexperienced CEO may feel obligated to please).

Last, some board members may be professionally adept, but they do not show interest in mentoring the management, nor can they successfully interact with other members, bond, or build team spirit.

Steve Blank provides a painful example of poor relationships between one of his ex-students and the chair of his startup.

How to avoid this mistake:

• Check each candidate’s track record (tenure, reasons for leaving, relationships developed) as board member at other firms.
• Replace board members who negatively impact the board’s internal relationships. This is not easy, but in extreme cases, it is necessary.

Eran Laniado advises multinational firms and mentors entrepreneurs. He gained corporate experience as VP of Business Development & Strategy of a NYSE traded firm and as a member on boards of directors. He writes about strategy, business models, and innovation on his blog on bmnow.com and can be followed at @EranLan.

Board meeting image via Monkey Business Images/Shutterstock

Yahoo brought PayPal cofounder Max Levchin on its board today, but while it gains a well-known Silicon Valley entrepreneur, it loses two other members: The Weather Channel’s David Kenny and Intuit’s Brad Smith.

Yahoo released a statement today announcing the new addition. Other than cofounding PayPal, eBay’s payments arm, Levchin also ran a social company called Slide that Google later acquired and shuttered. Levchin is otherwise on the board of Yelp and is a director for note-taking service Evernote.

Marissa Mayer, the current chief executive of Yahoo, explained, “Max is someone I’ve admired throughout my career for his phenomenal sense for great productions and keen focus on user experiences.”

This reinforces the idea of Mayer as a product-focused CEO, concentrating Yahoo on what it can build for its customers.

As Levchin enters, however, two other Yahoo board members are stepping down, bringing the total to 11 Yahoo board members. Mayer stated that that both of them had “critical roles in bringing me to Yahoo” and that they both were instrumental in the recent buyback agreement made with Chinese e-commerce company Alibaba. Kenny joined Yahoo’s board in February 2011 and Smith in 2010.

A spokesperson for Intuit said Smith, “decided not to stand for re-election so he could focus on his role leading Intuit along with his ongoing participation in industry groups and organizations like the CEO roundtable.”

Max Levchin photo via Joi/Flickr

This is a guest post by entrepreneur, Mark Rogers

Most entrepreneurs have their own board of directors, yet very few serve on others, despite the mass of experience they could gain from joining one.

Many want to serve on a board — for professional development, business development, or perhaps just to give back to their community through a non-profit organization — yet don’t know how to get themselves there and don’t have the free time to figure it out.

The overwhelming majority of board members obtained their board seats by knowing the right people. But what do you do when you don’t know anyone on a particular board or its management team and you want to get involved?

Understand the Recruitment Process

The boardroom recruitment process differs depending upon the structure of each company. For example, a public company has a fairly sophisticated process that entails shareholder approval. For most non-profits and non-closely held private companies the process for appointing new board members usually begins with the board’s nominating committee. This process is less than sophisticated.

The committee usually convenes a few months before director terms are set to expire and begins identifying candidates. Most often, this is done through the old-fashioned “who do you know” conversation.

Manage Your Expectations

Despite the wealth of knowledge/experience you’ve gained from starting your own business, it’s important to manage your expectations. For example, it is not realistic to assume that a young entrepreneur working on his/her first company, with no boardroom experience, is going to be appointed to the board of directors of a public company (or for that matter even a successful private company).

There are many factors that go into being selected to join a board, including but not limited to: age, diversity, experience, and expertise. Thus, it is best to view boardroom service in the same way you do their professional career – as a series of stepping stones.

Make Yourself an Attractive Candidate

Keeping in mind the need to manage expectations and the criteria for board selection, it’s important to also remember that as an entrepreneur you naturally have a lot to offer a board, and you should be confident in that.

Here is a 10-step process to use your strengths as an entrepreneur to get yourself a board seat:

1. Identify 2-3 non-profit organizations and/or startups whose mission you feel a connection with or whose business aligns with your expertise;
2. Determine what qualities, experiences, expertise you could offer this organization that would make you a valuable asset to this board;
3. Find out everything you can about these organizations – go to their websites, become familiar with their programs, identify who serves on the management team and board of directors;
4. See what events the organization may have coming up (a cocktail party, gala, golf outing) and attend one or all of those events;
5. Introduce yourself to members of the management team and board. Make sure to express your interest in learning more about the organization and perhaps becoming more involved;
6. Use online networks and communities to highlight your expertise and show your qualifications as a board member (e.g. Twitter, LinkedIn, blogs, Industry forums, etc.);
7. Make your presence felt. As an entrepreneur this will come more natural to you, so if the opportunity presents itself – have your company sponsor an upcoming event the organization is hosting;
8. Network-network-network – with management, board members, and, for non-profit organizations, their donors. You’re probably pretty comfortable with this process already, but it’s important to remember that this can be done both in-person and online through professional social networking sites;
9. Despite the fact that you are pressed for time, be willing to volunteer at events and serve on committees;
10. Finally, if after all this you believe that you could contribute to this board, make your interest known to the organization.

