October 2, 2024 • 40 mins
In this episode, Christopher Mirabile, Executive Chair of Launchpad Venture Group, explores the pivotal role of boards in startup companies and discusses how boards can be both a critical support system as well as a driver of success.
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Big Ideas/Thoughts/Quotes
“Life is too short to suffer with the wrong people in your boardroom.”
Startup Boards are different, but still vitally important
“Boards have featured prominently in my entire professional life.”
“When I was a consultant with the strategy group at Pricewaterhouse, ultimately our work was commissioned by boards and delivered to boards, and those board presentations when I was lucky enough to be in the room as a young person on the team were some of the most high-pressure situations that I ever was in professionally and left a real impression on me.”
“When I got into the startup world, I sort of had to unlearn a certain amount of what I’d learned about boards and moved to the end of the spectrum where boards provide as much mentoring and business value as they do governance.”
“Startup boards tend to be a little smaller, a little bit more nimble and often the membrane between shareholders and directors is much thinner because you often see meaningful representation direct from the shareholder base on the board.”
“When you run into resistance from a founder [about a board], it's often really more of an educational journey than a negotiating journey to try to get them to understand the value of a board.”
Why is a board important for a startup?
Your investors want it and you're not going to be able to raise money without it and why would you reinvent the wheel when you can have people who made those mistakes before and can help you avoid wasted time and wasted resources.
“A big part of what [we] do is help CEOs understand that …if you go into a relationship with your board, it's sort of like an intellectual partnership where you bring the courage to admit you don't have all the answers and you really seek to draw the wisdom out…”
…If you show me a CEO that's failing, I'll show you a board that's failing to support that CEO properly …
Attitude of Startup board members
“I don't want to be anywhere near the blast radius of a startup that fails, so I want to make sure that this company is going to succeed…”
Feedback to CEO after a Board Executive Session
A great way to give feedback after an executive session is: "Hey, let's just do a little case study here. In the meeting, you said this, here's what they heard..." and then it's not an in-your-face criticism, it's just helping them understand how they're being perceived and how their choice of words and their manner of speaking and their style affects the impact of their communications…I think that can be a very effective non-confrontational way to give quick feedback to a CEO.
The Independent Member of a Startup Board
“What we're looking for is two things. One is the avoidance of some negatives and the other is certain positives. I'll start with the avoidance o
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:05):
Hello and welcome to On Boards, a deepdive at what drives business success.
I'm Joe Ayoub, and I'm herewith my co-host, Raza Shaikh.
Twice a month, On Boards is the place tolearn about one of the most critically
important aspects of any company ororganization - its board of directors
or advisors, with a focus on theimportant issues that are facing boards,
(00:29):
company leadership, and stakeholders.
Joe and I speak with a wide range ofguests and talk about what makes a board
successful or unsuccessful, what itmeans to be an effective board member and
how to make your board one of the mostvaluable assets of your organization.
Before we introduce our guest, wewant to thank the law firm of Nutter
(00:50):
McClennen & Fish who are againsponsoring our On Board Summit.
This year, the Summit will take placeon October 22nd in Nutter's beautiful
conference center in the Boston Seaport.
They've been incredible partners withus in every way, we appreciate all
they have done to support this podcast.
(01:11):
Our guest today is Christopher Mirabile.
Christopher is the Executive Chair andFounder of Launchpad Venture Group,
one of the largest organized andprofessional angel groups in the country.
He is Chair Emeritus of the AngelCapital Association, which represents
angel groups, provides education andadvocates for investors and entrepreneurs.
(01:35):
Christopher has served on a number ofstartup and investor-backed boards.
He is coauthor with Ham Lord, anotherformer podcast guest, of a book
on startup boards entitled Guide,Advise and Inspire: How Startup
Boards Drive Growth and Exits.
Christopher is my mentor andmuch of what I have learned
(01:57):
about investing is from him.
Prior to Launchpad, Christopher servedas a public company CFO at IONA
Technologies, worked at the law firmof Testa, Hurwitz & Thibeault as a
corporate and securities lawyer, andbefore that, with PricewaterhouseCoopers
Strategic Consulting Groupas a management consultant.
(02:18):
Welcome, Christopher.
Thanks for joining us today on On Boards.
Thanks for having me, Joe and Raza.
It's great to be here.
Thank you.
So, let's just start witha little bit of background.
You've had a really interesting runup to becoming who you are today so
let's talk a little bit about it.
Yeah, boards have sort offeatured prominently in my
(02:40):
entire professional life.
When I was a consultant with thestrategy group at Pricewaterhouse,
ultimately our work was commissionedby boards and delivered to boards,
and those board presentations when Iwas lucky enough to be in the room as
a young person on the team were someof the most high-pressure situations
(03:02):
that I ever was in professionallyand left a real impression on me.
I spent a year doing a major performancemeasurement study for General Motors,
and we worked directly for the CEO ofGeneral Motors and interacted with the
board quite a bit and that left a realimpression on me, and then law school
(03:22):
is an opportunity to really studygovernance and some of the theories
around it, which I found fascinating.
And then when you're a young associateat Testa Hurwitz back in the day, you
do a lot of governance housekeeping andboard formation and just resolutions,
and you just do a lot of that and Ireally had to learn the mechanics.
Then I spent a huge chunk of my careeras a public company general counsel
(03:47):
running a board and it was a large board.
It was a complex board.
It had specific leadership on eachof three or four subcommittees
that we did 360-degreeperformance evaluation each year.
We were listed on a stock exchangein the US and in Europe so we had
to comply with both the accountingstandards in Europe and in the US.
(04:09):
That was a really formativeexperience in terms of what a board
is like, and then when I got intothe startup world, I sort of had to
unlearn a certain amount of that.
I'd been steeped in the theory ofreally heavy serious governance
boards and moved to the end of thespectrum where boards provide as much
(04:29):
mentoring and business value as theydo governance and the startup world
was a little bit of an adjustment,but the concepts are really, really
similar and the value is very similar.
It's great that you've had such aninteresting and diverse perspective
on the value of boards, and alsogreat that you've carried it forward
(04:52):
to startups, because not everyoneinvolved with startups, particularly
the founders, share your view.
Now, I understand that the value ofa board for startups is something
that you talk about, that youadvocate for regularly to founders
and other corporate leaders.
Let's talk about why in this world,as in other situations, but in the
(05:15):
startup world, why it's important andalso, of course, how it's different.
Well, we talk a lot aboutstage-appropriate controls and the
main way in which it's differentis that's where the company is at.
For example, when you're pre-revenue, youdon't really need a revenue recognition
policy, you do once you start bringingsome revenue, and so boards tend to
(05:37):
be a little bit smaller, a little bitmore nimble and often the membrane
between shareholders and directorsis much thinner because you often see
meaningful representation direct fromthe shareholder base on the board.
That said, best practices are reallyvery similar, and a lot of times when,
(06:01):
Raza and I are working on a term sheet,governance is a big part of that term
sheet, and when you run into resistancefrom a founder, it's often really
more of an educational journey than anegotiating journey to try to get them
to understand the value of a board.
I mean, the common senseelements are straightforward.
(06:24):
Your investors want it and you're notgoing to be able to raise money without
it and why would you reinvent thewheel when you can have people who made
those mistakes before and can help youavoid wasted time and wasted resources.
But it's quite a bit more subtle thanthat, there's really a significant
value in the board's network, theircontacts, their knowledge of things
(06:47):
like scaling sales, how to hire.
A lot of times when I'm working on aboard with a first time CEO, one of the
things I'm trying to teach her or himis just how to hire good people and how
to not be afraid to hire someone who'ssmarter than you or better than you as a
direct report, and that's just one of manyexamples of how a board can really help a
(07:11):
startup get where it needs to go faster.
Often where the resistance comesfrom, it's really two things.
One, it's ignorance and the other is fear.
