Startup Boards: A Field Guide to Building and Leading an Effective Board of Directors

by Brad Feld, Matt Blumberg, Mahendra Ramsinghani

Overview

A comprehensive guide on creating, growing, and leveraging a board of directors written for CEOs, board members, and people seeking board roles.

The first time many founders see the inside of a board room is when they step in to lead their board. But how do boards work? How should they be structured, managed, and leveraged so that startups can grow, avoid pitfalls, and get the best out of their boards? Authors Brad Feld, Mahendra Ramsinghani, and Matt Blumberg have collectively served on hundreds of startup and scaleup boards over the past 30 years, attended thousands of board meetings, encountered multiple personalities and situations, and seen the good, bad, and ugly of boards.

In Startup Boards: A Field Guide to Building and Leading an Effective Board of Directors, the authors provide seasoned advice and guidance to CEOs, board members, investors, and anyone aspiring to serve on a board. This comprehensive book covers a wide range of topics with relevant tips, tactics, and best practices, including:

• Board fundamentals such as the board's purpose, legal characteristics, and roles and functions of board members;
• Creating a board including size, composition, roles of VCs and independent directors, what to look for in a director, and how to recruit directors;
• Compensating, onboarding, removing directors, and suggestions on building a diverse board;
• Preparing for and running board meetings;
• The board's role in transactions including selling a company, buying a company, going public, and going out of business;
• Advice for independent and aspiring directors.

Startup Boards draws on the authors' experience and includes stories from board members, startup founders, executives, and investors. Any CEO, board member, investor, or executive interested in creating an active, involved, and engaged board should read this book—and keep it handy for reference.

Product Details

ISBN-13:	9781119859284
Publisher:	Wiley
Publication date:	06/15/2022
Edition description:	2nd ed.
Pages:	256
Sales rank:	419,009
Product dimensions:	6.30(w) x 9.30(h) x 0.90(d)

About the Author

BRAD FELD has invested in startups for over 25 years and co-founded Foundry and Techstars. He is the author of multiple books, including Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist and Startup Communities: Building an Entrepreneurial Ecosystem in Your City.

MATT BLUMBERG is the CEO of Bolster, an on-demand talent marketplace that supports startup and scaleup CEOs. He is the author of Startup CEO: A Field Guide to Scaling Up Your Business and Startup CXO: A Field Guide to Scaling Up Your Company’s Critical Functions and Teams.

MAHENDRA RAMSINGHANI is the founder of Secure Octane, a cybersecurity seed fund in the San Francisco Bay area. He is the author of The Business of Venture Capital and The Resilient Founder: Lessons in Endurance from Startup Entrepreneurs.