Most of the above steps are not exclusive to entrepreneurs looking to join their first board, regardless of your age, experience and expertise, the key is networking and promoting yourself as a ready and willing board member.

Above all, be patient. Opportunities will present themselves if you are strategic in your networking efforts.

Mark Rogers is the founder and CEO of BoardProspects, an online professional community dedicated to building better boards for private, public, and non-profit organizations. Prior to founding BoardProspects, Rogers was partner at a law firm in Boston, advising non-profit and for-profit entities on corporate governance and boardroom matters. Contact Mark at mark@boardprospects.com.

Boardroom Image via Shutterstock

---

Big Data and Predictive/Real-time Analytics startups: Are you looking to jumpstart development & accelerate market traction? Sign up for the SAP Startup Focus program to receive technology, support, resources and community to help you develop new applications on SAP HANA, a cutting edge database platform. Get started here, and enter promo code “VB2013″ on the form.

---

Networking giant Cisco has added Salesforce CEO Marc Benioff to its board of directors, a sign that it wants to get more serious about cloud-focused services and hardware.

Benioff spent 13 years at Oracle before he founded Salesforce on the correct notion that SaaS applications would become a hot thing. Salesforce is now a cloud-services powerhouse, offering services like Force.com, Heroku, Radian6, Desk.com, Do.com, and more. (Check out our coverage of Do.com, which just launched.) Benioff might be able to bring some of his knowledge into the Cisco fold and get the company looking to the future.

Cisco also added Enduring Hydro CEO and former U.S. Under Secretary of Energy Kristina Johnson. Other folks on the now 14-person board include former Yahoo CEO Carol Bartz, Yahoo co-founder Jerry Yang, Emerging Company Partners founder Steven West, and Cisco CEO John Chambers.

“We are extremely pleased to welcome Marc and Kristina to Cisco’s board of directors,” said Chambers, in a statement. “Marc has changed the face of technology through his bold ideas around cloud computing and the social enterprise. Kristina brings us an unmatched expertise in science and technology, which will help guide Cisco as we continue to innovate and transform our customers’ experiences.”

Marc Benioff photo: Kevin Krejci/Flickr

Facebook has named chief operating officer Sheryl Sandberg as its newest board member, settling recent criticisms that the public company doesn’t have a woman on its board.

Sandberg’s appointment to the board of directors has been a long time coming. She is one of the more familiar faces surrounding the social network and helped bring the company public. She joins Facebook’s chief executive and founder Mark Zuckerberg on the board, along with Silicon Valley heavy-weights Marc Andreessen, Peter Thiel, Reed Hastings, and James Breyer, as well as Erskine Bowles, president emeritus of the University of North Carolina, and Donald Graham, CEO of The Washington Post Company.

“Sheryl has been my partner in running Facebook and has been central to our growth and success over the years,” said Zuckerberg in a statement. “Her understanding of our mission and long-term opportunity, and her experience both at Facebook and on public company boards makes her a natural fit for our board.”

Facebook recently came under fire for not having a woman on its board. Women’s rights group Ultraviolet campaigned against Facebook, demanding that it appoint a female board member prior to going public. At the time, Facebook had a 7-person board of all men. Sandberg’s work for Facebook speaks for itself, and thus she was an obvious appointee, but the social network IPO-ed without acquiescing.

Zuckerberg snatched Sandberg away from Google in 2008, where she was the vice president of Global Online Sales and Operations. Like Zuckerberg, she was also a student at Harvard. Other than Facebook, Sandberg serves on The Walt Disney Company’s board and two others.

Sheryl Sandberg image via World Economic Forum/Flickr

Dave Morin, CEO of social-network Path, has joined ticketing startup Eventbrite‘s board of the directors, a move Eventbrite claims will help it continue innovating on the social front.

While Path had a major privacy blowup early this year, the company has carried on with its head high by raising a new $30 million funding round. Eventbrite doesn’t talk about Path much in their announcement, however, and instead lauds Morin’s role as a former head of Facebook’s platform group.