The ignorance often comes from sortof shoot-from-the-hip advisors who may
or may not really have any skin in thegame who say to a founder, "Oh, you
(07:33):
know, you don't need a board right now.
You can get a board later.
The board is going to need to beredone when the VCs come in anyway."
Well, of course, not every company isa good fit for institutional capital.
There may not be a VC round and ofcourse, there's a tremendous value and
in having a board, but that's often musicto the ears of a founder who's a little
bit intimidated by the idea of a board.
(07:55):
They're already giving a significantchunk of their company away.
They've taken a tremendous amount ofreputational risk and opportunity costs
to start this startup and the idea thatpeople they don't really know could fire
them, affect their compensation, affecttheir equity, push them around, tell
(08:15):
them what to do, a lot of people look atthat and they're very threatened by it.
A big part of what Raza and our partnerand I do is help them understand that
the management team is responsible forthe strategy of the company, the board is
just there to help, and if you go into arelationship with your board, it's sort
(08:36):
of like intellectual partnership whereyou bring the courage to admit you don't
have all the answers and you really seekto draw the wisdom out, even a first
time founder can have a really, reallybeneficial relationship with a board.
They just have to get out ofthat fear mentality and into
a work together mentality.
(08:57):
What a great way to think about itthough, be an intellectual partner with
your board members, I mean, as a firstinstance, because I get the fear, and
certainly, I get the ignorance really,because if you haven't done it before, you
don't really understand the full value.
Although I think something you saidwhen we talked earlier is if you get
(09:18):
a few people in the room who reallyknow the business or really know your
industry and whose job it is to helpyou succeed, because no one's in the
room to make it worse or if the companydoesn't succeed, it's not good for
anyone, why wouldn't you want that?
Why wouldn't you want all the help,assuming it's good help, and obviously
(09:38):
that gets back to who's on the boardand all that, but assuming good people,
why wouldn't a leader, especially afirst time CEO who's never done this
job, and it's not an easy job, andthey're giving away so much, and they
have so much in the line, why wouldn'tthey want all the help they can get?
If you take a CEO who's not good enoughand he or she fails at his or her job,
(10:02):
from their perspective, that was theirfailure, they didn't measure up, they're
not good enough, but from the board'sperspective, that's the board's failure.
They were supposed to coach that person.
They were supposed to develop that person.
They were supposed to augmentthat person to the extent they
had certain kinds of weaknesses.
So yes, at law, a board is responsiblefor evaluating the effectiveness of
(10:26):
a management team, but they're alsoresponsible for making that management
team successful to the extent theycan, particularly in early stage
companies, less so with later stage.
But If you show me a CEO that'sfailing, I'll show you a board
that's failing to support that CEOproperly and develop him or her.
(10:47):
So, there really isn'tanything to be afraid.
We all get into that canoe togetherat the top of the whitewater, and once
you get in and you start down thoserapids, we're all on the same team.
Is it different as the companygets older, more mature?
I mean, do the founders or do the CEOsrather learn to understand that a board
(11:11):
can be as we say in our opening, one ofthe most valuable assets of your company?
It really depends.
I think a lot of CEOs do become morecomfortable and you're certainly sweating
your armpits less on your 100th boardmeeting than on your first, so there's
a certain amount of comfort that grows.
But Raza and I have seen mid-career 40-,50-, 60-year-old CEOs who oversold what
(11:35):
was going to be possible and are clearlynot delivering and they get into a model
where they're trying to bullshit theirboard, and they are not comfortable and
confident enough to say, "You know what,my thesis was wrong and it isn't working,
and we need to come up with a betterstrategy here and I'm working on it.
(11:59):
Here's what I'm thinking.
What's your reaction?"
So, there are some CEOs who neverget it, it never clicks and they're
not able to really harness the powerof a board, and I think there's a
tremendous overlap between them andCEOs who aren't terrifically good.
Frankly, I think they'realmost congruent circles.
(12:21):
How do you over time help them understandthat, as you put it, the board can be
a partner with you, that this group ofpeople can help you figure out the stuff.
No CEO knows everything, and especiallywhen you're starting a company, there
are more unknowns than there areknowns probably, how do you help them
(12:42):
understand, and obviously some peopleare going to reject it no matter what,
because they just don't want to do itor they're afraid, as you said, but
what do you say to them, and how doyou go through that exercise with CEOs,
whether it's their first time or not?
If I take a board seat, I tend to forma relationship with the CEO, typically
talking to him or her every other weekfor a few minutes, because I don't want
(13:04):
to be anywhere near the blast radius of astartup that fails, so I want to make sure
that this company is going to succeed,and so I think that relationship where
you stay really current and you developa comfort level with someone and you
create a little bit of space to talk toeach other in a non-charged environment
(13:25):
where I can ask questions about life-workbalance and what's stressing you out right
now and develop a real comfort level.
But a lot of what I do on callslike that are mentoring and
development kinds of things.
There are different kinds of mentors.
Raza and I believe there are threeprimary categories; mentors who really
(13:48):
are knowledgeable about your industry,mentors who are just generally really
good at scaling and building startupsand building companies, and mentors
who really care about you as a personand your development as a leader.
When you are on a board especiallya first time CEO who is struggling
(14:08):
to fit and struggling to read all thedials in the cockpit at once and not
crash the plane into the side of amountain, you end up switching hats.
Often, if you're not an expert inthe industry, you use your context
to find someone who is, or make surethat that blind spot is addressed,
but a lot of what you're doing ismentoring and coaching and helping
(14:29):
them grow as a person and understand.
A lot of times it's as simple as going,"Well, what do you want the outcome to be?
You want consensus that thisis the right way to go forward?
Well, let's unpack that and talkabout how that consensus gets built."
The foundation is information sharing,and then it's an opportunity for everyone
on the board to feel seen and feel heardand this thing is going to get discussed.
(14:53):
People don't like surprises and you canwork with them and put together together a
plan to have a conversation and basicallyhelp them become a leader, and a great CEO
learns how to get their board to help themwith the bank shot, the board provides
(15:13):
the rubber the ball bounces off of.
Right.
I love the analogy.
And Christopher, I'lladd two things to that.
One, we always recommend the executivesession as a best practice to always
do that, and at the end of that, oneof the board members or lead director
is designated to provide feedbackto the CEO as a step that's kind of
(15:36):
similar to how you said the establishingthe relationship with the CEO.
The other, experimentally, we'venow also started training new
CEOs that are onboarded aboutboards and our board training.
We'll talk a little bit more aboutit as well, but just simply training
them what the board is about isalso a very, very helpful step.
(15:58):
Yeah, both are great steps.
I think the idea of an executivesession, it doesn't matter the stage of
the company, it's always a good idea.
What I've always thought and advised, haveit every meeting because if you have a
every now and then and someone comes toyou, then of course the CEO is going to
assume that something is wrong, "So, whyare you asking me to leave the room now?"
(16:20):
A really effective tool for those,you know how they say when you're
arguing with your significant other,you're not accusatory; you did
this, you did that, to talk abouthow it makes you feel or whatever.
A great way to give feedback afteran executive session is, "Hey, let's
just do a little case study here.
In the meeting, you said this,here's what they heard..."
(16:41):
and then it's not an in-your-facecriticism, it's just helping them
understand how they're being perceivedand how their choice of words and their
manner of speaking and their style affectsthe impact of their communications,
and I find that you have to know yourboards and know how to read a board
and understand, but I think that canbe a very effective non-confrontational
(17:05):
way to give quick feedback to a CEO.
Yeah.
The way you deliver amessage is everything.
I mean, the substance is important,but the delivery is often what
makes it either successful or not.
So, let's talk about board composition.
I think you mentioned, when we talkedbefore, that your favorite configuration
(17:27):
is two-two-one, which for those peoplelistening, two from ownership, two from
investors, and then one independent.
So, let's talk about the independent.
What are you looking for,and how do you find them?
