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Thursday, August 27, 2009

Novel approach to funding your start up

A short article from Francine Hardaway's Blog "Stealthmode Blog" on a novel approach to bootstrapping your start up, "GET MARRIED" by the way Francines Blog is an excellent read and would recommend her to anyone interested in start up a business:

Novel Way to Fund a Startup

by Francine on August 25, 2009

I met Drue Kataoka through her blog, Valley Zen. Only later did I find that she, a recent Stanford grad, is from a distinguished Japanese family and is an accomplished artist in a traditional Japanese medium. And that’s the end of my expertise about things Japanese. But I got a message from Drue yesterday saying she was getting married on August 29th, and directing me to the First Ever Startup Registry.

Drue and her fiancee are starting a company called Aboomba. It is, of course, in stealth mode, which is why she thought I should know about it:-) They have decided that they don’t need silver and crystal and all that stuff I’ve had in boxes and shlepped from home to home without unpacking since the days of Mad Men. Instead, they have asked their friends to give them gifts like food for their engineers ($273), lunch for a VC $291), a desk upgrade for a developer ($49.90), an hour of a Silicon Valley lawyer’s time ($385) and so forth. In this way, they have backed into a budget:-)

Maybe I should have just tweeted a link to it, but I thought the letter from the bride and groom was worth re-printing:

The big date of August 29 is quickly approaching. However, we realized we didn’t need blenders, silverware or champagne glasses. So we had two options: (1) create a wedding registry with objects that we don’t really need, but are expected for the retail-industry-imposed Wedding Registry Ritual or (2) surprise everybody and do a different kind of registry—one that is non-conventional, humorous, genetically Silicon Valley—and actually useful.

We decided that the future belongs to the bold—so below is our non-conventional Start-up Wedding Registry. As you know, besides starting our life together, we are excited to be starting a new Internet company called Aboomba. Instead of buying us silverware and kitchenware, we invite you to participate in nurturing this new internet organism. The list below is as much humorous as serious—you could indeed be feeding engineers and accountants; providing coffee, pizza and online hosting.

Many of you are entrepreneurs, venture capitalists or start-up lawyers yourselves.so you have already been through the exciting experience of starting a company and seeing it grow. We promise that Aboomba’s journey will be filled with creativity, excitement and drive. You will see your contributions to this non-conventional wedding registry result in building an amazing company!

But the wedding is not about the presents—it is about the guests who have played a special role in our lives. That’s why, the last and most important item in our registry is Your Attendance—the gift that we will cherish most.

Is this not the cleverest way to fund a company using the traditional 3Fs? What friend, family member, or fool can resist contributing under these circumstances? Like all early stage investors, you’d be buying a pig in a poke, but at least you would be kicking off the marriage in a useful way. Did you really like giving traditional brides a single china dinner plate or a blender?

And a word of advice to entrepreneurs: next time you think you need to raise money, perhaps you should just get married.

Preparing a Pitch

This article from www.growthbusiness.co.uk is a good introduction to prepping for a pitch, I have been asked these questions a few times...ok loads of times..as trying to raise money in these days is like finding the proverbial "Hens teeth" ....Well not that bad, what I would say select the VC funds carefully, make sure they are investing, they have an interest in your sector and look for a weakness in there portfolio companies, where you could bring something to the party

A lack of preparation will kill any presentation before you even enter the room. Here's how to make sure you have everything in place to wow your audience.

Start by asking yourself the following:

* What is the purpose of the pitch?
* Who are you pitching to?
* What are you likely to be asked?
* What could go wrong?

What is the purpose of a pitch?
Before you begin your research or start writing the presentation, you need to clearly define what you hope to achieve from the meeting or pitch and what the ideal outcome would be. This will ensure you have a clear approach and are consistent across your presentation. It is important to clarify your objectives: are you looking for investment or a partner? Are you trying to sell yourself, your product, or your company?

