1/ there is an old SV saying that good boards don’t make a company but bad ones will destroy one every time
2/ value add is elusive but value destruction can be extremely tangible - this is because venture investors hold real, measurable power
3/ VCs usually have the power to block a financing, a sale, a senior appointment. They must approve budgets and can usually fire the CEO.
4/ Usually trouble starts when VCs investors only have a superficial understanding of your startup. Many don’t go deep enough in understanding where the business is *really* at.
5/ Budgets are often set as unrealistic levels and anxiety ensues when targets are missed. Patience is not a virtue many exhibit. It gets worse when companies are supposed to be scaling as issues take more time to fix.
6/ It is easier (and sometimes needed) to play the role of the *tough* board member who insists on accountability. But all too often this ends up create mistrust at the board as management teams scramble to deliver impossible outcomes. A vicious circle.
7/ Cheerleader VCs are often no better - they support you until suddenly they don’t - leaving founders dumbfounded by the sudden change of atmosphere at board meetings - and again destroying alignment
8/ What are needed are engaged conversations grounded in the reality of what a team can deliver and where the business is really at - with a willingness to iterate fast on strategy, team and targets given we operate on fundamentally sparse and flawed data
9/ I’ve seen all kinds of deviant behaviour over the years - for example:
10/ a/ an insistence on hitting top line targets at all costs for the sake of discipline when this company really needed to focus hard on one of its verticals to become more successful long term, at the expense of a single years’ revenue objectives. CEO held firm.
11/ b/ an investor setting unreasonable burn targets on the grounds that “management has more info than we do, and they are playing you when they say they can’t cut” in an infrastructure heavy / fixed cost business where the request was clearly absurd given impact on headcount
11/ c/ a paranoid investor setting up traps for management members invited to present to the board - he would literally break them down publicly - because he thought this was the best to “get to the real truth”. We had to work hard to stop folks from resigning.
12/ d/ an investor completely misleading a management team about his partnership’s willingness to support the next round - because he was afraid of getting wiped out on a recap - only to let the company hit the wall and laying the blame squarely with management
12/ e/ investors blocking a reasonable sale, only to recap a company, dilute the founders to hell and sell a year later for the same price in what they later boasted of as a “great investor prowess”
13/ this is not to say I haven’t worked with great investors who can really make a difference (hello @robinklein @martinmignot @dafrankel @isai_fr and others) but that toxic investors can’t be fired and will hurt you.
14/ so whilst the rethoric of “optimise for the quality of investors not the pre-money” is clearly self-serving, I definitely recognise the paramount importance of building a “coalition of the willing” at your board that fosters the right environment for success. /EOT
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