How do you find the right fitis really what I'm asking.
The bar is pretty low in thesense that just getting that
seat filled is better than not.
(17:47):
I mean, almost anyone with any commonsense is better than a vacancy so we're
adamant about not letting those vacancieshappen because they can really hurt a
company and destroy shareholder value ifyou just get to a gridlock and a board
gets deadlocked and can't decide whether,for example, to change management.
I've actually been on a startupboard that needed to change CEOs
(18:08):
and it was deadlocked two-two, totwo and so that's not a situation
I ever want to be in again.
So, our term sheets are quite clear thatthat seat needs to be filled quickly.
But really, what we'relooking for is two things.
One is the avoidance of some negativesand the other is certain positives.
I'll start with theavoidance of the negatives.
We don't want an inexperienced blowhardwho has a lot of ego involved in
(18:35):
telling people what to do and insistingthat their advice be followed, and
someone who contributes to a boardmeeting in a manner which sucks all
the oxygen out of the room and makesit super awkward to disagree with them.
We're looking for someone who has a littlebit of experience, understands boards are
a working thing and that startups are animperfect science and they're not going to
(18:59):
be a disruptive or difficult board member.
That's the kind of the key negativesthat we're looking to avoid.
In terms of the positives, really,we want someone who understands the
industry dynamics, understands theplayers, knows who the company and
the CEO should be talking to, and hasthat bigger perspective, who can put
(19:25):
the day-to-day operational challengesof the company into a broader industry
context, and then ultimately makeintroductions when it's time to find
additional investors or exit the company.
So, all we need is a well-behaved genius.
It's easy.
Yeah, real easy.
Well, I think the no-asshole rulecertainly makes sense, and that covers
(19:47):
a wide range of people who are notgoing to be a good fit and not going
to help the dynamics of the boardroom.
But one of the things you've said isthat you are thinking that in those
instances where CEOs find a board member,sometimes it's not the right person
and that maybe you should put in yourpapers that you get a veto for suggested
(20:07):
independent board members, because ifthere's only one and it's the wrong guy
or the wrong girl, that's not so great.
So, it kind of doesmatter who that person is.
You said it, it's better tohave someone than no one.
Okay, I get that.
But what have you done or whatis being done to make sure if
you're only going to have one, begood to have a really good one.
Well, we sell the value and we make surewe have a common vocabulary and shared
(20:31):
goals in terms of what we're looking for.
We are deferential to the CEO in termsof finding someone that they're excited
about and they think would be good, andoften, even if it's a young CEO, they
have some knowledge of their industry,but a lot of them, particularly the
ones that fear boards or are not secure,will go and try to get a friend or
(20:54):
someone who will act as a friend oras a rubber stamp and try to shift the
dynamic of the board to essentiallybe three founder-oriented directors
and two investor-oriented directors.
And then the other mistake they can makeis they go for a marquee name and they
really understate the commitment andwhat's expected and the person really
(21:17):
thinks of the role as an honorificand they're not present and they're
not involved and they miss meetingsand they're hard to schedule, and they
really don't end up doing their shareof the work, and so I think Raza and
I have seen this fifth seat go haywireenough that we probably are going to
(21:38):
be more prescriptive in the next decadethan we've been in the past decade.
It makes sense.
Launchpad now has at least 50portfolio companies and 40 Launchpad
members are either in the boardroomas a director or an observer.
(21:59):
That's a pretty large portfolio of boardmembers and observers that the group
is adding human value to the companies.
How do we train all of theseto have a good governance game
and be helpful to each other.
What are steps, mechanics, and thingsfor training a large number of boards?
(22:22):
Yeah.
I think we've done about 135 companiesin our history, and 50 to 60 are active
at any one time, and as you said,Raza, we're in 40 out of 50 boardrooms.
Our training consists of three things.
One is expectation setting andaccountability, so people understand
the seriousness of what they're doingand they take it upon themselves to
(22:44):
fill in any gaps and train themselves.
I think having high expectationsof our directors and communicating
those very clearly and then holdingthem accountable is a big, big part
of how we drive good board service.
The second is we tend to give the newerinvestors in our group an opportunity
(23:09):
to serve as an observer under anexperienced board member for at least a
year so they get a little bit of a sense.
A lot of people who are activeinvestors in the early stage community
have spent time in their career in aboard meeting, but often it's on the
management side of the table, and beingan investor board member in a very
(23:31):
dynamic, risky, fuzzy, fast movingstartup is a different experience.
Equipping them to understand thosedynamics and serve as sort of an
understudy or an apprentice beforethey get put into a high-pressure
situation is the second piece.
And then, of course, the third pieceis really traditional training and
that consists of training we do beforethey serve on the board and then
(23:55):
ongoing training after they've begun.
The training we do before is basicallymaking them read the director's guidebook
that Ham and I wrote, which really coversall of the basics, and we go to great
pains to say, "No, we really mean itwhen we say we want you to read this.
Don't come to the class if youhaven't read it because we'll know."
(24:19):
Then we do a class where we give theman opportunity to discuss questions and
things that weren't clear from the bookand we take them through a whole layer
of sort of pragmatic suggestions on howto get that first meeting successful
and how to run a good board and allthe things around, just the blocking
and tackling, like who's going to writethe minutes, is counsel going to be
(24:41):
present, all those kinds of things.
So, that's the training we do beforesomeone starts, and then once they're
up and running, there's really a prettystrong continuing learning, continuing
corporate education, if you will, inthat we get those directors together.
And you do a terrific job, Raza, runningthis forum, getting those directors
together quarterly to talk about issuesthat they're facing in their companies,
(25:07):
and sometimes we do education around theM&A environment, we'll do studies, we'll
do postmortems of failures, we'll dopostmortems of particularly successful
outcomes, we'll look at exits, and ofcourse, when you do this long enough, you
recognize that most problems fall intoa relatively small number of buckets.
(25:29):
It's been said that all startup problemsare people problems and certainly dealing
with management and getting managementup to their full capability is a very
common recurring theme, but there'sa lot of value in just putting those
directors in a room and creating spacefor them to be resources for each other.
A little while ago, I went through thattraining myself as an early board member.
(25:54):
What struck me the most both about thebook and the checklist and the takeaway
materials is the practicalness of it.
It is very focused on the type of boardsthat we are likely to be dealing with,
covers day-to-day and important issues.
It does cover the theory in ourlegal responsibilities as board
(26:14):
directors, but more important is,what is the insurance, what do I need
to look for a startup to have that.
The first draft of that book was threetimes as long because I had come from
such a heavy board background, it waslike, "Oh, and this and this," and then
what we ended up doing was really tryingto pare it down to that essential topics,
(26:35):
the startup, the stage-specific kindsof issues, and then I took a lot of the
material, like dealing with difficultdirectors and tips, do's and don'ts for
writing minutes and all those kinds ofthings and just publish them as separate
pieces to make the book more manageable.
What I really love about thedirector's forum is that it's a
(26:55):
confidential safe space for peersto share learnings, ask each other.
As we know that these are issues thatdon't have one right answer or sometimes
no right answer, and I think it really,really helps to have others in the room to
be able to discuss and share that, and asyou know, sometimes we also have brought
(27:19):
together SWAT teams for particular crisis/issues in companies to help bolster
the governance with more experience.
I think it has been a terrific,terrific resource and a community for
directors to do their ongoing learning.
Can you talk a little bitabout the overboarding issue
(27:40):
with investor board members.
I mean, it's true for everyboard, but in the investor world,
there may be some issues thatare even more prominent, I guess.
Overboarding as in the boardjust gets too directed.
No, no, no, Serving on too many boards.
Sorry.
Yeah.
It's really an issue in the VC world andyou do sometimes see it in the sort of the
(28:03):
early stage world, and I think a lot ofpeople draw some measure of professional
pride out of being on a board and theycan tend to get a little carried away
and take on too many board assignments.
