E4: Your first board meeting

TRANSCRIPT

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Alex Levin: Hi, this is Alex Levin and Rebecca Greene, the co founders of Regal, and we're back with 15 Minute Founder. So this time we wanted to chat a little bit about your first board meeting and what it's like to have investors more involved in the company. So just to tell you a horror story to start with, we have some friends who founded a company and they had never been in a VC backed company before, and they had their first board meeting come, come up and, they saved some money by riding a bus to the board meeting.

And they're very excited to tell the board how they had saved so much money by not flying. And they show up and sit down and first mistake, one of them turns to somebody says, hi, who are you? And it turns out that was their counsel, their lawyer. So yes, you bring your lawyer with you and you should know them in advance of the meetings, it's your lawyer.

And second mistake, they turn around and say, Hey, what do you guys want to talk about? And the board says, excuse me, like, aren't you guys going to present to us? And don't you have materials prepared? So they frantically ran around and tried to put together some board materials. But , that board meeting was so bad.

I think, [00:01:00] they had their investors reconsidering whether they want them to be partners. So, let's, let's avoid that. And so I think today if nothing else can help you avoid that horror story. Maybe you give you some tips and tricks, tricks that you haven't heard of before. So, so to start, I guess, Rebecca, you've been in, a couple of different, companies where you've interacted with the board, both as an exec and as now a founder, what do you think , was the most helpful board member?

Not, not by name, but let's say, what are the traits of a very helpful board member? Like, what are you looking for in who you want to have on your board?

Rebecca Greene: That's a good question. I think that board members who are both thought partners and engaging in the business problems and opportunities that you're bringing up and offering ideas and specifically thoughtful questions for you to think about, or for us to think about as opposed to necessarily solutions.

Or saying, Hey, I've seen how this has worked at other companies in the past. Here are some ideas that have come from that, like not just pontificating, but actually using contextual examples. That would be really [00:02:00] helpful. Cause it's always hard as a founder to benchmark yourself. That's one thing I look for.

So like that thought partner and someone who engaged in a topic. I do look for someone who will, will challenge us, I think, where there's like a healthy. Tension of challenging our assumptions, challenging our goals, pushing us to be better and helping us validate that what we're actually focusing on and what we're trying to achieve is good.

So it certainly shouldn't be someone who doesn't talk or is a pushover and doesn't add any value to a board meeting. Those are the 2 things that I look for. And that that could be true of an investor or an independent as well.

Alex Levin: Yeah. Yeah. I mean, I think about, the joke I know we use sometimes is that every time we go in and raise, we, we say we're going to take the highest valuation and then we fall in love with somebody through the process and decide not to take the highest valuation, but, focus on a board member and look, if all you're after is money, you can be very explicit about that and just take the money, but, if you have the opportunity to work with somebody who, to your point, like is going to really, Make a difference in the business.

Like we [00:03:00] obviously believe that you should do that. , there are some investors that really can have a huge impact. , if I think back to the different boards where I was sort of involved in one regard or another, there are also just bad board members who, we're leading, pushing the company and perhaps the wrong direction or who weren't prepared for the meeting or, who were too strong a voice, let's say.

So, it can, it can go both ways. I think we've been very lucky at Regal to have fantastic board members. And it's been sort of one of the great pleasures of building this company to have those board members involved. But certainly it doesn't always happen.

Rebecca Greene: Yeah, I also think you asked about, like, what do we look for in a particular board member? I mean, certainly we didn't talk about. Call me. The composition of the board, and, different board members bring different experiences or skills. Like, some might be incredible at fundraising and really helping you set up your next round.

Some might have a product background or go to market background. And so, I didn't mention a particular skill or expertise because really, I don't think [00:04:00] 1 is better than the other. But certainly, I think the composition of those and putting all those on your side is really valuable in a board

Alex Levin: Yeah, I agree. So something you and I were talking about before this is, is I have a little spiel that I give, every new exec on our team. When they're about to join our first board meeting. And so I thought I'd run through kind of, board meeting one on one, like what to expect and, how we think about , our board.

So, once you've set up your board there, they're going to show up, you're going to have a meeting in a few weeks, like what should you be thinking about? I'd say the overarching point I make to folks is that. Your board is another stakeholder in the same way. You have employees, you have investors, you have the board and that doesn't make them evil and it doesn't make them all unilaterally good.

They just have a different perspective. And so it's very important that you understand their perspective and that you. Work with them in a different way than you work with perhaps an employee or a customer or outside investors. , a couple things to think about. , they're there with a fiduciary responsibility. They represent the investors in your [00:05:00] company. So legally they have things that they are required to do.

And largely that's for good to make sure that ultimately the value assigned to those investors is higher. But what you see in , succession and other TV shows where there's like votes on things never really happens. You never actually want to have a vote. When you're, with your board, largely everything is done informally and in complete agreement.

If you're ever in a situation where you have to vote on something and you're not sure of the outcome, you're in a bad situation and like, stop, don't do the vote and rethink your strategy. So, the number one rule with the board is , never have any surprises. So, tell them once, tell them again, tell them again, tell them again.