“Eventbrite has long been a believer in the impact of the social graph, and the work that Dave did while at Facebook has had a profound impact on our business,” Eventbrite CEO Kevin Hartz said, in a statement. “Our integration with Facebook Connect in 2008 predicated an exponential increase in traffic and engagement among event attendees. We are thrilled to welcome Dave to our board and believe his expertise and guidance will be an incredible asset to Eventbrite as we continue to grow.”

Eventbrite is arguably the hottest startup today with an emphasis on ticketing and events. In February, the company said it had issued more than 50 million tickets and today the company says it has issued nearly 60 million tickets. Eventbrite also recently launched its first hardware product with an “at the door” credit card reader.

“Eventbrite is fundamentally changing the way people create, promote and find events and gatherings in their local communities,” Morin said, in a statement. “I’ve been more than impressed by their level of innovation, their commitment to their users, and by their long term focus. The decision to join the board as they forge into making event discovery more mobile and social was an easy one. At the end of the day, we all live for great events.”

Morin joins former Netflix CFO Barry McCarthy, former Ticketmaster CEO Sean Moriarty, Sequoia Capital Partner Roelof Botha, and others on Eventbrite’s board.

Dave Morin photo: Flickr/Joi Ito

Groupon’s board of directors is playing musical chairs as the downtrodden daily deals company attempts to address fallout from an accounting restatement that sent its stock price plummeting.

The company, now trading at more than 60 percent off its initial offering, announced Monday that American Express CFO Daniel Henry and Deloitte vice chairman Robert Bass are joining Groupon’s board.

Henry is replacing Starbucks CEO Howard Schultz, who stepped down from Groupon’s board of directors on April 24. Bass will replace Kevin Efrusy of Accel Partners, who will leave his post as of Groupon’s shareholder meeting on June 19.

The swap-a-roo is Groupon’s attempt to self-correct after a revised fourth quarter earnings report that did more than raise a few eyebrows.

One month ago, Groupon informed shareholders that, due to yet another accounting snafu, revenue for Q4 2011 was $14.3 million less than it initially indicated. The restatement was not received well and shareholders who felt misled responded in turn with both a class action lawsuit and a derivative complaint. The latter suit specifically named both Schultz and Efrusy, along with other board members, as defendants in breach of their fiduciary duty to Groupon and its shareholders.

Henry and Bass add financial credibility to Groupon’s board. Bass, who will retire from Deloitte before his appointment, is said to have specialized in one area where the deals company could certainly use some help: SEC filings. Henry, meanwhile, has worked at American Express since 1990 and has served as the company’s CFO for more than four years. He was previously a partner at Ernst & Young.

“With their deep financial, accounting and operational experience, Dan and Bob will provide invaluable expertise to the Board going forward,” Groupon chairman Eric Lefkofsky said in a statement.

Groupon closed at $10.71 per share Monday afternoon, but its stock price is trading up roughly 2 percent in after-hours trading following news of the board shakeup. Valued as high as $17.8 billion on its first day of trading, Groupon’s market capitalization now stands at $6.83 billion.

Mobli, a video sharing website, can add Lance Armstrong to its list of celebrity endorsers today. The famed cyclist is joining the company’s board and starting his own Mobli channel.

Mobli’s goal is to show you life through another person’s eyes. It does this by allowing people to set up channels, similar to YouTube, where they can post pictures and video, as well as search for image-based content through certain verticals. These verticals include food, music, fashion, cars, sports, and more. Its other purpose is to allow people access to a person who is usually inaccessible, such as celebrities and political figures. You know the behind the scenes interviews that make channels like E! so popular? Mobli is similar, only the content comes directly from the celebrity.

Celebrities have seemingly taken to Mobli. In October, the company added Leonardo DiCaprio as an investor and advisor, now Armstrong is on its board, and others such as Paris Hilton, David Arquette, and Jaime King have channels.

“When I was first introduced to Mobli, I immediately thought it was an extraordinary platform and an innovative yet accessible way for different audiences to share their stories,” said Armstrong in a statement. “I’m excited to use Mobli as a direct channel for my social media followers to get a personal look at my experiences day to day.”

It seems the entertainment industry isn’t shy to investing time or money into technology any more. Now, celebrity investors are putting their names on startups all over Silicon Valley. Ashton Kutcher is a big name in this celebrity tech ring, with investments in companies like Zaarly, Hipmunk, and Airbnb. Also on the list are singers Will.I.Am, Selena Gomez, and Lady Gaga.

We asked Mobli chief exectuive Moshiko Hogeg what exactly celebrity investors could contribute to a tech company when DiCaprio invested. He explained that it wasn’t for their tech know-how, but rather their experience in marketing. Having a celebrity on your board doesn’t hurt in terms of getting the word out either.