Who are you pitching to?
Research is the foundation of any successful pitch, and is not just limited to the market you’re operating in. It sounds obvious, but you also need to ensure you have a thorough understanding of the company you are going to be talking to and the sector it operates in. In addition, you should also find out exactly who you are going to meet and get some background information about them. This can be done very easily using internet search engines and will allow you to engage with them on a much more knowledgeable and personal level.

What are you likely to be asked?
When you see senior executives of the world’s biggest companies, they often seem to know the answer to everything they are asked, whether that is the financial position of their business or the name of the cleaner’s niece. It’s impressive to watch, but do they really know the answer to every question about their business? The answer in most cases is ‘no’ – they have just done their research and prepared thoroughly based on their audience and subject – you should do the same.

Think about the types of questions that you may be asked, particularly those that may be difficult to answer. Questions vary depending on the type of audience, but here are a few examples:

* What does your company do exactly – the overarching pitch?
* What is the value of the market for your product?
* Is your intellectual property protected in any way?
* How much money do you need? How far will that go?
* What is your marketing strategy?
* Who is on your management team and what is their experience?

What could go wrong?
It may sound negative, but you have to think about everything that could go wrong and have contingencies in place. This can include basics like:

* Having business cards
* Ensuring you have all the leads for your computer
* Having a backup copy of your presentation (on a memory stick or DVD)
* Printing off and binding colour copies of your slide deck
* Having the exact location of the pitch and the contact details of the people you are meeting

Your ability to present in a clear, concise and convincing manner is vital in any pitch situation. Remember that everything you do sends out a message – people focus consciously on what you are saying but unconsciously on how you are saying it.

While there are always a few naturally gifted speakers who can present without practising, there aren’t very many of them. And even they rehearse. As a result, for those of us who don’t have the ability to ‘wow’ off-the-cuff, the more you rehearse your pitch the more natural it will become and the more confident you will be in delivering the content. Confidence is critical for any pitch, as it puts everyone involved at ease – including the presenter, who will give a more convincing performance as a result.

Anyone can feel a little nervous and silly rehearsing in front of others, particularly colleagues, but this is essential because we never get anything right without practice. Think about the pitch as going on stage, rather than just a way of imparting information and think what would happen if musicians, singers or actors had the same attitude – they would never perfect their art.

Getting it right: Ten questions to ask yourself before a pitch
1. Do you know what you want to achieve from the pitch?
2. Have you rehearsed the pitch?
3. Are you passionate about what you are presenting?
4. Are you comfortable with the content, especially any figures?
5. Do you know who you are pitching to?
6. Are you prepared for any difficult questions that may be asked?
7. Has someone else looked over the presentation?
8. Have you checked all of the facts?
9. Are you going to excite your audience?
10. Are you going to enjoy the pitch?

If you ask yourself the ten questions below and can answer ‘yes’ to them all, you are on your way to a great pitch; any ‘nos’ and there is still some room for improvement.

Wednesday, August 26, 2009

Status on the Venture Capital Industry

This is an interesting article on the status of the VC world, something that I find very interesting as I am in the process of trying to get funding for the companyI am working for, I have never found it as hard to raise funding as I do today, this being the 6th VC backed start up I have been involved in, there is a general shift in risk profile , and you find it hard to get interest in pre revenue projects, even a cleantech business with proven technology, experienced management team and a route to market, the summation of the article is that the VC community has to shrink to benefit all parties, would like to hear your comments on the matter. The article has been written by Bill Gurley who joined Benchmark Capital in 1999.

Many are speculating that the year two thousand and nine represents a fundamental turning point for the venture capital industry. Some are arguing that the industry is in dire straits after years of poor performance. Others have argued that the math simply does not work for the industry’s current size. Another theory suggests that permanent challenges with the IPO market call into question the fundamental economics of the VC industry. Lastly, some credible authors have suggested that things are so bad that a federal bailout may be in order.

