In this final episode on Boards of Directors, we will share tips for successful board meetings, how to manage them, how to be a value-add board member and insights on advisors and advisory boards.

Navigation:

• Intro (01:34)
  
• Section 1: Tips for Successful Board meetings (02:11)
  
• Section 2: How to manage your Board (18:24)
  
• Section 3: For Board members (25:52)
  
• Section 4: Advisory Board / Advisors (33:09)
  
• Conclusion (49:19)
  

Our co-hosts:

• Bertrand Schmitt, Entrepreneur in Residence at Red River West, co-founder of App Annie / Data.ai, business angel, advisor to startups and VC funds, @bschmitt
  
• Nuno Goncalves Pedro, Investor, Managing Partner, Founder at Chamaeleon, @ngpedro
  

Our show:

 

Tech DECIPHERED brings you the Entrepreneur and Investor views on Big Tech, VC and Start-up news, opinion pieces and research. We decipher their meaning, and add inside knowledge and context. Being nerds, we also discuss the latest gadgets and pop culture news

Intro (01:34)

Nuno

Welcome to Episode 39 of Tech DECIPHERED, where we continue our discussion around how to best manage your board and get the most out of it, as well as how to be a great and hopefully non-dysfunctional board member.

Nuno

In this episode, we will talk about tips for successful board meetings, how to manage your board, and we’ll go into details on anything from agendas to how to organize the cadence of it, KPIs, et cetera. How to think through advisory board members and advisors and how they’re different from consultants and contractors, and also on how to be a fully functional board member and bring value to the company that you’re a board member of.

Section 1: Tips for Successful Board meetings (02:11)

Nuno

Maybe we go to tips for successful board meetings and door calls. Maybe we go to the first one, which I know is one of your favorites.

Bertrand

I think it’s quite key to be prepared for your board meeting, and it works for both sides, the execs, the CEO, and on the other side, investors, people who receive the communication from the company. That part is quite critical.

Bertrand

Myself, not initially, but at some point when I was running my previous business, App Annie, Data.ai now, one thing I did after ending up sending a board deck and board back instead of the usual two days before a board meeting to send it a few hours before. I was not feeling very good about how it worked out. I ended up approaching that to share stuff at least a week in advance.

Bertrand

That might sound crazy from a lot of perspective, but at the end of the day, it’s a question of just organization. There is no reason you cannot do a week in advance. You can do two days in advance, but you would have more time. If it slips, it’s no big deal. If it slips by a day.

Bertrand

What it also gives you is the opportunity to potentially reach out to different board members between the moment where you send your board materials and the moment where you have your board meetings. It gives you more time to set up some calls, to answer some questions, highlight some points.

Bertrand

If you have time to do that between sending your board back and having a board meeting, you will have a much more streamlined board meeting itself because if the big questions have been discussed in one-to-one, if some controversies have been addressed in one-to-one, things will go a lot smoother.

Bertrand

Surprisingly enough, some board member might prefer more challenging confrontational type of board discussion. Personally, I don’t if it’s not needed, but working that way gives you definitely some more efficient board meetings.

Nuno

To your point, manage this thoughtfully. Again, when you’re sending board materials, you send it to observers as well, et cetera. If you have some lead board directors, in particular from investors, that are material to you and you know there’s going to be a complex conversation at the board meeting, have that conversation even before you send those materials because you might not want to have some of this material sent out.

Nuno

Again, be very thoughtful how this done. I think Bertrand, you alluded to a best practice. Sadly, I have very few boards that I sit on that send their decks and their information and financials a week before. I would love to have more. I’ve had people sending the day of and I’m like, “I don’t know what you want me to say.”

Bertrand

That’s clearly unacceptable.

Nuno

In that case, you need to say, “It can’t happen again.” In particular, if we have quarterly board meetings, which has become, again, the norm during these bullish times of the last three or four years. And if it’s quarterly, honestly, a week, you should have enough time to prepare and send a week before. Worst case, you send three or four days before, but again, you should send them well in advance.

Nuno

Be very thoughtful, again, what you put on the board materials versus what you don’t put. There’s elements around legality and stuff like that and materials being discoverable. There’s elements around you having potentially people on the board or that you’re sending the deck to that are not board members that might be board observers, or that might be privy to information or have connections to other people where the information you’re sharing might be taken in the wrong way.

Nuno

A lot of inside information cases that we’ve seen in large public companies have happened because of that. Either it was discussed at the board meeting or because there were materials shared that shouldn’t have been shared, then further on to people that were not privy to the companies.

Nuno

Again, just be thoughtful on what you write in the materials, how it’s written. Focus, first and foremost, the discussion on what absolutely needs board approval. Normally, stock option grants, increases in salaries, stuff like that. What should have board approval and what you should discuss, like strategic direction of the company, significant allocations of resources.

Nuno

I always put this “cover my ass” section of risks that have emerged internally or externally. Many founders that I know like to do the tops and flops of the last quarter. Address risks pretty early on. If it’s a huge risk, even before the board meeting, just put it in front of people. Don’t wait for the board meeting, just put it in front of people. It’s better to do that than to… If you’re being sued by Google or Google has stopped you from having access to their advertising stuff… These are true stories, by the way, raise that early on rather than late.

Bertrand

One thing I noticed is that some CEO might be a bit too positive on everything doing great and not acknowledging enough what’s potentially not working require more improvement. I think it’s key to have a balanced perspective of the business because at the end of the day, you are ultimately being judged by the facts. What happened, cold hard numbers. How are you ending the year in term of sales, in terms of EBITDA, in term of cash flow?