In our experience doing a startup boardwell, even in a year where it goes
(28:23):
pretty well, it's about a 200-hour-a-yearcommitment if you really stop and think
about it; preparing for meetings; insome cases, traveling for meetings, doing
the executive session; if you're a leaddirector doing the follow up, making
introductions, maybe you'll help with thehiring; perhaps it's giving advice around
(28:45):
a financing; in the case of a reallyinvolved director like myself, that every
other week call, it can really add up.
If a typical professional year is 2,000hours, one startup is 10 percent of your
time, and the person who is overcommittedin terms of startup boards tends to think
(29:05):
pretty highly of himself or herself,but they're actually unprepared, not
engaged, difficult to schedule, oftenlate or require a last-minute change
to the schedule, need to get a lot ofremedial updates on what's going on
(29:26):
in the company before the conversationcan start, and tend to be a little
bit reductionist, they tend to be alittle bit taken with themselves and
a little bit disengaged, and that's akind of director that isn't helpful.
If you end up with that kind of a directoron your board, you're missing out as
a founder, and we tend to be prettycareful about giving a precious board
(29:50):
seat away to that profile of director.
What do you do about it though?
When you find that you have someone likethat on the board, and this is a question
for both of you actually, what do you do?
Because if there are only five seats andone person is, as you suggested, just
kind of full of themselves and it's kindof about them rather than making the
(30:11):
business successful, that doesn't seemlike a good dynamic at the boardroom.
I know your question was, what do youdo if they're already on the board?
I will say we do go out of our way tokeep them off the board, and one of the
reasons we really prefer to lead roundsis because we want to have a hand in
building the board and making sure thatwe're giving our CEO all the resources
(30:35):
she or he needs to succeed and putting theright people around our management team.
But assuming we get into a situationwhere we're co-leading or someone else
is leading and somebody pompous ends upon the board, I think I tend to coach
the CEO its an opportunity to growas a leader, make your expectations
(30:57):
super clear, cold call the person.
I wrote an entire article series on thisabout the escalating steps you can take,
starting with very discreet, you cango to another director and say, "Hey,
I'm having trouble with this behavior.
Would you be willing to..."
Say something sort of peerto peer, that can be one.
(31:19):
Then if that's not working, the CEO cango direct to the director and say, "Hey,
my expectation is that you'll be on timeand you'll be prepared and that we won't
have to spend board time going overmaterial," whatever the case, whatever
the problematic behavior is, and then ifthat quiet behind-the-scenes doesn't work,
you can start to call the person out in amore public way and during a board meeting
(31:42):
and say, "Hey, I appreciate the question.
I'm going to table it because allthat information was covered in the
board package, which went out lastweek and we really don't have time
to bring you up to speed on that.
You were expected to haveread that before the meeting."
That's pretty embarrassing to that typeof director, and then ultimately, you can
escalate all the way into just saying,"Look, I need to get all five cylinders
(32:05):
firing to get the horsepower I need toget this startup rolling down the road as
fast as it needs to, and I feel like thisboard isn't a good fit for where you are
right now and we need a little bit more.
We're going to go in adifferent direction," and
just get rid of the person.
Life is too short to suffer withthe wrong people in your boardroom.
(32:25):
Amen.
I'll just add, as Ron Wiseman says,to remind them that being on a
board is not an honorific position.
It is a real job, it is a realresponsibility, and you only take
that up if you are going to do that.
One of the things that's worthpointing out, of course, is that if
you are, let's say you're on threeboards, which isn't that extreme.
(32:46):
That's 30 percent of your time, assumingnone of the three companies are in
crisis and every startup is in crisisat least once a year, and most crisis,
these take two to four months to fit out,which means if you're on three boards,
there's always a company in crisis, andanyone who's like, "Oh yeah, I sit on
five boards," they're not doing it rightbecause all it takes is one startup
(33:11):
board in total crisis to completelyblow your calendar to smithereens.
If you're not there, you're notcontributing, and who knows where it goes.
As you said, you don't want to beon a board of a company that fails.
And if you don't get that and you'renot willing to work hard to make sure
it doesn't happen, that must be a realrag for everyone else in the room.
(33:34):
That's actually the paradigm throughwhich a lot of our training has done,
helping them understand that behaviorthere is creating liability for you.
Do not tolerate being on a boardwhere this occurs, or the package
doesn't go out in time, or theyget behind in the minutes, or the
(33:54):
minutes are done inappropriately.
Trying to help people understandthat it's not a case of tolerating a
quirky personality, it's everyone'sresponsibility to make a board function
effectively, and if somebody ispaddling in the wrong direction, you
all have a responsibility to fix it.
Yeah, it's a great, greatway to approach it, I think.
(34:16):
Christopher, from your perspective,having really been a participant
for quite some time, what isthe state of company governance?
How is it trending for bothpublic and private companies,
and is it getting better?
Is it getting worse?
Where is it going?
Well, you and I talked about thislast time we spoke and we had to kind
(34:38):
of agree on our vocabulary, becauseon one level, it is getting better.
Boards are more sophisticated.
They're more reflective of thebroader population at large.
They have more sophisticated tools tostay productive and organized, whether
it be a board portal software or Zoom.
I can't tell you the number of timeswe sent a courier to Logan to get a
(35:02):
board package in FedEx at nine o'clock.
We knew the last box you couldhit was on the airport tarmac.
Nowadays, you don't have to fax orFedEx materials, you can distribute
them electronically, and so there's alot of ways in which boards are more
enlightened and have a broader perspectiveand are more effective, and they have
(35:24):
better tools as higher productivity.
But if you measure board successin terms of what percentage of the
waterfront a board is expected tocover, are they actually covering?
I think that percentage is creepingdown, not up, and I think there
are issues looming with boards.
(35:45):
And part of it is because the waterfrontis being defined pretty broadly
and maybe unrealistically broadly.
For example, regardless of what yourpolitics are, I mean, you recognize
that increasingly boards are beingheld to account for the ethics and the
environmental conscience of a companyand boards are increasingly sort of
(36:08):
thought of as the gatekeepers of sortof protecting labor and making sure
that the employees of a company aretreated humanely and appropriately and
non-discriminatory fashion and so forth.
Boards are now expected to becybersecurity experts and data
security and data privacy experts.
AI experts.
(36:29):
And AI experts, and so I think that thereare a lot of really core functions, like
making sure the management team is beingdeveloped and supported, like making
sure that the risk envelope the companyis running is appropriately defined in
(36:50):
terms of the promises they're making intheir contracts and whether they're able
to support their customers, making surethat the finances are looked at, reviewed
on an agreed upon set of principles areactually audited, making sure that the
compensation is appropriate, the sortof audit committee, comp committee,
(37:10):
financial controls, the basics sort ofused to constitute most of what a board
did, and now a board has so many otherjobs, it's really overwhelming a number
of things that we expect boards to do andI think that it not only takes away from
some of the time that could be spent onthe basics, but it creates a whack a mole
(37:35):
kind of a mindset in terms of directors.
I don't know how it works out.
These things tend to go in cycles and lawreview articles get written and things
evolve and doctrines like the Revlonduty and so forth, these things come and
go, so it'll probably sort itself out.
But right now, I would say the answerto your question is boards are probably
(37:58):
better and more productive in a lotof ways than they've ever been and
more reflective of society at largeand more accessible to different
kinds of people and perspectivesand so forth, which is terrific.
But I also think they're stretchedway too far, way too thin.
There's too much being expected ofthem and that a lot of modern boards
(38:18):
are a train wreck waiting to happen.
It's like once the train derails andthe chemicals are spilled all over
the town, then the questions beganabout who gets fired, who was in
charge here, and so I think boardsare in a tough phase right now.
I hope the world gets simpler reallysoon, because I don't see how it's
going get easier for boards giventhe trends that we're seeing now,
(38:40):
but hope springs eternal, so thankyou so much for being here today.