Armstrong will be sharing original content through his channel and plans to broadcast a special charity bike ride on the site as well. Alongside this venture, Mobli has also formed partnerships with Armstrong’s agent Bill Stapleton as well as best-selling author Andrew Razeghi.

July 9-10, 2013
San Francisco, CA

Early Bird Tickets on Sale

In what will likely be the first of many major power struggles at BlackBerry maker Research in Motion over the next year, the company is reportedly considering ousting co-CEOs Mike Lazaridis and Jim Balsillie as co-chairmen of the board.

In their place, RIM is considering anointing Barbara Stymiest, a former COO of the Royal Bank of Canada, who has been on the company’s board since 2007, sources tell the Financial Times. That would make Stymiest the first independent chairman at RIM, and it would also reduce the influence of Lazaridis and Balsillie, who have been heavily criticized for the company’s performance in the post-iPhone era.

Seven independent directors of RIM’s board — including Stymiest, but not including the co-CEOs — have been exploring the board’s structure, according to the FT. In particular, they’re considering the “business necessity” for Lazaridis and Balsillie to hold significant board roles, as well as the need for a lead director (a role currently served by John Richardson since 2007).

RIM is expected to issue its full report on the matter at the end of the month. The board shakeup was sparked by investor outcry at the company’s last shareholder meeting (though honestly, it should be self-evident by now that some sort of change is needed at RIM).

Balsillie and Lazaridis notably own 12 percent of the company’s outstanding shares, making them the second and third largest shareholders, the FT points out. That has allowed them to deflect previous efforts to remove their from their co-chairmen and co-CEO roles. But it’s unclear if they’ll be able to resist further attempts after the company’s 2011 performance, which saw its stock fall 75 percent.

RIM certainly needs to shape up somehow to survive 2012. The company’s long-awaited BlackBerry 10 devices were delayed until the end of the year (and are already being called a failure). They’ll likely be too little, too late to help RIM gain considerable ground against the iPhone and Android.

Early investors Fred Wilson of Union Square Ventures and Bijan Sabet of Spark Capital will leave Twitter’s board of directors by the end of September, the company confirmed today in a statement:

“Bijan Sabet and Fred Wilson both played important and greatly appreciated roles in our success. Both saw what Twitter could become before most anyone else. We look forward to their continued input as both investors in the company and passionate users of the product.”

According to a report from All Things D, both funds sold a portion of their Twitter holdings via secondary market sales, but both will also continue to hold a majority of their stake in the company.

As VentureBeat reported earlier this week, tech entrepreneur and Digg founder Kevin Rose also cashed out 20 percent of his total investment in Twitter.

Twitter is valued at $8.4 billion after its most recent $400 million round of funding, which was intended to cash out some of the early investors.

Bartz was fired from her post as Yahoo’s chief executive September 6. Previously, she stated that she didn’t plan on leaving the board, despite conflicting comments from Yahoo board members.

Bartz has made several inflammatory comments about the situation — calling Yahoo’s board members a bunch of “doofuses” and also (in her first interview since getting fired) told Fortune that the board “fucked her over”.

The comments might have caused Bartz to violate the non-disparagement clause in her employment contract, which would cost her an estimated $10 million in severance pay.

Bowles has an extensive background in academia, which seems appropriate given Facebook’s close ties with universities. When the site first launched, Facebook spread virally as a way to communicate and connect on college campuses — much like the ones in the UNC system. But it’s Bowles’ experience as a government official which might prove more valuable for Facebook as it inches closer to its inevitable colossal IPO.

“Erskine has held important roles in government, academia and business which have given him insight into how to build organizations and navigate complex issues,” Facebook chief executive Mark Zuckerberg said in a statement.  ”Along with his experience founding companies, this will be very valuable as we continue building new things to help make the world more open and connected.”

Bowles took over as president of the UNC system in 2006. He retired as president of the UNC system last year after leading the state’s 17-school system through a rocky period at the height of the 2007 recession, one of the worst since the Great Depression. Bowles is a graduate of the system’s flagship school, the University of North Carolina at Chapel Hill.

He joins a board of directors filled with storied titans in Silicon Valley, including the likes of Marc Andreessen, Accel Partners’ Jim Breyer, Washington Post CEO Donald Graham, Netflix chief executive Reed Hastings (who joined in June) and Peter Thiel, an early Facebook investor and graduate of the PayPal school of sick-nasty exits.

Bowles served in former President Bill Clinton’s Small Business Administration in 1993 before becoming Clinton’s chief of staff the following year. He served as White House chief of Staff from 1996 to 1998. Bowles is on the board of directors of General Motors, Morgan Stanley and North Carolina Mutual Life Insurance Company.