Bertrand

My point is that there is only so much that everything is looking great at each presentation, but ultimately you don’t make the numbers or you achieve not-so-exciting targets. I think it’s quite important to show and demonstrate that you understand what’s going on, you understand the positive as well as the negatives of the business. Because at the end of the day, that’s the only way to propose a plan and discuss how we can do things better.

Nuno

Also, take credit to your point. The achievements that you’ve gotten to.

Bertrand

Of course.

Nuno

I know some founders who are like this, they only talk about the crap stuff and risks and whatever. If you’re just parachuting into the board meeting, you’re like, “Oh, my God.” But the company is doing incredibly well.

Nuno

Again, also give credit for achievements. Give credit for achievements if you have a senior executive presenting to the board and that person is doing particularly well. Or even if the person is not there that you can convey to that person, the board, “I mentioned to the board your performance and they’re aware of it,” and all of that.

Nuno

A couple of things on form. I don’t think you should spend too much time on beautiful presentations, but really focus on content. “I have the core content there.” If a board member, in particular, an investor asks you for something, make sure it’s there on the next board meeting. If they ask you for North Star metrics on a certain aspect, make sure it’s there in the next board meeting. If they ask you for an analysis of sales pipeline or something else, make sure it’s there on the next board meeting.

Nuno

Just pay attention to what people are telling you. These are important things because these are quarterly. If you miss two, it’s like half a year. The person that is in front of you will only get the level of update they want nine months down the road and that’s not cool. Again, be very thoughtful about that.

Bertrand

Yeah, and on that point, I think you can standardize board meetings presentation quite a lot. That should simplify your life. If it’s always the same framework, your life would be much easier.

Bertrand

Typically, I think you can reuse maybe 70% of your board deck quite easily and you just have some new section to talk about some stuff in product, some legal matters, some different stuff. But all the finance, sales, even quite a bit of marketing can really be quite repeatable and product metrics.

Bertrand

You don’t need to reinvent the wheel for every board meeting. Also, it makes life of everyone easier, not just the life of the people building the decks, but also the life of board members who are reviewing these documents. If they have a different format every board meeting, that’s painful.

Nuno

That’s absolutely spot on because it makes it easier for us to also read if we’re not executives. For example, I have one board where the founder CEO always does it in a memo and then has financials and minutes, unless there’s a very specific discussion around strategy or product or whatever where there might be a slide deck around it. But in general, it’s a memo, financials, minutes, and you know the sequence.

Nuno

Again, one thing to be cautious of is if there is a huge issue happening, highlight the hell out of it. Don’t just put it somewhere hidden somewhere in the middle of the memo of the presentation. Highlight that you want to discuss it.

Nuno

Again, you might even not want to have it in the board materials in some cases, because it’s too sensitive of a discussion. For example, you’ve been approached for M&A or something like that, you might not want some of the stuff in board materials.

Nuno

But again, highlight it, certainly, when you’re preparing your board members, to your point, I think it is a best practice to talk to your core board members. If the chairperson is not yourself as the CEO, obviously, in some cases chairperson or chairpeople don’t exist until pretty late in the company or they don’t get properly defined.

Nuno

But if there is a chairperson and it’s not you, the CEO, prepare that person for the board meeting. It’s likely that that person, if they’re doing it properly, will lead the meeting and will lead the agenda. The material is being shared before, we’d already talked about prepare members individually.

Nuno

In my opinion, only board members should attend the entire meeting. All the rest can come in. Observers normally stay the entire time, but with observers, one should reserve the ability to tell observers to leave and we would do what is called, I don’t know where this term came from, but it’s called an executive session, which is really just with the board members. I haven’t felt the need for it much in my career, but sometimes it might be needed, so just take that into account.

Nuno

On observers, I think one thing I always put at the table is the observer should be there to represent specific investors, VCs, et cetera. They shouldn’t be just putting some associates on the middle of it. One of the things that pisses me off the most is that we have observers in some cases that at some point in time, last minute, they’re like, “Oh, my associate’s going to join.” That’s not how it works.

Nuno

You need to tell and ask the board if they’re okay with your associate joining instead of you, and then the board will say yes or no. But if you systematically do that, I think the company, in particular, the CEO should have a conversation with that investor saying, “Look, you have an observer seat as a partner of the front, not your associate.”

Nuno

Again, if you want to use your observer seat to join, great. If you don’t want to use it, then you’re not joining at all as a VC firm. It shouldn’t be your associates just taking notes of it because you didn’t want to join the meeting. That’s something that I would be thoughtful about, again, as you think about, in particular, board observers.

Bertrand

Ultimately, it requires quite some preparation. It requires a process that you do regularly. That’s true, in my mind, I was more thinking about quarterly board meetings, but early on in the life of the business, you might have more board meetings, maybe once a month even.

Bertrand

If you have once a month, obviously, there are some steps and processes. You cannot do that easily. One week in advance doesn’t work. It’s once a month, but once a quarter, definitely, you can achieve that.

Nuno

Moving normally to once a month is because there’s something with the company. It doesn’t necessarily need to be negative. There’s something happening to the company that requires the attention of the board in a more systemic way that a quarter doesn’t really allow for.

Nuno

It might be some decisions, it might be an investment round that’s coming in, M&A discussions, a new client. It might be things that for some reason you need your board to be there. Or it might be actually an investor saying, “You know what? I need to have the monthly cost because I think we need to be more present in what’s happening.”