Christopher, it's been greatspeaking with you and we really
appreciate you being here.
Oh, my pleasure.
It's not necessarily the mostscintillating sounding topic, but
there's a lot of intellectual meat inthis governance area and I feel very
(39:01):
fortunate to have been exposed to a lotof these issues as part of my career.
It's an endlessly fascinating area.
As Raza will tell you, figuringout what it is that makes a startup
successful, if we could only bottlethat lightning, we'd be happy investors,
but board is a big piece of the recipe.
Yeah.
It's a big piece in a lot of instances.
(39:24):
And thank you all forlistening to On Boards with our
guest, Christopher Mirabile.
Please visit our websiteat OnBoardsPodcast.com.
That's OnBoardsPodcast.com.
We'd love to hear your comments,suggestions, and feedback.
And if you're not already a subscriber,please be sure to subscribe at Apple
Podcasts, Spotify, or wherever youget your podcasts, and remember
(39:47):
to leave us a five-star review.
Please stay safe and take careof yourselves, your families and
your communities as best you can.
We hope you'll tune in forthe next episode of On Boards.
Thanks.
Hello and welcome to On Boards, a deepdive at what drives business success.
I'm Joe Ayoub, and I'm herewith my co-host, Raza Shaikh.
Twice a month, On Boards is the place tolearn about one of the most critically
important aspects of any company ororganization - its board of directors
or advisors, with a focus on theimportant issues that are facing boards,
(00:29):
company leadership, and stakeholders.
Joe and I speak with a wide range ofguests and talk about what makes a board
successful or unsuccessful, what itmeans to be an effective board member and
how to make your board one of the mostvaluable assets of your organization.
Before we introduce our guest, wewant to thank the law firm of Nutter
(00:50):
McClennen & Fish who are againsponsoring our On Board Summit.
This year, the Summit will take placeon October 22nd in Nutter's beautiful
conference center in the Boston Seaport.
They've been incredible partners withus in every way, we appreciate all
they have done to support this podcast.
(01:11):
Our guest today is Christopher Mirabile.
Christopher is the Executive Chair andFounder of Launchpad Venture Group,
one of the largest organized andprofessional angel groups in the country.
He is Chair Emeritus of the AngelCapital Association, which represents
angel groups, provides education andadvocates for investors and entrepreneurs.
(01:35):
Christopher has served on a number ofstartup and investor-backed boards.
He is coauthor with Ham Lord, anotherformer podcast guest, of a book
on startup boards entitled Guide,Advise and Inspire: How Startup
Boards Drive Growth and Exits.
Christopher is my mentor andmuch of what I have learned
(01:57):
about investing is from him.
Prior to Launchpad, Christopher servedas a public company CFO at IONA
Technologies, worked at the law firmof Testa, Hurwitz & Thibeault as a
corporate and securities lawyer, andbefore that, with PricewaterhouseCoopers
Strategic Consulting Groupas a management consultant.
(02:18):
Welcome, Christopher.
Thanks for joining us today on On Boards.
Thanks for having me, Joe and Raza.
It's great to be here.
Thank you.
So, let's just start witha little bit of background.
You've had a really interesting runup to becoming who you are today so
let's talk a little bit about it.
Yeah, boards have sort offeatured prominently in my
(02:40):
entire professional life.
When I was a consultant with thestrategy group at Pricewaterhouse,
ultimately our work was commissionedby boards and delivered to boards,
and those board presentations when Iwas lucky enough to be in the room as
a young person on the team were someof the most high-pressure situations
(03:02):
that I ever was in professionallyand left a real impression on me.
I spent a year doing a major performancemeasurement study for General Motors,
and we worked directly for the CEO ofGeneral Motors and interacted with the
board quite a bit and that left a realimpression on me, and then law school
(03:22):
is an opportunity to really studygovernance and some of the theories
around it, which I found fascinating.
And then when you're a young associateat Testa Hurwitz back in the day, you
do a lot of governance housekeeping andboard formation and just resolutions,
and you just do a lot of that and Ireally had to learn the mechanics.
Then I spent a huge chunk of my careeras a public company general counsel
(03:47):
running a board and it was a large board.
It was a complex board.
It had specific leadership on eachof three or four subcommittees
that we did 360-degreeperformance evaluation each year.
We were listed on a stock exchangein the US and in Europe so we had
to comply with both the accountingstandards in Europe and in the US.
(04:09):
That was a really formativeexperience in terms of what a board
is like, and then when I got intothe startup world, I sort of had to
unlearn a certain amount of that.
I'd been steeped in the theory ofreally heavy serious governance
boards and moved to the end of thespectrum where boards provide as much
(04:29):
mentoring and business value as theydo governance and the startup world
was a little bit of an adjustment,but the concepts are really, really
similar and the value is very similar.
It's great that you've had such aninteresting and diverse perspective
on the value of boards, and alsogreat that you've carried it forward
(04:52):
to startups, because not everyoneinvolved with startups, particularly
the founders, share your view.
Now, I understand that the value ofa board for startups is something
that you talk about, that youadvocate for regularly to founders
and other corporate leaders.
Let's talk about why in this world,as in other situations, but in the
(05:15):
startup world, why it's important andalso, of course, how it's different.
Well, we talk a lot aboutstage-appropriate controls and the
main way in which it's differentis that's where the company is at.
For example, when you're pre-revenue, youdon't really need a revenue recognition
policy, you do once you start bringingsome revenue, and so boards tend to
(05:37):
be a little bit smaller, a little bitmore nimble and often the membrane
between shareholders and directorsis much thinner because you often see
meaningful representation direct fromthe shareholder base on the board.
That said, best practices are reallyvery similar, and a lot of times when,
(06:01):
Raza and I are working on a term sheet,governance is a big part of that term
sheet, and when you run into resistancefrom a founder, it's often really
more of an educational journey than anegotiating journey to try to get them
to understand the value of a board.
I mean, the common senseelements are straightforward.
(06:24):
Your investors want it and you're notgoing to be able to raise money without
it and why would you reinvent thewheel when you can have people who made
those mistakes before and can help youavoid wasted time and wasted resources.
But it's quite a bit more subtle thanthat, there's really a significant
value in the board's network, theircontacts, their knowledge of things
(06:47):
like scaling sales, how to hire.
A lot of times when I'm working on aboard with a first time CEO, one of the
things I'm trying to teach her or himis just how to hire good people and how
to not be afraid to hire someone who'ssmarter than you or better than you as a
direct report, and that's just one of manyexamples of how a board can really help a
(07:11):
startup get where it needs to go faster.
Often where the resistance comesfrom, it's really two things.
One, it's ignorance and the other is fear.
The ignorance often comes from sortof shoot-from-the-hip advisors who may
or may not really have any skin in thegame who say to a founder, "Oh, you
(07:33):
know, you don't need a board right now.
You can get a board later.
The board is going to need to beredone when the VCs come in anyway."
Well, of course, not every company isa good fit for institutional capital.
There may not be a VC round and ofcourse, there's a tremendous value and
in having a board, but that's often musicto the ears of a founder who's a little
bit intimidated by the idea of a board.
(07:55):
They're already giving a significantchunk of their company away.
They've taken a tremendous amount ofreputational risk and opportunity costs
to start this startup and the idea thatpeople they don't really know could fire
them, affect their compensation, affecttheir equity, push them around, tell
(08:15):
them what to do, a lot of people look atthat and they're very threatened by it.
A big part of what Raza and our partnerand I do is help them understand that
the management team is responsible forthe strategy of the company, the board is
just there to help, and if you go into arelationship with your board, it's sort
(08:36):
of like intellectual partnership whereyou bring the courage to admit you don't
have all the answers and you really seekto draw the wisdom out, even a first
time founder can have a really, reallybeneficial relationship with a board.
