Startup Boards

BRAD FELD has invested in startups for over 25 years and co-founded Foundry and Techstars. He is the author of multiple books, including Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist and Startup Communities: Building an Entrepreneurial Ecosystem in Your City.MATT BLUMBERG is the CEO of Bolster, an on-demand talent marketplace that supports startup and scaleup CEOs. He is the author of Startup CEO: A Field Guide to Scaling Up Your Business and Startup CXO: A Field Guide to Scaling Up Your Company’s Critical Functions and Teams. MAHENDRA RAMSINGHANI is the founder of Secure Octane, a cybersecurity seed fund in the San Francisco Bay area. He is the author of The Business of Venture Capital and The Resilient Founder: Lessons in Endurance from Startup Entrepreneurs.

• Foreword xiiiPrefacex viiSection 1: Board Fundamentals 1Chapter 1: Introduction 3What’s New in the Second Edition 4Who This Book Is For 6Magic Words, Phrases, Abbreviations, and Style 7Note 9Chapter 2 : The Board’s Purpose 11Accountability 12General Responsibilities 12Chapter 3: Legal Characteristics 15A Board Member’s Legal Duties 16Addressing Conflicting Duties 18Benefit Corporations and the B Corp Movement 20Should You Get D&O Insurance? 21Note 23Chapter 4: Board Member Roles 25Chair or Lead Director 25Executive Chair 28Should You Be Chair of Your Board? 29Independent Board Members 30Board Observers 30Outside Counsel 32Note 34Chapter 5: Board Functions 35The Role of Board Committees 35Informal Responsibilities of a Board 36Control Priorities 37Being Rich and Queen (or King) 39Shareholder Rights 40Economic and Performance Priorities 41Emotional Priorities: Trust, Judgment, and Transparency 42Notes 43Section 2: Creating Your Board 45Chapter 6: Size and Composition 47Management 48Investors 49Independents 50Matt’s Rule of 1s 51Notes 52Chapter 7: VCs and Boards 53Notes 56Chapter 8: Board Evolution 57Startup Stages 57Limiting the Number of Investor Board Members 59Managing Independent Seats 60Chapter 9: What to Look for in a Director 63General Skills 63Fit with Your Existing Board 64What Does Your Company Need? 65Experiences 66Attributes 69Governance Philosophy 69Chapter 10: Recruiting and Interviewing Board Members 71Sourcing 71The Interview Process 73Interviewing VCs Before They Join Your Board 76Chapter 11: Compensation 77VCs and Management 77Independent Directors 78Notes 80Chapter 12: Board Diversity 81Unconscious Bias 81The First Step: Appoint Independent Directors Early 83The Second Step: Open Your Search to Board- Ready First- Timers 83Notes 86Chapter 13: Onboarding Your Directors 87Using Employee Onboarding as a Guide 87Onboarding New Directors 88Interacting with Your Team 89Chapter 14: Removing a Board Member 91Removing a Founder Director 92Removing an Investor Director 92Removing an Independent Director 93Getting Rid of the Entire Board 94Notes 95Chapter 15: Is an Advisory Board Useful? 97Board of Directors vs. Advisory Board 98Attributes of a Useful Advisory Board Member 99Selecting Advisory Board Members 100Building an Advisory Board 100Challenges of Advisory Boards 101Notes 102Section 3: Preparing for and Running the Board Meeting 103Chapter 16: Preparing for the Board Meeting 105The Value of Preparation 106The Meeting Agenda 107Focus on Critical Items 108The Board Book 109Creating an Annual Calendar 113Notes 114Chapter 17: Meeting Dynamics 115Seating 115The Meeting Length 116Including Your Team in the Board Meeting 117Slides or No Slides? 118Discussion or Decision Item? 118The Executive Session and the Closed Session 119A Board Call Instead of a Meeting 120Remote Attendees and Hybrid Meetings 121The Post- Meeting Survey 123Post Meeting 124Notes 125Chapter 18: Motions and Votes 127Robert’s Rules of Order 127Have Your Lawyer at the Meeting 128The Mechanics of Voting 128What If You Don’t Agree? 129Dealing with Formal Items 130Minutes 131Unanimous Written Consent 131Notes 132Section 4: Between Meetings: Ongoing Work 133Chapter 19: Managing Ongoing Communication 135What the Board Expects from a CEO 135Communicate Both Good and Bad News 136Note 138Chapter 20: Committees 139Committee Meeting Formalities 139Compensation 140Audit 141Nominating 142CEO Expenses 142Chapter 21: Mentors and Learning by Doing 145Mentorship and Vulnerability 145Learning by Doing 147Chapter 22: CEO Transitions 149Situations That Lead to a CEO Change 149Scale Up with Growth 151Why Boards Fire CEOs 152Planning for Healthy Transitions 154Notes 155Section 5: Transactions 157Chapter 23: Financings 159New Investor- Led Round 159Insider- Led Round 160The Down Round and a Rights Offering 161How Involved Should VCs Be in Financings? 161Convertible Notes 162Venture Debt 162Notes 163Chapter 24: Stock Option Grants and 409A Valuations 165Chapter 25: Selling a Company 169Confidentiality 169Fiduciary Responsibility 170Your Outside Counsel’s Role 171Acquihire 172Carve- Outs and 280G 173Shareholder Representative 173Note 174Chapter 26: Buying a Company 175Negotiating and Structuring the Deal 175Financing an Acquisition 176Board Approvals 177Managing Transaction and Post- Deal Integration 178Chapter 27: Going Public 179Process 179Committees 180Confidentiality 180Insider Status 181VCs on Public Company Boards 181SPACs 182Chapter 28: Going Out of Business 185The Zone of Insolvency 185Responsibility to Creditors 186Responsibility to Shareholders 187Liability 188Chapter 11 188Chapter 7 189Assignment for the Benefit of Creditors 189Section 6: For Independent Directors and Aspiring Board Members 191Chapter 29: Preparing for Your First Board Role 193Note 196Chapter 30: Interviewing for a Board Role 197The Interview 197Diligence Items to Explore 198Chapter 31: Your First Board Meeting 201Chapter 32: Communicating Effectively 205Note 208Chapter 33: How to Be a Great Board Member 209Chapter 34: Conclusion 213Acknowledgments 215Bibliography 217Index 221