Nuno

They should not, in my opinion, be sustained for very long periods of time. At that point in time, becomes almost like an executive committee meeting, and I’m not sure that’s warranted.

Bertrand

Yes, I totally agree. I think your good example was around asking some stuff from the company in terms of reporting, in term of follow-through. Sometimes if you just meet once a quarter, you cannot move fast enough to see things going. That’s where the once-a-month can help.

Bertrand

But it doesn’t need to be a full board meeting. You can also have the approach of a full board meeting every quarter and every month you have something in between, which is a shorter one-hour call focused on a specific topic, for instance.

Nuno

With some of my startups, I have to be honest, I don’t do with all of them. It depends on the stage the company is at and the specific strategic elements that they have at that point in time to push for a one-on-one with the CEO, potentially with the executive team to discuss very specific topics.

Nuno

Normally it’s one or two levels below what would be a classic board discussion. It might be very focused on operational matters or marketing matters or fundraising matters. And it’s a two-way street. It’s not just me asking the founder and his executive team to give me an update and reporting on a monthly basis. That’s not really the point.

Nuno

It’s more me trying to help them and problem solve and offering my practical help. Because at the end of the day, we as partners of VC firms, we also suffer a little bit from ADHD. We have a lot of balls running at the same time, and it’s sometimes difficult to pay attention if someone doesn’t lock you in for that one hour and says, “By the way, you gave me some really good comments on this operational issue.” “By the way, I need introductions to three experts in this. Can you provide them to me, Mr. VC?”

Nuno

I think it’s a win-win if it’s nicely done. To your point, it allows us not to have board meetings on a monthly basis to give a little bit more space to team, and for you to be really more part of the key discussions that you can be helpful as a VC on rather than just show up every quarter and give “Amen” and move on.

Nuno

On a typical board agenda, there’s many ways to do this. If you’re not bringing a lot of people into your board meeting, like other senior executives who are not board members, other external parties, I always recommend that you start with the stuff that needs to be approved by the board first, that you get the financials, the capital needs, the option grants, deals and partnerships, minutes from the last meeting.

Nuno

People forget to do minutes, by the way. One rule for minutes, we might talk about it later, but for me, minutes should say the least possible amount of information.

Bertrand

I totally agree. Yes, you have to be careful about what you put in it.

Nuno

You have to be very careful about what was discussed and how it was discussed and how it was put forward. Just core items. If there’s obviously formal approvals from the board, they can be minuted. They can also be put in other board documents that require board approval, but they can be minuted as well.

Nuno

Then you move to strategic discussions. You’ve done your classic stuff on board approval and oversight on core things. Minutes, strategic discussion, update from last meeting, you share metrics, you talk about team, you talk about product evolution, sales strategy, any strategic discussion.

Nuno

Again, I would focus on discussions where you want the input of the board, or you want to highlight a risk or an achievement. But in particular, if you want input of the board, board shouldn’t have input on everything. Just to be clear. Even if you have someone on the board and he’s a VC and he’s a product expert, he or she is a product expert, you shouldn’t bring very detailed product discussions to the board, but you should bring the high-level product evolution roadmap, classic things around that.

Nuno

Then obviously final part, any other business, there should be this discussion on when is the next board meeting, call, I think the best practice is that you do a doodle at the beginning of the year and you get your board calls and meetings organized for the full year so that everyone can have them on their agendas.

Nuno

Because if you have a bunch of board seats, in particular, if you’re an investor, it is helpful to know when these are taking place. It doesn’t mean that there won’t be changes, but it gives clarity. Also now in these times of COVID, to clarify on whether there’s a bit of an expectation at some point that people will meet in person.

Nuno

I’m now pushing my startups post-COVID that we go to at least once a year in person. It’s effectively twice a year because we invite all our portfolio companies also to our AGM session. In some ways I think it’s a practice that is good. Just book everything in ahead, get it in front of people. There might be some minor tweaks on the dates later on, but at least that gives you the clarity on when do you need to prepare for board meetings and when people need to show up.

Bertrand

I think that’s a very good list. Totally in agreement with how deep or not you should go on some of these items. Again, I think that’s something that can be the same process. Every board meeting, you organize it, it’s smooth. People expect the same stuff, board-after-board meetings, and your life would be easier as CEO or as an exec, as investor.

Bertrand

I think that’s quite critical to find your process that works. For that, you need to listen to your board members who will give you feedback about stuff they are expecting. At the end of the day, things change. When you’re a smaller company to a bigger company, you don’t need to provide the same stuff. Early on might be more operational, later on might be more strategic.

Nuno

It’s also worthwhile noting that, as I said, if you have other people in the meeting that are not board members and you need them at different times of the discussions, you might actually start with strategic discussion and leave all the approval stuff for financials, option grants, et cetera, to the end and use that as so-called executive session.

Nuno

Again, it depends a little bit on your board. There’s a couple of my boards that run it like that. Most of my boards start with approvals at the top, which is a little bit easier. But again, if you run it the other way around, there’s no problem. You just need to make sure there’s time.

Bertrand

Yes, same here. That’s why I like to start with basic stuff early on and to keep the end for, personally, I didn’t use to call it executive session, more like director-only session where we just focus maybe first director with CEO and then director without CEO, if it’s needed.

Nuno

Just to be clear, and I think if you’re a CEO and the board asked to have a discussion at the board meeting without you in it, it doesn’t necessarily mean something bad. It might be, for example, a compensation issue or some element that the board wants to actually address positively towards you.