They just have to get out ofthat fear mentality and into
a work together mentality.
(08:57):
What a great way to think about itthough, be an intellectual partner with
your board members, I mean, as a firstinstance, because I get the fear, and
certainly, I get the ignorance really,because if you haven't done it before, you
don't really understand the full value.
Although I think something you saidwhen we talked earlier is if you get
(09:18):
a few people in the room who reallyknow the business or really know your
industry and whose job it is to helpyou succeed, because no one's in the
room to make it worse or if the companydoesn't succeed, it's not good for
anyone, why wouldn't you want that?
Why wouldn't you want all the help,assuming it's good help, and obviously
(09:38):
that gets back to who's on the boardand all that, but assuming good people,
why wouldn't a leader, especially afirst time CEO who's never done this
job, and it's not an easy job, andthey're giving away so much, and they
have so much in the line, why wouldn'tthey want all the help they can get?
If you take a CEO who's not good enoughand he or she fails at his or her job,
(10:02):
from their perspective, that was theirfailure, they didn't measure up, they're
not good enough, but from the board'sperspective, that's the board's failure.
They were supposed to coach that person.
They were supposed to develop that person.
They were supposed to augmentthat person to the extent they
had certain kinds of weaknesses.
So yes, at law, a board is responsiblefor evaluating the effectiveness of
(10:26):
a management team, but they're alsoresponsible for making that management
team successful to the extent theycan, particularly in early stage
companies, less so with later stage.
But If you show me a CEO that'sfailing, I'll show you a board
that's failing to support that CEOproperly and develop him or her.
(10:47):
So, there really isn'tanything to be afraid.
We all get into that canoe togetherat the top of the whitewater, and once
you get in and you start down thoserapids, we're all on the same team.
Is it different as the companygets older, more mature?
I mean, do the founders or do the CEOsrather learn to understand that a board
(11:11):
can be as we say in our opening, one ofthe most valuable assets of your company?
It really depends.
I think a lot of CEOs do become morecomfortable and you're certainly sweating
your armpits less on your 100th boardmeeting than on your first, so there's
a certain amount of comfort that grows.
But Raza and I have seen mid-career 40-,50-, 60-year-old CEOs who oversold what
(11:35):
was going to be possible and are clearlynot delivering and they get into a model
where they're trying to bullshit theirboard, and they are not comfortable and
confident enough to say, "You know what,my thesis was wrong and it isn't working,
and we need to come up with a betterstrategy here and I'm working on it.
(11:59):
Here's what I'm thinking.
What's your reaction?"
So, there are some CEOs who neverget it, it never clicks and they're
not able to really harness the powerof a board, and I think there's a
tremendous overlap between them andCEOs who aren't terrifically good.
Frankly, I think they'realmost congruent circles.
(12:21):
How do you over time help them understandthat, as you put it, the board can be
a partner with you, that this group ofpeople can help you figure out the stuff.
No CEO knows everything, and especiallywhen you're starting a company, there
are more unknowns than there areknowns probably, how do you help them
(12:42):
understand, and obviously some peopleare going to reject it no matter what,
because they just don't want to do itor they're afraid, as you said, but
what do you say to them, and how doyou go through that exercise with CEOs,
whether it's their first time or not?
If I take a board seat, I tend to forma relationship with the CEO, typically
talking to him or her every other weekfor a few minutes, because I don't want
(13:04):
to be anywhere near the blast radius of astartup that fails, so I want to make sure
that this company is going to succeed,and so I think that relationship where
you stay really current and you developa comfort level with someone and you
create a little bit of space to talk toeach other in a non-charged environment
(13:25):
where I can ask questions about life-workbalance and what's stressing you out right
now and develop a real comfort level.
But a lot of what I do on callslike that are mentoring and
development kinds of things.
There are different kinds of mentors.
Raza and I believe there are threeprimary categories; mentors who really
(13:48):
are knowledgeable about your industry,mentors who are just generally really
good at scaling and building startupsand building companies, and mentors
who really care about you as a personand your development as a leader.
When you are on a board especiallya first time CEO who is struggling
(14:08):
to fit and struggling to read all thedials in the cockpit at once and not
crash the plane into the side of amountain, you end up switching hats.
Often, if you're not an expert inthe industry, you use your context
to find someone who is, or make surethat that blind spot is addressed,
but a lot of what you're doing ismentoring and coaching and helping
(14:29):
them grow as a person and understand.
A lot of times it's as simple as going,"Well, what do you want the outcome to be?
You want consensus that thisis the right way to go forward?
Well, let's unpack that and talkabout how that consensus gets built."
The foundation is information sharing,and then it's an opportunity for everyone
on the board to feel seen and feel heardand this thing is going to get discussed.
(14:53):
People don't like surprises and you canwork with them and put together together a
plan to have a conversation and basicallyhelp them become a leader, and a great CEO
learns how to get their board to help themwith the bank shot, the board provides
(15:13):
the rubber the ball bounces off of.
Right.
I love the analogy.
And Christopher, I'lladd two things to that.
One, we always recommend the executivesession as a best practice to always
do that, and at the end of that, oneof the board members or lead director
is designated to provide feedbackto the CEO as a step that's kind of
(15:36):
similar to how you said the establishingthe relationship with the CEO.
The other, experimentally, we'venow also started training new
CEOs that are onboarded aboutboards and our board training.
We'll talk a little bit more aboutit as well, but just simply training
them what the board is about isalso a very, very helpful step.
(15:58):
Yeah, both are great steps.
I think the idea of an executivesession, it doesn't matter the stage of
the company, it's always a good idea.
What I've always thought and advised, haveit every meeting because if you have a
every now and then and someone comes toyou, then of course the CEO is going to
assume that something is wrong, "So, whyare you asking me to leave the room now?"
(16:20):
A really effective tool for those,you know how they say when you're
arguing with your significant other,you're not accusatory; you did
this, you did that, to talk abouthow it makes you feel or whatever.
A great way to give feedback afteran executive session is, "Hey, let's
just do a little case study here.
In the meeting, you said this,here's what they heard..."
(16:41):
and then it's not an in-your-facecriticism, it's just helping them
understand how they're being perceivedand how their choice of words and their
manner of speaking and their style affectsthe impact of their communications,
and I find that you have to know yourboards and know how to read a board
and understand, but I think that canbe a very effective non-confrontational
(17:05):
way to give quick feedback to a CEO.
Yeah.
The way you deliver amessage is everything.
I mean, the substance is important,but the delivery is often what
makes it either successful or not.
So, let's talk about board composition.
I think you mentioned, when we talkedbefore, that your favorite configuration
(17:27):
is two-two-one, which for those peoplelistening, two from ownership, two from
investors, and then one independent.
So, let's talk about the independent.
What are you looking for,and how do you find them?
How do you find the right fitis really what I'm asking.
The bar is pretty low in thesense that just getting that
seat filled is better than not.
(17:47):
I mean, almost anyone with any commonsense is better than a vacancy so we're
adamant about not letting those vacancieshappen because they can really hurt a
company and destroy shareholder value ifyou just get to a gridlock and a board
gets deadlocked and can't decide whether,for example, to change management.
I've actually been on a startupboard that needed to change CEOs
(18:08):
and it was deadlocked two-two, totwo and so that's not a situation
I ever want to be in again.
So, our term sheets are quite clear thatthat seat needs to be filled quickly.
But really, what we'relooking for is two things.
One is the avoidance of some negativesand the other is certain positives.
I'll start with theavoidance of the negatives.
We don't want an inexperienced blowhardwho has a lot of ego involved in
(18:35):
telling people what to do and insistingthat their advice be followed, and
someone who contributes to a boardmeeting in a manner which sucks all
the oxygen out of the room and makesit super awkward to disagree with them.
We're looking for someone who has a littlebit of experience, understands boards are
a working thing and that startups are animperfect science and they're not going to
(18:59):
be a disruptive or difficult board member.