[Photo: Medill DC]

I had two similar experiences recently where I heard from employees of two different companies that I’m on the board of. In each case, a senior exec said something like “I heard the board wants us to do blah.”

I was in each board meeting and the board most definitely did not say “we want the company to do blah.” Rather, in each case there was a discussion about the topic in question. In one of the cases, consensus was reached quickly. In the other, there was a robust discussion since two of the board members disagreed and the CEO wasn’t sure what he wanted to do. Ultimately in that case as well there was consensus.

In each case I asked the executive what he’d heard back from the CEO. I got two versions of “the board had a discussion, there was a lot of disagreement, but the board wanted us to do blah.” I then asked, as non-politically as I could, “Do you think CEO wants to do that?” In both cases, the answer was “I’m not sure, but he knows the board wants that.”

I think this is a brutal communication mistake on the part of each of the CEOs. I’ve seen this many times over the past sixteen years since I stopped being a CEO and started being a board member. In each case the CEO is abdicating some responsibility for the decision. In the worst situation, the CEO is blaming the board for a decision and ultimately setting up a very negative context if the decision is an incorrect one – as in “see – I didn’t want to do this but the board did – so it’s not my fault.”

I’ve come to believe that the only real operating decision that a board makes is to fire the CEO. Sure, the board – and individual board members – is often involved in many operational decisions, but the ultimate decision is (and should be) the CEO’s.

If the CEO is not in a position to be the ultimate decision maker, he shouldn’t be the CEO. And if board members don’t trust the CEO to make the decision, they should take one of two actions available to them – leave the board or replace the CEO.

In one of the cases, I asked the executive “if I told you the CEO was strongly in favor of the decision, would that impact you.” The response was a simple one: “yes – I’d be much more motivated to make sure we did it right.” I smiled and reinforced that the CEO was in fact supportive, which I think was a relief (and motivator) to this particular executive.

In my leadership experience, people really value when a leader takes responsibility for a decision, even if it turns out to be an incorrect one. CEO’s – don’t be the guy who says “the board made me do it.”

Last week, I made a call to entrepreneurs that it is time to change the boardroom structure. Startups, after all, have evolved over the past 20 years, but boardrooms haven’t.

Startups now understand what they should be doing in their early formative days is search for a business model. The process they use to guide their search is customer development. And to track their progress, startups now have a scorecard to document their week-by-week changes – the business model canvas.

Yet even with all these tools, early stage startups still need to physically meet with advisors and investors. That’s great if you can get it.  But what if you can’t?

What’s missing is a way to communicate all this complex information and get feedback and guidance for startups that cannot get advice in a formal board meeting.

We propose that early stage startups communicate in a way that didn’t exist in the 20^th century: Online – collaboratively through blogs.

We suggest that the founders/CEO invest 1 hour a week providing advisors and investors with “Continuous Information Access” by blogging and discussing their progress online in their startup’s search for a business model.

In essence, they would:

• Blog their Customer Development progress as a narrative
• Keep score of the strategy changes with the Business Model Canvas
• Comment/Dialog with advisors and investors on a near-real-time basis

What Does this Change?
1) Structure. Founders operate in a chaotic regime. So it’s helpful to have a structure that helps “search” for a business model. The “boardroom as bits” uses Customer Development as the process for the search, and the business model canvas as the scorecard to keep track of the progress, while providing a common language for the discussion.

This approach offers VC’s and Angels a semi-formal framework for measuring progress and offering their guidance in the “search”
 for a business model. It turns ad hoc startups into strategy-driven startups.

2) Asynchronous Updates. Interaction with advisors and board members can now be decoupled from the once every six weeks “big event” (aka the board meeting). Now, as soon as the founders post an update, everyone is notified. Comments, help, suggestions and conversation can happen 24/7. For startups with formal boards, it makes it easy to implement, track, and follow-up board meeting outcomes.

Monitoring and guiding a small angel investment no longer requires the calculus to decide whether the investment is worth a board commitment. It potentially encourages investors who would invest only if they had more visibility but where the small number of dollars doesn’t justify the time commitment.

A board as bits ends the repetition of multiple investor coffees. It’s highly time-efficient for investor and founder alike.

3) Coaching. This approach allows real-time monitoring of a startup’s progress and zero-lag for coaching and course-correction.  It’s not just a way to see how they’re doing. It also provides visibility for a deep look at their data over time and facilitates delivery of feedback and advice.