Nuno

I’ve had board-only non-executive board sessions where in this case, two of the founders were not in it because we were discussing their compensation without them asking for it. We just thought the compensation was actually pretty low and we wanted to raise it and we wanted to make them incentivize.

Nuno

It’s not always necessarily a bad thing. It just means that the non-execs want to have a conversation. That’s a good time for us to have a conversation because we’re all there anyway. It’s difficult then for us to actually convene outside of that.

Bertrand

Of course, if you meet physically, another thing you can do after that board meeting is to organize drinks, is to organize a dinner or a lunch. I think finding a way for people to get together, to know each other can be pretty useful.

Section 2: How to manage your Board (18:24)

Nuno

That’s a very good segue on how to manage your board. Again, socializing beyond the boardroom is what you were alluding to. Get to know your board members, get them to know you, understand what their aspirations and what they’re doing, understand how their firms are doing, understand how decisions are being made.

Nuno

It’s very important, even if it’s with the professional need to understand whether the investors will stand by you in the next round or not, if they have the capital to put into it. But in general, just get to know people. I think you get the most out of people when you’re fully engaged beyond just the professional realm and into the socialization realm. Obviously, not doing anything silly, but socialization is a very good thing.

Nuno

The board members are not your buddies. Normally, they’re not necessarily your friends. They might become your friends. They might be very friendly to you, but they’re not necessarily your buddies. Actually, that’s a good thing. It’s good to have board members that will not always agree with you, that will tell you and call you out on stuff that you’re doing that’s bullshit or that doesn’t work.

Nuno

You might disagree with their opinions. You might actually as a CEO say, “You know what? I appreciate your candid and feedback, and it was given in the right way, hopefully, but I disagree with you and I’m going in a different direction.” But that discussion is very valuable.

Nuno

To the point we were making earlier, you don’t want cheerleaders, you want the coaches. The coaches will tell you when there’s something that they’re seeing that’s a blind spot. Sometimes it’s very small things. Sometimes they’re bigger things. Again, listen. You can decide what you’re going to run with or not, but listen, always listen.

Nuno

Don’t forget that actually, their time is valuable. A lot of these board members, if they’re a VC, they have other portfolio companies, other boards, they’re working on deals, they’re managing their own firm. They do need to hobnob, we’ve talked about it in the past, and speak at events and do the shows and talk in the press and whatever. That’s also part of their job, shockingly enough.

Nuno

Again, make sure that the time is valuable for yourself, but also is valuable for them. Prepare them for the conversations you have. Share context before those conversations. Tell them what it’s going to be about so that the person comes to the call or the conversation, even if it’s relatively informal, slightly prepared.

Nuno

Engage them on areas that you see are areas where they can provide value add. Access their networks as much as you can. Again, it’s not just Rolodex. It’s Rolodex in a meaningful, proper way.

Nuno

Then customize your approach to each board member. All board members are very different. You might have a board where you have three board members that are non-executive and you have one who has deep expertise in product, you have someone who’s very strategic and very high-level, and you might have a third one who’s just a hub. They’ll introduce to everyone their mother that you need to make.

Nuno

Again, figure out within that board situation if your board member is more well-equipped for one thing or the others, customize your approach to them and go through that.

Nuno

We already talked about independent board members. Obviously, they are a great buffer. You can use them in the right way, not just through their expertise, but also as they can simply and informally talk to investors and figure out where they are. Basic things like, “Can you figure out if the other investors are going to put money in our next round?” Sometimes between investors, we won’t tell each other because we don’t want to talk about follow on capital and stuff like that.

Nuno

It might be that we’re more amenable to share at least at a high level with an independent board member and tell them, “You know what? We might not have the capacity to do that. Our fund is coming to an end. We don’t want to put more capital right now. We don’t have a lot more capital or raising our next fund,” whatever that is. In some cases, the CEO can ask this question directly and should. In some cases, the independent board member can facilitate it.

Bertrand

Personally, maybe I feel a bit different in the sense that independent board member is not putting money. A good discussion between investors, and most of them might be on the board, some might not be or might be just board observer. An investor-only discussion, I think, can be useful to answer this question. I get your point around not everyone want to share enough, but I think that at some point you need to push stuff around and provide clarity.

Bertrand

I think a CEO is quite critical that you push your investors to make some level of decision when there is time because you need to plan. Should I plan for an external round of financing? Should I plan instead for internal round of financing? How much are we talking about that could be on the table? What is the backup plan? I think there is a need of feasibilities that needs to be provided to the CEO. It’s important there is a fine discussion that happened between investors during this moment.

Nuno

I have a couple of cautionary tales on when investors came together.

Bertrand

Yeah, there might be some risk.

Nuno

I think there’s something about the psyche of investors, which is there’s probably more pride between us than when we’re having the discussion, and I’m talking about pride in a negative way, than when we’re having the discussion. For example, even with the CEO, forget the independent board member for a second, and it generates really funky dynamics.

Nuno

I’ve had dynamics of the CEO thought that the investors were all going to pony up for a bridge round and because there was an ill-equipped conversation between investors at some point in time, nobody was. Because there was one on the investor that misbehaved and then it escalated. Fortunately, things saw an end to it and they were properly done.

Nuno

But I would be very thoughtful on how that gets facilitated. I mean, if you have a highly functioning board where you think your investor board members are very thoughtful people, they are acting in the best interests of the company, they are up to date on what’s really happening, at least at a high level, then yes, you can get away with, let the investors talk about this and figure it out and whatever. But again, I’d be very, very thoughtful about it.