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Table of Contents

Foreword xiii

Prefacex vii

Section 1: Board Fundamentals 1

Chapter 1: Introduction 3

What’s New in the Second Edition 4

Who This Book Is For 6

Magic Words, Phrases, Abbreviations, and Style 7

Note 9

Chapter 2 : The Board’s Purpose 11

Accountability 12

General Responsibilities 12

Chapter 3: Legal Characteristics 15

A Board Member’s Legal Duties 16

Addressing Conflicting Duties 18

Benefit Corporations and the B Corp Movement 20

Should You Get D&O Insurance? 21

Note 23

Chapter 4: Board Member Roles 25

Chair or Lead Director 25

Executive Chair 28

Should You Be Chair of Your Board? 29

Independent Board Members 30

Board Observers 30

Outside Counsel 32

Note 34

Chapter 5: Board Functions 35

The Role of Board Committees 35

Informal Responsibilities of a Board 36

Control Priorities 37

Being Rich and Queen (or King) 39

Shareholder Rights 40

Economic and Performance Priorities 41

Emotional Priorities: Trust, Judgment, and Transparency 42

Notes 43

Section 2: Creating Your Board 45

Chapter 6: Size and Composition 47

Management 48

Investors 49

Independents 50

Matt’s Rule of 1s 51

Notes 52

Chapter 7: VCs and Boards 53

Notes 56

Chapter 8: Board Evolution 57

Startup Stages 57

Limiting the Number of Investor Board Members 59

Managing Independent Seats 60

Chapter 9: What to Look for in a Director 63

General Skills 63

Fit with Your Existing Board 64

What Does Your Company Need? 65

Experiences 66

Attributes 69

Governance Philosophy 69

Chapter 10: Recruiting and Interviewing Board Members 71

Sourcing 71

The Interview Process 73

Interviewing VCs Before They Join Your Board 76

Chapter 11: Compensation 77

VCs and Management 77

Independent Directors 78

Notes 80

Chapter 12: Board Diversity 81

Unconscious Bias 81

The First Step: Appoint Independent Directors Early 83

The Second Step: Open Your Search to Board- Ready First- Timers 83

Notes 86

Chapter 13: Onboarding Your Directors 87

Using Employee Onboarding as a Guide 87

Onboarding New Directors 88

Interacting with Your Team 89

Chapter 14: Removing a Board Member 91

Removing a Founder Director 92

Removing an Investor Director 92

Removing an Independent Director 93

Getting Rid of the Entire Board 94

Notes 95

Chapter 15: Is an Advisory Board Useful? 97

Board of Directors vs. Advisory Board 98

Attributes of a Useful Advisory Board Member 99

Selecting Advisory Board Members 100

Building an Advisory Board 100

Challenges of Advisory Boards 101

Notes 102

Section 3: Preparing for and Running the Board Meeting 103

Chapter 16: Preparing for the Board Meeting 105

The Value of Preparation 106

The Meeting Agenda 107

Focus on Critical Items 108

The Board Book 109

Creating an Annual Calendar 113

Notes 114

Chapter 17: Meeting Dynamics 115

Seating 115

The Meeting Length 116

Including Your Team in the Board Meeting 117

Slides or No Slides? 118

Discussion or Decision Item? 118

The Executive Session and the Closed Session 119

A Board Call Instead of a Meeting 120

Remote Attendees and Hybrid Meetings 121

The Post- Meeting Survey 123

Post Meeting 124

Notes 125

Chapter 18: Motions and Votes 127

Robert’s Rules of Order 127

Have Your Lawyer at the Meeting 128

The Mechanics of Voting 128

What If You Don’t Agree? 129

Dealing with Formal Items 130

Minutes 131

Unanimous Written Consent 131

Notes 132

Section 4: Between Meetings: Ongoing Work 133

Chapter 19: Managing Ongoing Communication 135

What the Board Expects from a CEO 135

Communicate Both Good and Bad News 136

Note 138

Chapter 20: Committees 139

Committee Meeting Formalities 139

Compensation 140

Audit 141

Nominating 142

CEO Expenses 142

Chapter 21: Mentors and Learning by Doing 145

Mentorship and Vulnerability 145

Learning by Doing 147

Chapter 22: CEO Transitions 149

Situations That Lead to a CEO Change 149

Scale Up with Growth 151

Why Boards Fire CEOs 152

Planning for Healthy Transitions 154

Notes 155

Section 5: Transactions 157

Chapter 23: Financings 159

New Investor- Led Round 159

Insider- Led Round 160

The Down Round and a Rights Offering 161

How Involved Should VCs Be in Financings? 161

Convertible Notes 162

Venture Debt 162

Notes 163

Chapter 24: Stock Option Grants and 409A Valuations 165

Chapter 25: Selling a Company 169

Confidentiality 169

Fiduciary Responsibility 170

Your Outside Counsel’s Role 171

Acquihire 172

Carve- Outs and 280G 173

Shareholder Representative 173

Note 174

Chapter 26: Buying a Company 175

Negotiating and Structuring the Deal 175

Financing an Acquisition 176

Board Approvals 177

Managing Transaction and Post- Deal Integration 178

Chapter 27: Going Public 179

Process 179

Committees 180

Confidentiality 180

Insider Status 181

VCs on Public Company Boards 181

SPACs 182

Chapter 28: Going Out of Business 185

The Zone of Insolvency 185

Responsibility to Creditors 186

Responsibility to Shareholders 187

Liability 188

Chapter 11 188

Chapter 7 189

Assignment for the Benefit of Creditors 189

Section 6: For Independent Directors and Aspiring Board Members 191

Chapter 29: Preparing for Your First Board Role 193

Note 196

Chapter 30: Interviewing for a Board Role 197

The Interview 197

Diligence Items to Explore 198

Chapter 31: Your First Board Meeting 201

Chapter 32: Communicating Effectively 205

Note 208

Chapter 33: How to Be a Great Board Member 209

Chapter 34: Conclusion 213

Acknowledgments 215

Bibliography 217

Index 221