4) Geography. When the boardroom is bits, angel-funded startups can get experienced advice – independent of geography. An angel investor or VC can multiply their reach and/or depth. In the process it reduces some of the constraints of distance as a barrier to investment.

Imagine if a VC took $4 million (an average Series A investment) and instead spread it across 40 deals at $100K each in a city with a great outward-facing technology university outside of Silicon Valley. In the past they had no way to monitor and manage these investments. Now they can. The result: An instant technology cluster with equity at a fraction of Silicon Valley prices.  It might be possible to create Virtual Valley Ventures.

At Stanford our Lean Launchpad class ran an experiment that showed when “the boardroom is bits” can make a radical difference in the outcome of an early stage startup.

Our students used Customer Development as the process to search for a business model. They used a blog to record their customer learning, and their progress and issues. The blog became a narrative of the search by posting customer interviews, surveys, videos, and prototypes. They used the Business Model Canvas as a scorekeeping device to chart their progress. The result invited comment from their “board” of the teaching team.

We were able to give them near real-time feedback as they posted their results. If we had been a board rather than a teaching team we would have added physical reality checks with Skype and/or face-to-face meetings.

While this worked in the classroom, would it work in the real world? I thought this idea was crazy enough to bounce off five experienced Silicon Valley VC’s. I was surprised at the reaction – all of them want to experiment with it.

Jon Feiber at MDV is going to try investing in startups emerging from Universities with great engineering schools outside of Silicon Valley that have entrepreneurship programs, but minimal venture capital infrastructure. Kathryn Gould of Foundation Capital and Ann Miura-Ko of Floodgate also want to try it.

Shawn Carolan of Menlo Ventures not only thought the idea had merit but seed-funded the LeanLaunchLab, a startup building software to automate and structure this process. (More than 700 startups signed up for the LeanLaunchLab software the day it was first demo’d.) Other entrepreneurs think this is an idea whose time has come and are also building software to manage this process. Citrix thought this was such a good idea that their Startup Accelerator has offered to provide GoToMeeting and GoToMeeting HD Faces free to participating VC’s and startups.

For startups with traditional boards, I am not suggesting replacing the board meeting – just augmenting it with a more formal, interactive and responsive structure to help guide the search for the business model. There’s immense value in face-to-face interaction. You can’t replace body language.

But for Angel-funded companies I am proposing that a “board meeting in bits” can dramatically change the odds of success. Not only does this approach provide a way for founders to “show your work” to potential and current investors and advisors, but also it helps expand opportunities to attract investors from outside the local area.

As customer and agile development reinvent the Startup, it’s time to ask why startup board governance has not kept up with the pace of innovation. Board meetings that guide startups haven’t changed since the early 1900s.

It’s time.
Reinventing the board meeting may offer venture-backed startups a more efficient, productive way to direct and measure their search for a profitable business model. It may also offer angel-funded startups – which because of geography or size of investment typically don’t have formal boards or directors – the ability to attract experienced advice and investment outside of technology clusters (i.e. Silicon Valley, New York).

Here’s how.

The combination of Venture Capital and technology startups is only about 50 years old. Rather than invent a new form of corporate governance, venture investors adopted the traditional board meeting structure from large corporations. Yet boards of large companies exist to monitor efficient strategy and execution of a known business model. While startups eventually get into execution mode, their initial stages are devoted to a non-linear, chaotic search for a business model: finding product/market fit to identify a product or service people will buy in droves at a sustainable, profitable pace.

In the last few years, our understanding that startups are not smaller versions of large companies, made us recognize that startups need their own tools, different from those used in existing companies: Customer Development – the process to search for a Business Model, the Business Model Canvas – the scorecard to measure progress in the search, and Agile Engineering – the tools to physically construct the product.

Yet while we’ve reinvented how startups build their companies, startup investors are still having board meetings like it’s the 19^th century.

From a VC’s point of view there are two reasons for board meetings.

1) It’s their fiduciary responsibility. Once a startup gets going, it has asymmetric information. Investors get board seats to assure themselves and their limited partners that they are duly informed about their investment.

2) Investors believe that their experience and guidance can maximize their return. Here it’s the board that has asymmetric knowledge. A veteran board can bring 50-100x more experience into a board meeting than a first time founder. (VC’s sit on 6 – 12 boards at a time. Assume an average tenure of 4 years per board. Assume two veteran VC’s per board=50-100x more experience.)

From a founder’s point of view there are three reasons for board meetings.

1) It’s an obligation that came with the check.

2) Founders who have a great board do recognize the uncanny pattern recognition skills that good VC’s bring.