What is really happening in the venture capital industry? It is indeed quite likely that the venture industry is in the process of a very substantial reduction in size, perhaps the first in the history of the industry. However, the specific catalyst for this reduction is not directly related to the issues just mentioned. In order to fully understand what is happening, one must look upstream from the venture capitalists to the source of funds, for that is where the wheels of change are in motion.

Venture capital funds receive the majority of their funds from large pension funds, endowments, and foundations which represent some of the largest pools of capital in the world. This “institutional capital” is typically managed by active fund managers who invest with the objective of earning an optimal return in order to meet the needs of the specific institution and/or to grow the size of their overall fund. These fund managers have one primary tool in their search for optimal returns: deciding which investment categories (referred to as “asset classes”) should receive which percentage of the overall capital allocation. This process is known in the financial field as “asset allocation.”

Asset allocation is the strategy an investor uses to choose specifically how to divide up capital amongst asset classes such as stocks, bonds, international stocks, international bonds, real-estate funds, leveraged buys-outs (LBOs), venture capital, as well as other obscure classes such as timber funds. Some of these asset classes, such as stocks and bonds, are known as “liquid assets,” because these instruments trade on a daily basis on exchanges around the world. For these assets, investors can be quite sure of the exact value of their holdings, as the price is set continuously in the market. Also, if they need to sell, there is a ready market to accept the trade. Illiquid assets, also known as alternative assets, include all the other investment classes that do not trade on a daily exchange. These “private” investments (as compared to “public” liquid investments) are considered higher risk due to their illiquidity, but also are expected to earn a higher return. Some hedge funds are included in alternative assets either because they themselves invest in illiquid investments or because they put strict limitations on the trading capability of the institutional investors, rendering themselves “illiquid”.

graphAsset allocation is a well-studied area within the field of finance. A prototypical U.S.-based asset allocation model might allocate 25% to U.S. stocks, 30% to U.S. debt, 25% to international equity and debt, and let’s say 20% to all alternative assets. Within alternative assets, LBOs might be 60%, and venture capital could be as low as 10% (of the 20%). As a result, venture capital could be as low as 2% of a institutional fund’s overall capital allocation. Most people fail to realize just how small venture capital is in the overall scheme of things.

Very generally speaking, experts and academicians have considered it “conservative” to have a smaller allocation to all alternative assets reflecting the risks of illiquidity, the inability to ascertain price, and the higher difficulty in analyzing the non-standard vehicles. It is a fairly straightforward, conservative investment approach to favor liquidity and certainty over absolute potential upside (this is the same argument for holding bonds over stocks).

Over the past decade or so, a large number of very influential institutional funds have substantially increased their allocation in alternative assets. In some extreme cases, these investors have taken this allocation from a conservative amount of say 15-20% to well over 50% of their fund. Many people suggest that David Swensen at Yale was the original architect of a strategy to adopt a much higher allocation to alternative assets. Regardless of whether he was the leader or not, several funds simultaneously adopted this higher-risk, higher-return model. (For a more detailed look at how this evolved and why, see Ivy League Schools Learn a Lesson in Liquidity and How Harvard Investing Superstars Crashed. For an even deeper dive including comparative asset allocation models see Tough Lessons for Harvard and Yale.)

lbo_dataContributing to this dynamic on the field, the early movers to this model were able to post above-average returns.* Also, due to the high disclosure policy of most universities, these above average performances were often touted in press releases. This “public benchmarking” put further pressure on competing fund managers who were not seeing equal returns, which as you might guess, led to them mimicking the same strategy. As a result, alternative assets have grown quite substantially over the past ten years. This is perhaps best seen in the size of the overall LBO market. The included chart shows the money raised in the LBO market over the past 30 years. As you can see, the amount of dollars pouring into this category over the past five years is nothing short of breathtaking.