Nuno

If I was a CEO, I would be very thoughtful about it. It’s not that investors don’t talk to each other. We all talk to each other. But just be careful on how you orchestrate the conversation. If it’s a particularly vital strategic conversation. If it’s about the next bridge that I need, otherwise, I’m going to run out of cash, be thoughtful on how you orchestrate it. If I was a CEO, I’d probably talk individually with the lead investors first who are on my board and then go from there. Really assess that.

Bertrand

That I totally agree. As a CEO, if you are properly running the show, you should have this one-to-one discussion as we discuss before every board meeting, between board meetings as well. If you have a quarterly board meeting, between two board meetings, you do an additional one-to-one. Nothing should come as a surprise. You should prepare, you should get feedback. If you are considering a fund raise, internal, external, asking question, asking advice, go one-to-one with a lot of people.

Bertrand

My point is that sometimes, I’ve seen CEO who don’t do the job so well or who try to mislead. Oh, yeah, this and that, I’m sure they are going to put money. Then you realize that actually, no. For a definite amount, at some point, you might need investors coming together to basically provide clarity between themselves and then to the CEO. Unfortunately, sometimes this has to happen.

Nuno

But the VCs do need to do that as their job. We should connect to other board members and talk to them, even if they’re just observers.

Bertrand

That’s part of the game anyway. On the other side, it’s not just CEO with others, it’s board members between each other.

Nuno

I was just involved in a transaction. I won’t go into a lot of details. There was another board member, we were having this discussion. I took it offline, talked to the person one-on-one and was like, “Are you willing to pony up some capital?” The person was like, “I’m tapped out.” To your point, he was honest in this case, then maybe he wouldn’t have been with the CEO. There might be cases where there’s more amenability, but just my point that I wanted to make is never leave stuff fully in the hands of your investors, or you might get an answer that it’s not very good answer.

Bertrand

For me, it’s more that unfortunately, these days I’ve seen a few situation where there is a dream vision of the CEO that is not much to the reality of the investors.

Nuno

There are poor investors as well. There are poor investors and there are poor CEOs. That’s clear.

Bertrand

My point that you need to end up with structural visibility into what’s really doable or not. Hopefully, the CEO, the chairperson do their job, manage that properly. But if not, at some point, you need investors coming together to provide a clear perspective.

Section 3: For Board members (25:52)

Nuno

Maybe switching gears to what if you’re a board member? What should be your attitude and mindset? We’ve talked a lot from the perspective of the executive and the CEO. What if you are an investor? What if you are an independent board member? I think the first piece is the piece of attitude. We’ve talked about it over and over again.

Nuno

Again, fiduciary duty towards the company. Fiduciary duty towards the company. If you’re an investor, obviously, there is a notion of returns towards your own investors, and you need to be sometimes taking some tough decisions because of that. But again, they shouldn’t be necessarily fully against the decision of supporting the company.

Nuno

It might be in some cases that you have an opportunity to do a transaction, I don’t know. A secondary transaction, sell your stock. Because you want to make that return. Because of your fund and it’s coming to an end and all of that stuff. Again, it doesn’t necessarily need to hamper the future of the company. It is a transaction. You should obviously have the conversation with the CEO. You probably want to have the conversation with other investors. In some cases, there’s rights of first refusal involved.

Nuno

But again, that attitude and mindset is always towards, again, what’s the best thing for the company? Not for the CEO of the company, not for the founders of the company, not for the investors in the company, for the company. The second piece is the piece of value add. What is the value as a board member that I bring to the board? As an individual, and I might bring my VC firm all behind me and super well-organized and a bunch of shared services. Very uncommon, by the way, guys. That might be institutional value-add, as I call it.

Nuno

The institutional value-add piece of, for example, at Chameleon, the way we pitch it is our institutional value is clearly around the fact that we have very proprietary data that we create views on, that we massage, anonymize, and then we share with our portfolio companies.

Nuno

The fact that we are a quantum tech augmented VC firm allows us to do that. That we have something called #kin, which is our network of operators and advisors that support our portfolio companies and that work with a variety of our stakeholders. There’s institutional value that you can bring as a board member through the backing of your firm.

Nuno

There’s your non-institutionalized and process-driven value that can be brought by the firm as well, which is this notion of all hands on deck if we need to raise more money. Do we need introductions to venture that fund? How many can we get? That we jump on it, two or three people from the VC firm jump on it and we get those introductions in front of you.

Nuno

It’s more ad hoc, as I would call it, less systemic, but still institutional. Then there’s the individual value that I bring as a board member. What do I bring to the table as a board member myself? Is it just strategic thinking, good governance? Do I have areas of spike? Am I an expert again on marketing or operations or something else? Can I bring that value to the table?

Nuno

Obviously, the half life of some of this knowledge expires and so you shouldn’t expect VCs to still have tremendously valuable knowledge to you. If they did this job 20 years ago, if they were ops people 20 years ago, it’s unlikely that everything they knew will translate, but some of it might. Again, if I’m a board member, I can still bring that frame of mind to table.

Nuno

How do I create real value to the executives and therefore to the company and to my other board members? Then the final piece I would add on board members is the notion of observers. Observers are very tricky, as I said. They’re there, but they don’t get a vote, but in some case, they’re shareholders as well. If you’re an observer, just be thoughtful. Should you just be quiet?