That's the kind of the key negativesthat we're looking to avoid.
In terms of the positives, really,we want someone who understands the
industry dynamics, understands theplayers, knows who the company and
the CEO should be talking to, and hasthat bigger perspective, who can put
(19:25):
the day-to-day operational challengesof the company into a broader industry
context, and then ultimately makeintroductions when it's time to find
additional investors or exit the company.
So, all we need is a well-behaved genius.
It's easy.
Yeah, real easy.
Well, I think the no-asshole rulecertainly makes sense, and that covers
(19:47):
a wide range of people who are notgoing to be a good fit and not going
to help the dynamics of the boardroom.
But one of the things you've said isthat you are thinking that in those
instances where CEOs find a board member,sometimes it's not the right person
and that maybe you should put in yourpapers that you get a veto for suggested
(20:07):
independent board members, because ifthere's only one and it's the wrong guy
or the wrong girl, that's not so great.
So, it kind of doesmatter who that person is.
You said it, it's better tohave someone than no one.
Okay, I get that.
But what have you done or whatis being done to make sure if
you're only going to have one, begood to have a really good one.
Well, we sell the value and we make surewe have a common vocabulary and shared
(20:31):
goals in terms of what we're looking for.
We are deferential to the CEO in termsof finding someone that they're excited
about and they think would be good, andoften, even if it's a young CEO, they
have some knowledge of their industry,but a lot of them, particularly the
ones that fear boards or are not secure,will go and try to get a friend or
(20:54):
someone who will act as a friend oras a rubber stamp and try to shift the
dynamic of the board to essentiallybe three founder-oriented directors
and two investor-oriented directors.
And then the other mistake they can makeis they go for a marquee name and they
really understate the commitment andwhat's expected and the person really
(21:17):
thinks of the role as an honorificand they're not present and they're
not involved and they miss meetingsand they're hard to schedule, and they
really don't end up doing their shareof the work, and so I think Raza and
I have seen this fifth seat go haywireenough that we probably are going to
(21:38):
be more prescriptive in the next decadethan we've been in the past decade.
It makes sense.
Launchpad now has at least 50portfolio companies and 40 Launchpad
members are either in the boardroomas a director or an observer.
(21:59):
That's a pretty large portfolio of boardmembers and observers that the group
is adding human value to the companies.
How do we train all of theseto have a good governance game
and be helpful to each other.
What are steps, mechanics, and thingsfor training a large number of boards?
(22:22):
Yeah.
I think we've done about 135 companiesin our history, and 50 to 60 are active
at any one time, and as you said,Raza, we're in 40 out of 50 boardrooms.
Our training consists of three things.
One is expectation setting andaccountability, so people understand
the seriousness of what they're doingand they take it upon themselves to
(22:44):
fill in any gaps and train themselves.
I think having high expectationsof our directors and communicating
those very clearly and then holdingthem accountable is a big, big part
of how we drive good board service.
The second is we tend to give the newerinvestors in our group an opportunity
(23:09):
to serve as an observer under anexperienced board member for at least a
year so they get a little bit of a sense.
A lot of people who are activeinvestors in the early stage community
have spent time in their career in aboard meeting, but often it's on the
management side of the table, and beingan investor board member in a very
(23:31):
dynamic, risky, fuzzy, fast movingstartup is a different experience.
Equipping them to understand thosedynamics and serve as sort of an
understudy or an apprentice beforethey get put into a high-pressure
situation is the second piece.
And then, of course, the third pieceis really traditional training and
that consists of training we do beforethey serve on the board and then
(23:55):
ongoing training after they've begun.
The training we do before is basicallymaking them read the director's guidebook
that Ham and I wrote, which really coversall of the basics, and we go to great
pains to say, "No, we really mean itwhen we say we want you to read this.
Don't come to the class if youhaven't read it because we'll know."
(24:19):
Then we do a class where we give theman opportunity to discuss questions and
things that weren't clear from the bookand we take them through a whole layer
of sort of pragmatic suggestions on howto get that first meeting successful
and how to run a good board and allthe things around, just the blocking
and tackling, like who's going to writethe minutes, is counsel going to be
(24:41):
present, all those kinds of things.
So, that's the training we do beforesomeone starts, and then once they're
up and running, there's really a prettystrong continuing learning, continuing
corporate education, if you will, inthat we get those directors together.
And you do a terrific job, Raza, runningthis forum, getting those directors
together quarterly to talk about issuesthat they're facing in their companies,
(25:07):
and sometimes we do education around theM&A environment, we'll do studies, we'll
do postmortems of failures, we'll dopostmortems of particularly successful
outcomes, we'll look at exits, and ofcourse, when you do this long enough, you
recognize that most problems fall intoa relatively small number of buckets.
(25:29):
It's been said that all startup problemsare people problems and certainly dealing
with management and getting managementup to their full capability is a very
common recurring theme, but there'sa lot of value in just putting those
directors in a room and creating spacefor them to be resources for each other.
A little while ago, I went through thattraining myself as an early board member.
(25:54):
What struck me the most both about thebook and the checklist and the takeaway
materials is the practicalness of it.
It is very focused on the type of boardsthat we are likely to be dealing with,
covers day-to-day and important issues.
It does cover the theory in ourlegal responsibilities as board
(26:14):
directors, but more important is,what is the insurance, what do I need
to look for a startup to have that.
The first draft of that book was threetimes as long because I had come from
such a heavy board background, it waslike, "Oh, and this and this," and then
what we ended up doing was really tryingto pare it down to that essential topics,
(26:35):
the startup, the stage-specific kindsof issues, and then I took a lot of the
material, like dealing with difficultdirectors and tips, do's and don'ts for
writing minutes and all those kinds ofthings and just publish them as separate
pieces to make the book more manageable.
What I really love about thedirector's forum is that it's a
(26:55):
confidential safe space for peersto share learnings, ask each other.
As we know that these are issues thatdon't have one right answer or sometimes
no right answer, and I think it really,really helps to have others in the room to
be able to discuss and share that, and asyou know, sometimes we also have brought
(27:19):
together SWAT teams for particular crisis/issues in companies to help bolster
the governance with more experience.
I think it has been a terrific,terrific resource and a community for
directors to do their ongoing learning.
Can you talk a little bitabout the overboarding issue
(27:40):
with investor board members.
I mean, it's true for everyboard, but in the investor world,
there may be some issues thatare even more prominent, I guess.
Overboarding as in the boardjust gets too directed.
No, no, no, Serving on too many boards.
Sorry.
Yeah.
It's really an issue in the VC world andyou do sometimes see it in the sort of the
(28:03):
early stage world, and I think a lot ofpeople draw some measure of professional
pride out of being on a board and theycan tend to get a little carried away
and take on too many board assignments.
In our experience doing a startup boardwell, even in a year where it goes
(28:23):
pretty well, it's about a 200-hour-a-yearcommitment if you really stop and think
about it; preparing for meetings; insome cases, traveling for meetings, doing
the executive session; if you're a leaddirector doing the follow up, making
introductions, maybe you'll help with thehiring; perhaps it's giving advice around
(28:45):
a financing; in the case of a reallyinvolved director like myself, that every
other week call, it can really add up.
If a typical professional year is 2,000hours, one startup is 10 percent of your
time, and the person who is overcommittedin terms of startup boards tends to think
(29:05):
pretty highly of himself or herself,but they're actually unprepared, not
engaged, difficult to schedule, oftenlate or require a last-minute change
to the schedule, need to get a lot ofremedial updates on what's going on
(29:26):
in the company before the conversationcan start, and tend to be a little
bit reductionist, they tend to be alittle bit taken with themselves and
a little bit disengaged, and that's akind of director that isn't helpful.
If you end up with that kind of a directoron your board, you're missing out as
a founder, and we tend to be prettycareful about giving a precious board
(29:50):
seat away to that profile of director.