3) An experienced board brings an extensive network of customers, partners, help in recruiting, follow-on financing, etc.

What’s Wrong With a Board Meeting?
The Wrong Metrics. Traditional startup board meetings spend an insane amount of wasted time using Fortune 100 company metrics like income statements, cash flow, balance sheet, waterfall charts. The only numbers in those documents that are important in the first year of a startup’s life are burn rate and cash balance. Most board meetings never get past big company metrics to focus on the crucial startup numbers. That’s simply a failure of a startup board’s fiduciary responsibility.

The Wrong Discussions. The most important advice/guidance that should come from investors in a board meeting is about a startup’s search for a business model: What are the business model hypotheses? What are the most important hypotheses to test now? How are we progressing validating each hypothesis? What do those numbers/metrics look like? What are the iterations and Pivots – and why?

Not Real-time.  Startup board meetings occur every 4-6 weeks. While that’s great when you showed up in your horse and buggy, the strategy-to-tactic-to implementation lag is painful at Internet speeds. And unless there’s rigor in the process, because there is no formal structure for follow up, tracking what happened as a result of meeting recommendations and action items gets lost in the daily demands of everyone’s work. (Of course great VC’s mix in coffees, phone calls, coaching and other non-board meeting interactions but it’s ad hoc and not always done.)

Wastes Founders Time. For the founders, “the get ready for the board meeting” drill is often a performance rather than a snapshot. Powerpoints, spreadsheets and rehearsals consume time for materials that are used once and discarded. There are no standards for what each side (board versus management) does. What is the entrepreneur supposed to be doing? What are the board members supposed to be contributing?

The Wrong Structure. If you read advice on how to run a board meeting you’ll get advice that would have felt comfortable to Andrew Carnegie or John D. Rockefeller.

In the age of the Internet why do we need to get together in one room on a fixed schedule? Why do we need to wait a month to six weeks to see progress? Why don’t we have standards for what metrics VC’s want to see from their early stage startup teams?

For angel-funded startups, life is even tougher. Data from the Startup Genome project shows that startups that have helpful mentors, listen to customers, and learn from startup thought leaders raise 7x more money and have 3.5x better user growth. If you’re in a technology cluster like Silicon Valley you may be able to attract ad hoc advice from experienced investors. But very little of it is formal, and almost none of it approaches the 50-100x experience level of professional investors.

As there’s no formal board, most of these angel/investors meetings are over coffees. And lacking a board meeting there’s no formal mechanism to get investor advice. Angel investments in mobile and web apps today are approaching the “throw it against the wall and see if it sticks” strategy.

And for startups outside of technology clusters, there’s almost no chance of attracting Silicon Valley VC’s or angels. Geography is a barrier to investment.

So given all this, the million dollar question is: Why in the age of the Internet haven’t we adopted the tools we build/sell to solve these problems?

(Next week: What changes should be made? Add your thoughts below in the comments.)

---

Big Data and Predictive/Real-time Analytics startups: Are you looking to jumpstart development & accelerate market traction? Sign up for the SAP Startup Focus program to receive technology, support, resources and community to help you develop new applications on SAP HANA, a cutting edge database platform. Get started here, and enter promo code “VB2013″ on the form.

---

One of the most important things you will do as the founder of a start-up is assemble your board. And if you take the proper time and care to assembled a knockout collection of members to fill those chairs, there’s a lot to gain. The question is: How can you attract world-class board members to your start-up, especially if you’re in the very early stages?

Before my partner Steven Krein and I started the process of searching for investors and board members to join our digital health and wellness company, we set out to build a world-class board of directors with whom we could flourish. This was an important transformation from previous businesses we created that focused entirely on product development and sales.

This time around, we committed to building a world-class board from Day 1 – and challenged ourselves to establish a group of advisers to serve not merely as deep pockets to catalyze our business, but rather as partners working towards our mission. For entrepreneurs currently building your board, consider these key lessons learned that can help you attract world-class board members.

Start early – Identifying the ideal board members may start well before you even begin building your company. We began meeting and nurturing relationships with potential investors early so that we would have a chance to get to know our prospective partners well. Always be on the lookout for great partners, advisers, and mentors.

Define your mission – Record the answer to this question into an audio recorder: Why am I building this company?

You need to be able to clearly and succinctly communicate the purpose of what you are doing and why it matters to you. If your mission is inspiring and can be communicated easily, then you are more likely to attract others to join you.

Ask yourself big questions – Take out a pencil and sheet of paper and ask yourself three big questions:

• Is there someone whom you most admire within your industry or the business world in general?
• What’s your mission, business philosophy, and can you clearly state the key characteristics of a partner most valuable to you and your team?
• Why do you want to add great board members?