The market contraction of late 2008 and early 2009 severely compromised the high-alternative asset allocation strategy. The liquid portion of average portfolio contracted as much as 30-40%, which had two resulting impacts. Initially, this resulted in most fund managers having an even higher portion of their funds in illiquid investments. Ironically this was largely an accounting issue. Most likely, the illiquid pieces of their portfolio had declined just as much, but as illiquid investments are not valued on a day-to-day basis, they simply were not properly discounted at this point (over time they “would” and “are” eventually coming down). But with one’s fund already down 30% or so, no one is eager to further decrement the value. Despite that this may have only been an “accounting” issue, it presented a problem nonetheless, as many fund managers have triggers that force them to reallocate capital if they go above or below a certain asset allocation. This is one of those policies that encouraged selling at a point that may be the exact wrong time, contributing to further declines.

A second and more complicated problem also emerged. It turns out that when an institutional investor “invests” in an LBO fund they don’t actually invest the dollars all at once, rather they commit to an investment over time, which is “drawn down” by the LBO manager (venture capital works in the same way, but once again is a much smaller category). As these funds substantially increased their commitment to the LBO category, they were de facto increasing a guaranteed negative cash flow in the future to meet these draw-downs. Now, with portfolios out of balance, and lack of new liquidity events from the M&A and IPO markets, these funds have cash needs (to meet the draw-downs) that are not offset by cash availability. If anything, the universities and endowments these managers represent want more cash now to deal with the difficult overall economic environment.

To meet these new liquidity needs an institutional investor could:

  1. Sell more of it’s liquid securities. This is problematic because it further compromises the target asset allocation.
  2. Try to sell the LBO commitments on the secondary market. As you might suspect the secondary market is extremely depressed. Some have even suggested that due to the forward cash need on an early LBO fund, an institution might have to “pay” to get out of the position, and to encourage someone else take on the future cash commitment.
  3. Default on the commitment. While this does have penalties in most cases, it would not be out of the realm of possibilities for this to occur if the investor has lost faith in the manager, and it is early in the fund (with more cash needs in the future).
  4. Try to raise more capital. Not surprisingly, donations to foundations and universities are down dramatically due to the overall decline in the capital markets. This makes this strategy unlikely.

As you can see, none of these options are overly compelling.

If this is not bad enough, many institutional fund managers and the groups to whom they report (such as a board of trustees) are now second-guessing the high-alternative asset allocation model. As a result, they may desire to return to the more conservative and more traditional asset allocation of 10-20% allocated to alternative assets. Ironically, they are in no position to rebalance their portfolio precisely because they lack incremental liquidity. Think about it this way – it is very easy to shift a portfolio from liquid assets to illiquid. You simply sell positions in highly liquid securities, and buy or commit to illiquid ones. Going the other way is not so simple, as there is no ability to conveniently exit the illiquid positions.

This is a very long explanation, but the punch line is that as these large institutions adjust their portfolios and potentially abandon these more aggressive strategies, the amount of overall capital committed to alternative assets will undoubtedly shrink. As this happens, the VC industry will shrink in kind. How much will it go down? It is very hard to say. It would not be surprising for many of these funds to cut their allocation in the category in half, and as a result, it shouldn’t be surprising for the VC industry to get cut in half also.

One could argue that poor returns in the VC industry is the primary reason the category will shrink and that, as a result, the VC industry could be cut even further – or perhaps even go away. There are two key reasons that this is highly unlikely. First, one of the key tenets of finance theory is the Capital Asset Pricing Model (CAPM). The CAPM model argues that each investment has a risk, measured as Beta, which is correlated with return vs. that of the risk-free return. Venture Capital is obviously a high-Beta investment category. As of August 3rd, 2009, the S&P 500 has a negative 10-year return. As a higher-Beta category, no rational investor could reasonably expect the VC industry as a whole to outperform in a catastrophic overall equity market. In fact, the expectation would be for lower returns than the equity benchmark. This multiplicative correlation with traditional equity markets is the exact same reason that venture capital outperformed traditional equities in the late 1990’s. The bottom line is that no institutional investor should be surprised by the recent below-average performance of the entire category, all things being equal.