What do you do about it though?
When you find that you have someone likethat on the board, and this is a question
for both of you actually, what do you do?
Because if there are only five seats andone person is, as you suggested, just
kind of full of themselves and it's kindof about them rather than making the
(30:11):
business successful, that doesn't seemlike a good dynamic at the boardroom.
I know your question was, what do youdo if they're already on the board?
I will say we do go out of our way tokeep them off the board, and one of the
reasons we really prefer to lead roundsis because we want to have a hand in
building the board and making sure thatwe're giving our CEO all the resources
(30:35):
she or he needs to succeed and putting theright people around our management team.
But assuming we get into a situationwhere we're co-leading or someone else
is leading and somebody pompous ends upon the board, I think I tend to coach
the CEO its an opportunity to growas a leader, make your expectations
(30:57):
super clear, cold call the person.
I wrote an entire article series on thisabout the escalating steps you can take,
starting with very discreet, you cango to another director and say, "Hey,
I'm having trouble with this behavior.
Would you be willing to..."
Say something sort of peerto peer, that can be one.
(31:19):
Then if that's not working, the CEO cango direct to the director and say, "Hey,
my expectation is that you'll be on timeand you'll be prepared and that we won't
have to spend board time going overmaterial," whatever the case, whatever
the problematic behavior is, and then ifthat quiet behind-the-scenes doesn't work,
you can start to call the person out in amore public way and during a board meeting
(31:42):
and say, "Hey, I appreciate the question.
I'm going to table it because allthat information was covered in the
board package, which went out lastweek and we really don't have time
to bring you up to speed on that.
You were expected to haveread that before the meeting."
That's pretty embarrassing to that typeof director, and then ultimately, you can
escalate all the way into just saying,"Look, I need to get all five cylinders
(32:05):
firing to get the horsepower I need toget this startup rolling down the road as
fast as it needs to, and I feel like thisboard isn't a good fit for where you are
right now and we need a little bit more.
We're going to go in adifferent direction," and
just get rid of the person.
Life is too short to suffer withthe wrong people in your boardroom.
(32:25):
Amen.
I'll just add, as Ron Wiseman says,to remind them that being on a
board is not an honorific position.
It is a real job, it is a realresponsibility, and you only take
that up if you are going to do that.
One of the things that's worthpointing out, of course, is that if
you are, let's say you're on threeboards, which isn't that extreme.
(32:46):
That's 30 percent of your time, assumingnone of the three companies are in
crisis and every startup is in crisisat least once a year, and most crisis,
these take two to four months to fit out,which means if you're on three boards,
there's always a company in crisis, andanyone who's like, "Oh yeah, I sit on
five boards," they're not doing it rightbecause all it takes is one startup
(33:11):
board in total crisis to completelyblow your calendar to smithereens.
If you're not there, you're notcontributing, and who knows where it goes.
As you said, you don't want to beon a board of a company that fails.
And if you don't get that and you'renot willing to work hard to make sure
it doesn't happen, that must be a realrag for everyone else in the room.
(33:34):
That's actually the paradigm throughwhich a lot of our training has done,
helping them understand that behaviorthere is creating liability for you.
Do not tolerate being on a boardwhere this occurs, or the package
doesn't go out in time, or theyget behind in the minutes, or the
(33:54):
minutes are done inappropriately.
Trying to help people understandthat it's not a case of tolerating a
quirky personality, it's everyone'sresponsibility to make a board function
effectively, and if somebody ispaddling in the wrong direction, you
all have a responsibility to fix it.
Yeah, it's a great, greatway to approach it, I think.
(34:16):
Christopher, from your perspective,having really been a participant
for quite some time, what isthe state of company governance?
How is it trending for bothpublic and private companies,
and is it getting better?
Is it getting worse?
Where is it going?
Well, you and I talked about thislast time we spoke and we had to kind
(34:38):
of agree on our vocabulary, becauseon one level, it is getting better.
Boards are more sophisticated.
They're more reflective of thebroader population at large.
They have more sophisticated tools tostay productive and organized, whether
it be a board portal software or Zoom.
I can't tell you the number of timeswe sent a courier to Logan to get a
(35:02):
board package in FedEx at nine o'clock.
We knew the last box you couldhit was on the airport tarmac.
Nowadays, you don't have to fax orFedEx materials, you can distribute
them electronically, and so there's alot of ways in which boards are more
enlightened and have a broader perspectiveand are more effective, and they have
(35:24):
better tools as higher productivity.
But if you measure board successin terms of what percentage of the
waterfront a board is expected tocover, are they actually covering?
I think that percentage is creepingdown, not up, and I think there
are issues looming with boards.
(35:45):
And part of it is because the waterfrontis being defined pretty broadly
and maybe unrealistically broadly.
For example, regardless of what yourpolitics are, I mean, you recognize
that increasingly boards are beingheld to account for the ethics and the
environmental conscience of a companyand boards are increasingly sort of
(36:08):
thought of as the gatekeepers of sortof protecting labor and making sure
that the employees of a company aretreated humanely and appropriately and
non-discriminatory fashion and so forth.
Boards are now expected to becybersecurity experts and data
security and data privacy experts.
AI experts.
(36:29):
And AI experts, and so I think that thereare a lot of really core functions, like
making sure the management team is beingdeveloped and supported, like making
sure that the risk envelope the companyis running is appropriately defined in
(36:50):
terms of the promises they're making intheir contracts and whether they're able
to support their customers, making surethat the finances are looked at, reviewed
on an agreed upon set of principles areactually audited, making sure that the
compensation is appropriate, the sortof audit committee, comp committee,
(37:10):
financial controls, the basics sort ofused to constitute most of what a board
did, and now a board has so many otherjobs, it's really overwhelming a number
of things that we expect boards to do andI think that it not only takes away from
some of the time that could be spent onthe basics, but it creates a whack a mole
(37:35):
kind of a mindset in terms of directors.
I don't know how it works out.
These things tend to go in cycles and lawreview articles get written and things
evolve and doctrines like the Revlonduty and so forth, these things come and
go, so it'll probably sort itself out.
But right now, I would say the answerto your question is boards are probably
(37:58):
better and more productive in a lotof ways than they've ever been and
more reflective of society at largeand more accessible to different
kinds of people and perspectivesand so forth, which is terrific.
But I also think they're stretchedway too far, way too thin.
There's too much being expected ofthem and that a lot of modern boards
(38:18):
are a train wreck waiting to happen.
It's like once the train derails andthe chemicals are spilled all over
the town, then the questions beganabout who gets fired, who was in
charge here, and so I think boardsare in a tough phase right now.
I hope the world gets simpler reallysoon, because I don't see how it's
going get easier for boards giventhe trends that we're seeing now,
(38:40):
but hope springs eternal, so thankyou so much for being here today.
Christopher, it's been greatspeaking with you and we really
appreciate you being here.
Oh, my pleasure.
It's not necessarily the mostscintillating sounding topic, but
there's a lot of intellectual meat inthis governance area and I feel very
(39:01):
fortunate to have been exposed to a lotof these issues as part of my career.
It's an endlessly fascinating area.
As Raza will tell you, figuringout what it is that makes a startup
successful, if we could only bottlethat lightning, we'd be happy investors,
but board is a big piece of the recipe.
Yeah.
It's a big piece in a lot of instances.
(39:24):
And thank you all forlistening to On Boards with our
guest, Christopher Mirabile.
Please visit our websiteat OnBoardsPodcast.com.
That's OnBoardsPodcast.com.
We'd love to hear your comments,suggestions, and feedback.
And if you're not already a subscriber,please be sure to subscribe at Apple
Podcasts, Spotify, or wherever youget your podcasts, and remember
(39:47):
to leave us a five-star review.
Please stay safe and take careof yourselves, your families and
your communities as best you can.
We hope you'll tune in forthe next episode of On Boards.
Thanks.
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