Nuno

My view on observers is there’s two ways you can definitely bring value. Bring expertise and knowledge to the table, if it makes sense. There’s a discussion happening, you have that knowledge, you have that expertise, contribute. It will always be welcome. I have never seen a case where it wasn’t. Secondly, bring to the table your perspective in what constitutes your ability to further the capacity of the company in terms of introductions, in terms of fundraising, in terms of areas that need development.

Nuno

Again, I think observers and independent board members, to a certain extent, are more at the mercy of value-add. Sometimes I feel a lot of observers are just there listening in. As I said, some partners send in their associates, and they’re not really taking much value out of something where they could take a ton of value from.

Nuno

Not just for their own firms, but also for their own firms, because CEOs will value that a lot. I’ve had some CEOs of companies saying, “I appreciated the role of that observer a lot.” But also the value that you can bring to your investment, which in the end of the day, even if you’re not a board member, you’re going to reap the benefits anyway because you’re a shareholder, so it doesn’t matter.

Nuno

Sometimes I feel some observers just want to be there to listen in. Then there’s other cases where I see maybe the worst case of observers, which are the guys who are just there to give their opinions where they have very little to contribute. Or it wasn’t asked for and they just want to take that air time. Again, just stay in the middle, stay in your lane in some ways and be thoughtful. Again, as an observer on where you can bring that value-add.

Bertrand

Totally. That’s true that observer is sometimes pretty poorly defined position because there is no clear standard about how you should manage a board of observers. There are some practices. As you said, I’ve seen board observers totally silent during board meetings. I have seen some who talk as much as any other board member. I guess it really depends in term of practice.

Bertrand

Also, what’s the philosophy behind taking a board observer seat? Some firms, it’s because that was the best they could get. They couldn’t get a full board seat because the investment was too small. Some might be because much later stage type of investor and they don’t want to bother to have a full board seat. That might be very real difference about why, how they got this board seat, and what does it mean for them.

Nuno

In some cases, they want to be inside the loop. They want to justify to their LPs that they have inside information on what’s happening to the company. We have as a thesis that if we’re leading or co-leading around, we should get potentially board observer, depending on the situation. But board seat would be ideal. It has to do with this notion of we are active fund managers. We want to be inside the company. We want to know what’s going on, and we want to participate in core governance decisions and strategic decisions for the company.

Nuno

But honestly, there’s many investments where we will not lead or co-lead and we will not get board seat or even board observer rights, and we want to still be impactful. We want to still have these calls with the founders once in a while and see how we can be impactful.

Nuno

We had one just the other day. It was very funny. It was me and a colleague of mine jumped on a call. We’re on a company where we’re not leads, and we just reached out to the guy just saying, “What’s going on? Can we be of help?” The usual thing. He probably thought he just had to give us a reporting note. He spent the first 10 minutes giving us a reporting note.

Nuno

By the end of the first 10 minutes, we were like, “Yeah, cool, but do you need our help on something?” He’s like, “Oh, I have these three things.” He started talking through these things and it was supposed to be a quick call, like a 30, 45 minute call. It ended up being an hour because he actually just wanted to talk to us and ask for our opinion.

Nuno

I’m not sure if he’s going to do something with our opinion or not, but we gave our best opinion. I think that’s valuable even if you’re not a lead investor. Again, even if you’re not a board member or board observer, just an investor. That’s why I think our relationship is like that. I was never a board member or board observer of your company. We developed a relationship that had nothing to do with your board in some ways. It’s possible to do it. Sometimes it creates actually quite a lot of value. It’s not regrettable.

Bertrand

You definitely provided more values than some board members. That’s for the entrepreneur to manage his network of investors, business agents who are not on the board and think about them and keep them in the loop and basically be able to get additional value from that.

Bertrand

I think as an investor, there is obviously value to have information rights or to have board observer rights, because that also give you better perspective when it’s time to make the next financing. Should you put more money to work? Should you put less money to work? Should you not put money to work? Having seen how the business is run firsthand at board meetings, I can make a big difference in how you evaluate the next opportunity to participate to a new financing.

Section 4: Advisory Board / Advisors (33:09)

Nuno

Moving from board observers to and non-board members to an even less well defined category of people, advisors, in particular advisory boards. There’s this emergence of advisory boards and people for some reason on advisory boards. An advisory board is something that doesn’t really formally exist legally. You can call whatever it is. It’s a bunch of advisors on something that looks like a board.

Nuno

Then there’s a lot of confusion on what advisors or advisory board members are versus what they’re not. Let’s start with what they’re not. Maybe that’s a good way to start. They’re not consultants. They’re not consultants or contractors. Normally, consultants or contractors fulfil a role that is limited in time. It could be weeks, months, maybe a year, but it’s normally not a super long process.

Nuno

Obviously, if a consultant or contractor provides value for a very long period of time, it’s very likely that person at some point might become a full time or a full member of the team. Normally, consultants provide a very specialized domain knowledge or domain of operations, either in engineering or around communications or HR and recruiting and all of that. The engagement intensity of a consultant is normally relatively significant from a day a week to maybe even full time.

Nuno

That’s not an advisor. An advisor does not fulfil that role normally. An advisor is a different thing. An advisor is also not a board member. They’re not overseeing the whole company. They don’t have a say. Or if you do sherry duty, their advice is cool, but it’s not binding in any way. Normally, board members should have 2-3 year term, depending on the board seats and how they’re organized.

Nuno

Certainly if it’s more formalized, they should have a term at some point in time as the company becomes larger. Early on, probably it’s less important because you have different rounds of investing that will facilitate the terms and the discussion around the terms over time. Again, that’s not what an advisor is. Advisors normally are people that have a specific set of specialism or expertise either in a functional area.