Put together your dream list – Write down 10-20 people you would love to join your board and circle the most important one. This list should serve the roadmap for assembling your board. By identifying the people you’d like to work with, you know who you need to meet. For us, we were determined to add someone who was not only passionate about our mission, but who also had previously scaled a company to over a billion dollars in revenue. Ultimately, we landed Jerry Levin, former Chairman and CEO of Time Warner.

Leverage existing connections – After you’ve identified a dream list of board members, it’s time to tap your connections and establish the auspices that will put you in the same room with those people. Look at your list and tap into your network to figure out how you can get within one or two degrees of separation. It may be easier than you think.

Build a relationship first – Most people are not simply won over by an introductory lunch or product demonstration. Assuming you are well-aligned on mission and vision, what matters most are trust and credibility. A great way to foster those is to create a personal connection, getting to know someone before talking business. Rather than asking for something right off the bat, create a meaningful dialogue about your business and let the connection build over time.

Ask questions that matter to you  – The interviewing process is not a one way street. You can interview your potential board members too. In initial meetings, seize the opportunity to ask him or her questions, such as:

• Why do you want to advise start-ups?
• What interests you in this company?
• How do your personal interests and other investments align well with this company?

Avoid “No” – It’s easy to get discouraged when your presentation is met with skepticism or an investor that tells you “it’s not the right time”. Don’t give up the first time you hear the word “no”, and use your passion to convince the investor that it is the right time.

Don’t give up – Persistence matters. People are busy. Trust takes time to foster, so make sure to keep in touch with your dream board members after the first and second meetings.

Every company needs a board of directors – even startups.

Well, OK, maybe not every company. Raw startups – two people in a garage kinda thing – shouldn’t waste their time with anything formal. But young companies – those that are established and on their way, regardless of their size or level of funding should, as should any company more established than that.

It seems that we frequently relate having a board of directors to some kind of funding event. Of course, it often happens that way. Investors require one or more board seats, which becomes the impetus for creating a formal board – at least one with non-employees on it. But even without funding, companies should establish and use a board of directors made up of people from inside and outside the company.  A board of qualified people can offer great benefits to a company, its management and its founders.

To me, the most important of these is that board members, unlike informal outside advisors, have a fiduciary responsibility to the company and, therefore, offer advice that is often better thought out and more responsible. After all, it’s their job.

Additionally, because there is greater long-term continuity with board members than other advisors, the input received from directors tends to be more specific, context sensitive and applicable to the company’s long-term strategy. Finally, a board tuned in to what the company is doing and how it is doing it can provide dynamic guidance, including a kick in the ass now and then, that advisors without an ongoing, interactive relationship with the company are unable to deliver.

To some new company founders, these advantages may seem to be a bit abstract. In fact, lately, I’ve seen some resistance to the concept of establishing a board of directors entirely. From what I observe, this seems to be primarily driven by three factors:

• Fear that creating a formal board will somehow turn control of their baby to their new “boss”
• Reluctance to “spend” the equity necessary to recruit and retain quality board members
• Belief that they already have advisors who deliver all the guidance they need

Yes, there have been cases where boards have fired CEOs or somehow otherwise wrested control of the company from its leader or founder. However, I’ve never seen this type of thing from non-investor board members.

Even with board members who are investors, it’s incredibly rare and definitely a last resort type of move. Virtually no one outside wants your job.  If they did, they’d just go start another company or take their money to another playground.

Yes, you will have to compensate outside, non-investor, board members.  Don’t be cheap. The compensation will be with equity, likely a single percentage point or lower and vesting over four years.  What you will get in return will likely help you immeasurably.

It may not be the sole difference between long-term success and short term failure (it might), but the advice you get will at the very least make your life easier and substantially increase your odds for success.

Finally, and I sorta hit on this earlier, having many advisors and mentors is terrific.  You shouldn’t have fewer of these when you establish a board – they are always valuable.

They do not, however, take the place of a dedicated group of individuals who have committed their efforts and wisdom to the success of the fledgling enterprise.  Outside advisors will never have the volume of background data that your directors have to analyze situations nor will they feel the responsibility to do the right thing.

Directors are tied to the company’s success and failure. Advisors and mentors are not. There’s a huge difference in responsibility and, ultimately, quality of action.

So there you have it. Do you still have a reasonable excuse for why you shouldn’t establish a board? If so, I’d like to hear it.  “It’s hard,” by the way, doesn’t count. You’re an entrepreneur, just work harder and smarter to get it done.

Photo by RandallBass via Flickr