The second reason the category will not be abandoned is contrarianism. Most students of financial history have read the famous quote attributed to Warren Buffet, “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.” One of the biggest fears of any investor is to abandon an investment at its low point, and then miss the corresponding recovery that would have helped offset previous poor returns. While this mindset will not guarantee the 100-year viability of the venture capital category, it should act as a governor on any mass exodus of the category. The more people that exit, the more the true believers will want to double-down.

So when will this happen? One thing for sure is it will not happen quickly. The VC industry has low barriers to entry and high barriers to exit. Theoretically, a fund raised in 2008, where all the LPs have no plans to commit to their next fund, may still be doing business in 2018. VC funds have long lives, and the point at which they decide to “not continue” is usually when they go to raise a new fund. This would typically be 3-5 years after they raised their last fund, but could be expanded to 5-7 years in a tough market. In some ways the process has already started. Stories are starting to pop up about VC funds that were unable to raise their next fund. Also, some entrepreneurs are starting to discuss favoring VCs of which they can be confident of their longevity. All in all, one should expect a large number of VC firms to call it quits over the next five years.

How should Silicon Valley think about these changes? It is important to realize that there are approximately 900 active VC firms in the U.S. alone. If that number fell to 450, it is not clear that the average Silicon Valley resident would take much notice. Another interesting data point can be found in the NVCA data outlining how much money VCs are investing in startups (as opposed to LP’s committing to VC firms). VC firms invested about $3.7B in the second quarter of 2009. Interestingly, this number is about half of the recent peak of around $8B/quarter. It is also quite similar to the investment level in the mid 1990s, prior to both the Internet bubble, and the rise of the aggressive asset allocation model. So from that perspective, this, meaning the investment level we see right now in Q2 of 2009, may be what it is going to be like in the future.

There are many reasons to believe that a reduction in the size of the VC industry will be healthy for the industry overall and should lead to above average returns in the future. This is not simply because less supply of dollars will give VCs more pricing leverage. We have seen over and over again how excess capital can lead to crowded emerging markets with as many as 5-6 VC backed competitors. Reducing this to 2-3 players will result in less cutthroat behavior and much healthier returns for all companies and entrepreneurs in the market. Additionally, at a stabilized market size of well over $15B a year, there should be plenty of capital to fund the next Microsoft, Ebay, or Google.

* To date, it is unclear if these “above-average” returns were a result of the liquid half of these portfolios or the illiquid half. As we mentioned earlier, it is extremely difficult to ascertain the actual value of an illiquid investment. In many cases, the institutional fund manager relies on the investment manager of the asset in which they invested to prescribe a value to the investment, even though they may be highly biased. If it turns out a large portion of the “above-average” returns of these early adopters of this more aggressive strategy were on the illiquid side, we may have yet again another example of the dangers of mark-to-market accounting.



Monday, August 17, 2009

What VC'S are looking for

What VCs are looking for

Article Date: Aug 12 2009
VCs often have set criteria in mind
VCs often have set criteria in mind

Nenad Marovac, managing partner of venture capital firm DN Capital, throws light on what makes VCs say ‘yes’.

Despite the reduced funding levels for technology start-ups in 2009, many opportunities for investment still exist, as the recent establishment of Google’s new technology VC fund, Google Ventures, demonstrates.

In order to be successful at securing investment in an atmosphere of increased competition for a smaller pot, young companies must have certain qualities. They require an excellent product, a unique service proposition, the ability to save their customers time or money, and the potential to generate significant revenue.

VC investors will also want to see a solid team in charge of the business, made up of experienced executives who understand their market. Investors always prefer cautious entrepreneurs who are cash-flow efficient and watch their expenses. Entrepreneurs must avoid traditional errors such as hiring new talent in anticipation of contracts that have yet to be won. They must also be able to take a step back from their business and objectively asses whether anyone will really need or want their product.

Finally, these start-ups must be entering a market that is ready for significant growth. How can a start-up know when the market is ready for their product? This should be clear when they start to see dramatic growth in their revenue and reputation. For example, mobile advertising, while promising decent growth in the future, is nowhere near ready for large-scale investment. It's too far off mass consumer adoption and this means it won't turn a decent profit for quite a while.