Nuno

It could be data science or analytics or product management or sales ops or sales strategy or in a specific industry, as we mentioned before, within the industry that the company actually is in. Or wants to operate in in the future and where the company needs help. There might be advisors that you want to have on board to put on your pitch deck because they’re very famous people.

Nuno

I would say if they have very little role with the company, if they’re not really helping you with anything like Rolodex or help you fundraise, that could be a specialty. Someone can help you fundraise or can help you introduce you to their Rolodex. If there’s no specialty, et cetera, and you just put that name there, that’s negative from the perspective of any investor that looks at it. Because they’re like, “There’s no way that person is spending much time with you.” It’s very funny because now people have gotten to that.

Nuno

I see sometimes start-ups saying, “Hey, this advisor is very deeply involved with us. This advisor is a celebrity,” that she’ll go and named a famous whatever sports celebrity. I’m like, “How many hours a week does that person spend with you?” They’re like, “Oh, it varies.” It’s like, “No, on average, right?” It’s maybe an hour a month. It’s like, “Okay, cool.” An hour a month for that celebrity is a lot. It’s like, “What do you guys talk about?” Again, there’s been this thing of having advisors like logos of companies that you sell to. Advisors should give you some value-add. Either, again, it’s a specialty or an area of expertise or something else.

Bertrand

I remember early on having a board of advisor 25 years ago because I was told that doing a board of advisor, it was useful. But first thing is that we never met all together. It was just one-to-one. That notion of board of advisor makes a little sense. I think it’s good to talk about senior advisors. That’s probably the easiest way to talk about it.

Bertrand

As you said, people provide value. Sometimes it’s good for two years, three years. It really depends. But I’ve seen value in having some people connected early to the business if you need to learn more, if you need some connections. One hour a month in many cases, that can still be pretty useful. I’m not sure a lot of people have one or two hour a week available like this and really want to spend it with start-ups. I think it depends. It’s a balance for everyone to find out.

Nuno

I’ve done a variety of advisory roles. I think I still have one. I normally spend a couple of hours a month. To your notion, it’s like you distil the knowledge into those hours. That’s it. You get the top of me advice, specific, that’s it, and then you move on. Normally there are light intensity. It’s 1-2 year term things. You should define some term. Normally, you attach it to your vesting period.

Nuno

There is compensation normally for these roles. It might be just stock compensation or options. It might be that there’s some cash involved as well. Again, having this cadence of interacting with the individual, to your point, the one-on-ones is probably the most valuable piece, and it should be both ways. It should be that the advisor feels that the founder CEO or the senior executive who brought them in really wants to have her or his opinion on stuff. But it also needs to be the other way around.

Nuno

The CEO, founder of the company, needs to ping the person, have something organized. Make sure that there’s something on the calendar that they talk regularly. Otherwise, these things just stop working over time and there’s nothing wrong with it. Some advisory roles might expire over a period of time and they’re no longer super valuable to the company or to the advisor or to both. There’s nothing wrong with that. The person was still helpful, as you said, for a period of time.

Nuno

The advisory board dimension that they were talking about, I think it’s particularly valuable. It’s very difficult to orchestrate properly. It’s particularly valuable as a convener. It’s particularly valuable. If I’m an advisor, but you have five other advisors or three other advisors and I want to meet them. I’ve met very few people that are good at doing this.

Nuno

Larger corporations, because they have a lot of resources and a lot of people around them, have interesting advisory boards. I’m not sure they’re very meaningful or impactful into the company, but they do. Smaller companies rarely do this well.

Nuno

I’ve seen very few occasions I said. Normally, the best practice for me is it’s a convener. It links potentially to a board meeting where the advisory board can co-locate for part of the board meeting as well, where there’s some social activity around it. Because that’s the value. The value is I get at least to meet not just the people at the company, but I get to meet other advisors, maybe even board members, and there’s value in there.

Nuno

To your point, as an org by itself, the board is rarely a functioning thing. The board for me is more of a social construct rather than an execution or operations construct. You get most of the value normally from the one-on-ones. I would finalize just on how to best engage with advisors, that be very specific, very early on, even before you’ve signed that advisory agreement on what you want from this person. What you want from him or her.

Nuno

If what you expect from this person, like this is a mega senior person, normally what you expect from the mega senior person is the opening of doors. It’s rare that it’s very deep functional knowledge. Be very explicit with the person. Be very explicit with the potential advisor saying, “Is this something that you’re willing to do for us? If I ask you for five intros, what would be the limit of you doing those intros for us?”

Nuno

Because it’s shocking how often it happens that the expectation on one side is, “Oh, the founder and CEO wants me involved because I have great knowledge around area X.” The founder and CEO is like, “Oh, I’m involving this person because they can open a ton of doors for me.” The expectations are misaligned. It might be that the person doesn’t want to burn through their Rolodex, which, by the way, they’re entitled to. They’re not burned through their Rolodex just to serve this advisory role and these rarely work.

Nuno

Be very specific about what it is. If it’s more deep functional expertise, be specific around what it is about. Define some high-level objectives. You don’t need to do a consulting agreement to the end degree with very detailed milestones and whatever. But at least at a high level, define what you expect. Try to understand the motivations on why that person wants to collaborate with a company and with yourself. Normally it’s not just money, very rarely it is. Might be the upside, might be that they find you cool. It might be that they want to be hands-on.

