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.
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