There is no “magic formula” to securing VC funding. Every company that receives funding represents a calculated risk, with investors weighing up the cost, the team, the product and the market. It is important to remember that even amongst funded start-ups, 50 per cent still fail.

What start-ups should expect from VCs
High-quality VC funding should encompass much more than simple investment. Especially when working with young start-ups, the investors should provide proactive guidance at all levels of a portfolio company’s business plan. They should also:

* Have a global network of contacts, including potential customers, channel partners, employees, Tier I US and European investors and acquirers
* Help recruit outstanding candidates for the company’s executive team
* Bring in new customer leads
* Introduce their portfolio companies to new international markets (for example by cross-pollinating between Europe and the US, as DN Capital has done with companies like Datanomic, Lagan and OLX)

It's a tough market, but companies should not be so keen to secure funding that they forget to ask how much their investors can bring to the table besides their money.

DN Capital is a pan-European investor that invests €1-10 million per company.

Extract from an article in www.growthbusiness.co.uk a leading advice website for the start up

Tuesday, August 11, 2009

Building your company structure.

How to Design a Flat Organization
By Matthew E. May

Conventional wisdom says that to be successful, our ideas—be they designs, strategies, products, performances, or services—must be concrete, complete, and certain. And when it comes to managing a company big or small, we need organizations to be highly ordered, with a strong and well-defined structure. But what if that’s wrong?

Take the case of French company FAVI, an autoparts supplier manufacturing copper alloy components. CEO Jean-Francois Zobrist eliminated the personnel department immediately upon taking the helm of the company in 1983. But that wasn’t all he got rid of. Says Zobrist: “I came in the day after I became CEO, and gathered the people. I told them tomorrow when you come to work, you do not work for me or for a boss. You work for your customer. I don’t pay you. They do. Every customer has its own factory now. You do what is needed for the customer.” And with that single stroke, he eliminated the central control: personnel, product development, purchasing…all gone.

The company formed twenty teams based on knowledge of customers like Fiat, Volvo, Volkswagen, etc. Each team was responsible not only for the customer, but for its own human resources, purchasing, and product development. There are two job designations in the team: leader and compagnon—or companion—which is an operator able to perform several different jobs.

Every customer has a single FAVI linchpin who oversees all aspects of the relationship which are handled by the team. This includes all the technical requirements, cost negotiations, purchasing, product development, quality control issues, scheduling and delivery, meeting organization, and information coordinating. The linchpin is a critical position of high strategic importance, so Zobrist handpicked each one. In effect, what happened at FAVI was that it moved from being one big plant to being a couple of dozen entrepreneurial miniplants housed under one roof.

Zobrist did what the best designers do: add by subtracting. The lack of hierarchy solves a number of problems. With work at FAVI organized into horizontal customer teams, job titles and promotions become irrelevant, so they are no longer a distraction. All that energy is channeled into the work itself, which at FAVI is of the highest quality.

Accountability is to the customer and to the team, not a boss, so FAVI people are free to experiment, innovate, and solve problems for customers. They’re known for working off-shift to serve customers or to test out new procedures. Equipment, tooling, workspace, and process redesign all rest in the hands of those doing the work. FAVI people are encouraged to make decisions and take quick action to improve their daily work and respond to the needs of their customers. Control rests with the front lines, where it adds the most value.

It works. Still, customers visiting FAVI are often astounded at what they perceive to be a total lack of control. A favorite story Zobrist tells involves a customer’s site inspection at FAVI: “They asked to audit our procedures,” he says. “They were not pleased because we had no measurement system for tracking late orders—nothing in place, no plan, no process, no structure in case of delay. They are a customer for over ten years, so I say, ‘In that time, have we ever been late?’ They say, ‘No.’ I say, ‘Have we ever been early?’ They say again, ‘No.’ And so I ask them why they want me to measure things that do not exist.” Good point.