Nuno

Even if you’re talking to a CEO or a former CEO of a company, like mega superstar, whatever, and they reach out to you or you reach out to them and they want to collaborate with you, don’t assume anything. Don’t assume that it’s just because they want to do the hobnobbing and open doors for you. It might be that they actually just want to be hands-on.

Nuno

They want to actually spend a couple of hours with you a month working on something at a different level that then worked in the last few years. Finally, a lot of people ask me if advisors should put money in the company or not. I don’t think it’s needed. It is a left pocket, right pocket type situation because if you’re compensating them in some way and then they’re giving you money, it’s like, are they an investor or not? I like to detach both relationships.

Nuno

My view is if this person gives you money, in that respect, they’re an angel investor of some sort. That’s it. They are an investor as other investors are. They have rights, they have preferences, they have a number of things that they’re willing to ask from you. If they are an advisor to you, there’s stuff you ask from them. There’s responsibilities on both sides on things you need to execute, operate on, et cetera. That person should get compensated for that.

Nuno

It might be that there’s a case that you’re an angel investor in the company and you’re also an advisor in the company and getting compensated for it. This has happened to me in one situation in my career, and it was very clear what was one situation, what was the other situation. When I was asking questions as an investor and when I was asking questions as an advisor and trying to bring value to the company.

Nuno

Now, obviously, things can get muddled pretty quickly, but having those two relationships well established, I think is a must. It’s not a nice-to-have, it’s a must. Because even legally, they’re not well-defined. They don’t get magically well-defined as you start operating and working together.

Bertrand

I think that the key point, it’s not like a business consultant, it’s not like a board member where things are actually quite more or less defined. As an advisor, it could be anything in term of time spent, in term of what you expect from them. That clear explicit alignment of interest is pretty key.

Nuno

Maybe a couple of final thoughts, at least from my end. Just be very thought about the contracts that you establish with everyone, independent board members, advisors, all of that stuff. Be very cautious on how these are drafted. Work with lawyers. I know people like, “Oh, I’ll just download some from the internet, a consulting agreement, and give it to the person.”

Nuno

Be very thoughtful on when is the stock option plan put forward, when is it defined, is there accelerate investing? Are things working out, et cetera, et cetera? How does that work and how does that manifest itself?

Nuno

Be very clear about things like IP assignation, invention rights, stuff like that, in particular with advisors, but also, for example, with independent board members, expenses. How does that… I mean, the devil’s in the detail, I know. It’s like, oh, we’re all friends. We’re all friends today, but some stuff might come in between. It’s not necessarily that the other person is being nefarious, but it’s a good thought to do it properly.

Nuno

Final thoughts from my end. No free lunches. Investor board members, executive board members don’t get anything to be on your board, but obviously, investors get the return so that’s why they’re on your board. They’re helping you govern the company, helping you define the strategic elements of the company and take you forward.

Nuno

Board members get compensated. We talked about it, at least options, maybe even cash, a bunch of other things, advisors and advisory board members.

Bertrand

Independent.

Nuno

Exactly. Independent board members outside directors get compensated and can get remuneration as well in cash. As you go through the history of the company, companies, in particular in the Bay Area, in the US, but in the Bay Area in particular, are very stingy about giving cash away even to board members. I think that’s a bit silly.

Nuno

Cash is actually a good incentive for both sides because it’s probably not much, but it’s coming out of my account every month as a company. Someone’s paying attention to it. For the person on the other side, although it’s not much, it shows that the company is giving them something as well.

Nuno

A lot of people are against cash. I’m actually for cash in many cases. Again, depending on the role, but certainly for the independent board member outside role, it could be valuable. Advisors, advisory board members, options could get remuneration as well. It could be cash-free, depends.

Nuno

Then finally, I call it garbage in, garbage out. If you don’t prepare your board members, don’t expect them to give you nuggets of wisdom. If you send stuff the day itself, don’t expect them to come back to you with something meaningful and positive and good.

Nuno

If you do not ask for specific things from them, be the outside directors or investor board members, you won’t get anything in return. If you don’t follow up, you won’t get anything in return. Again, most people in the VC industry have some form of ADHD, more controlled or less controlled. Make sure you ask for stuff and you follow up on it. Then don’t complain if we didn’t follow up on it.

Nuno

If someone asks you for something, an investor or an outside board member, it seems like a valid ask. If it’s not something silly like a change in the presentation, date on a specific topic, et cetera, et cetera. Provide it relatively quickly, be on top of your game. It’s an important illustration on how you do as a CEO of a company.

Nuno

If I ask for an analysis, it takes a month and it’s an afterthought or if you totally forgot it, it’s not cool. Again, if it’s positive or it’s not a ridiculous ask in terms of analysis. There’s always this notion of I want to do everything for no cash, I want to be very lean. Well, in the last four or five years, maybe we haven’t had enough of that, but certainly, I know some founders are like that.

Nuno

Being lean is important, but you’re getting a lot of value from people around you and in particular getting their time. Be thoughtful on how you use it, be thoughtful on how you personally commit to those people, and be thoughtful on how you commit the company to those people.

Nuno

There’s little details that are very, very stupid but are very, very meaningful. If your company does a special edition T-shirt or hoodie or whatever, share it with your board members. If you did some swag for an event you’re going to, share it with your board members. If there’s something cool happening and there’s a dinner and whatever, ask if one of your board members wants to come along and join. Again, go beyond this notion of it’s just governance and strategic and stuff.

Bertrand

Maybe another piece we don’t talk much, we talk in general. How muc