Zobrist’s management reveals a different way of thinking, one driven by a central question: how can we achieve the maximum effect with the minimum means?

In other words, Zobrist was thinking like a designer.

Monday, August 10, 2009

How to run your first Board Meeting IMHO

Running a Board meeting...

This is a neat article on how to run a boardmeeting, if it is your first time..remember it is your meeting not the investors, though you have to satisfy there needs, but you have to get the most out of your board as well, make them work for there "kilo" of your flesh.

Over the past 15 years I’ve been to thousands of board meetings. Last week I had four; this week I have two. I’ve spent a lot of time – often during board meetings – thinking about how to make them better and more effective.

Yesterday, Fred Wilson (who was at the Return Path board meeting in Boulder with me) wrote a great post titled Face To Face Board Meetings. Fred and I have been on a number of boards of the years and I strongly agree with his post. To be effective, board meetings need to be (a) in person and (b) there is immense value in a board dinner the night before a board meeting (maybe not every meeting, but at least once a quarter).

While board meetings have a different tempo at different stages of the life of a company, I’ve developed the point of view that the vast majority of the board meeting should be “forward looking.” Ironically (and frustratingly), the general culture of many VC-based boards – especially larger ones – is “backward looking”.

What I mean by this is that most board meetings are 80% status updates, 10% strategy / issues, and 10% administration. I’m fine with the 10% administration, but the 80% / 10% split on status vs. strategy should be reversed. There are plenty of different ways to organize the “strategy” (I’m using “strategy” as shorthand for “forward looking discussion”) and strategy includes a blend of short, medium, and long term issues, as well as plenty of “tactical stuff” (for those that think “strategy” is too specific a word), but I imagine you get the idea.

My favorite board meetings have the following characteristics.

  1. All board material goes out 48 hours in advance, including a detailed financial package and operating review of the business. This material includes any administrative stuff (draft 409a report, options grants, compensation stuff, audit stuff, prior board meeting minutes.) Everyone reads this in advance – if the materials go out 48 hours in advance there’s no excuse to have not read it.
  2. There is a dinner the night before that is at least the board and the CEO. Sometimes it includes non-CEO founders; other times it includes various members of the leadership team. This is a casual dinner (e.g. not expensive or full of pomp and circumstance) – a chance for everyone to catch up with each other. If the board meeting is an afternoon meeting, sometimes you can pull off a lunch prior to the meeting that acts as a proxy for the dinner, or a dinner after, although I find the dinner after to be much less helpful.
  3. The first 30 minutes of the meeting are administrative. Everyone settles down, you go through any formal board business, discuss it, and get it done. Often it takes five minutes (which gives you 25 minutes for the strategy stuff); sometimes it takes the full 30 minutes. I can’t think of a case where it has ever needed to take longer.
  4. The CEO then puts up one slide summarizing prior period financial performance and asks if anyone has any questions about the board package. This discussion takes however long it takes.
  5. The CEO then puts up one slide with the issues he’d like to discuss. These are bullet points that are crisp yet detailed enough to know what the issue is. This is then the bulk of the meeting.

Some CEOs are capable of running a 2+ hour discussion off of one slide (I love these guys). Others need slides to prompt them through the setup for each topic (which is fine). Either way, the setup for each topic should be brief (five minutes at most) and the bulk of the activity should be a discussion. The CEO and management team is looking for board feedback, input, advice, and guidance. Ultimately, the CEO has to synthesize this and decide what he wants to do, but by engaging the board in an active discussion, the team will generally get useful input as well as discover where there might be additional domain expertise around the table on the particular issue.

I’ve found that the more time that is spent on #5, the more impactful the meeting is. Obviously, it’s difficult for people on the phone to engage as effectively, which draws them into physically attending the meeting, or not participating.

By Brad Feld , Brad had grown Feld Technologies into one of Boston’s leading software consulting firms prior to the acquisition. He also directed the diversification into software consulting at AmeriData, a $1.5 billion publicly-traded company which was acquired by GE Capital in 1995.