You never want a situation where you're surprising the board. You never want a situation where you're surprised by your board. It's not the purpose of that board. , a common thing for folks to do is to have, check ins with the board members outside of the board. , perhaps in advance of the board, if you're going to have something negative you want to tell them.

Make sure that they know about it in advance so they have time to think about it. So the [00:06:00] second thing is When you're talking with the board, make sure that you're , sticking to exactly , what you want to be sort of covering. So if they ask you a question that you don't know the answer to, it's perfectly fine to say, I don't know.

I think one mistake people get themselves into is they start trying to... , speculate on things that they're not ready to talk about. And then, two weeks later, they have to come back and tell the board they're wrong. If you don't know the answer, say you don't know, and say, Hey, we really want to talk about this other issue today that I am prepared to talk about.

We're going to stick to that. And I'm happy to come back in X period with the answer to that. Now, if they keep asking the same question, board call after board call, and you still don't have the answer, that's a problem. But it's perfectly okay to say, I don't know once. Especially, if you're a new executive in the board and not the founder.

And a board member turns to you and ask you a question. It's okay to look to the founder and say. , I'm not sure, what the answer is like, but maybe, one of the founders can help with this. So, don't go out on a limb during a board meeting only to have to correct yourself later. So another [00:07:00] thing sort of like, I think people learn pretty quickly is. , a lot of execs will have the opportunity to go and present to the board. It's a different kind of experience, and it's worth practicing in advance, rehearsing, making sure that it's material that you're very familiar with.

So assuming you have a board that's an experienced board, they're going to know exactly the question to ask that is going to be the hardest question.

And so, don't try to like trick anybody. Don't try to like do anything else, set it up in advance and be very clear that this is the difficult issue. And here's your current opinion on it. Here's the data that you're using to make the decision and then, open it into a conversation where you can, leverage the board strengths.

To figure out what the answer is to that. So I think, it's a tricky thing to do, but it's very important to make sure you're, you're, using the board to take advantage of all of their insight and not trying to steer away from the complicated things that are going on in your business.

So I'll pause there for a second. , that's kind of the general spiel I give people anything like Rebecca, you think that I've missed that, you [00:08:00] think people should know about their first board meeting. Yeah.

Rebecca Greene: you think about the board materials? What should those be? I've seen, I don't know if this is just LinkedIn ads. I've never really looked into the detail of like, people are moving away from the board, but like, use this better way of managing your board. How do you think of materials?

Alex Levin: Yeah, look, have materials start there, like the, my general advice to folks when they start is whether you use a Google doc or a PowerPoint presentation or some other material, have a set of charts or ways of looking at the business that you're showing every single time the first board meeting is going to take a little time.

People to understand what they mean, but by the third or fourth board meeting, everyone's going to understand them. And then, everyone can be talking the same language about what's important in the business and whether it's moving in the right direction. So have those like key charts and don't change them.

Please, please, please. , then given what's going on in those charts, you'll have different areas that you're focused on. So, if you really believe that the focus area needs to be , customer success , I would then have a deep dive into customer success and show them the framework that you use for how you think [00:09:00] about what to do and what to prioritize and customer success, what your targets are for that team and where you're on or off those targets.

And what are the next couple of projects that you've prioritized to go and try to change the process or technology or.

And so I think that process of, sort of framework data, and then like, next couple of prioritized projects is a very sort of useful way of introducing, individual concepts you might in a short board meeting, only be able to cover one of those, or in a slightly two hour or three hour board meeting, be able to cover kind of two deep dives like that.

And make sure you're getting feedback. , It's okay to be sort of not sure exactly on the direction when you're showing that, but definitely don't, have those conversations when you've never gone through the material before. You don't want the first time you're going through this to be with the board because you won't have had time to ingest it and understand it and think through the potential implications.

Then typically at the end, I suggest having a founder session, very common as boards get bigger or more mature to actually ask the founders to step away for a few minutes so that, The [00:10:00] board can consolidate their feedback and then with just the board and the founders in session, none of the execs, usually the board will give them some feedback and the founders can ask for specific help on certain topics that haven't been covered so far.

So, I think that's a typical good practice. , make sure you're getting people the deck at least, at least a couple of days, if not a week in advance and expect that they read it. , if somebody is not reading the deck in advance and coming prepared, that's a problem. So it's worth you talking with them offline about that.

I've even seen some companies now that pre record the sort of general business updates, so they don't have to do it live. That's sort of a personal preference, like you don't need to do it one way or another. And then, usually I do it at the end, like there'll be a legal review section where you do things like options approvals and other sort of board approvals.

If you find you're constantly missing that, just put it at the front and get it done way at the beginning before anything else happens so you can get out of the way. Usually there's not much contentious sort of things happening in that board approval, but you do need to get them done.[00:11:00]

Rebecca Greene: We also always send the materials in advance by like, two or three days, is what we do.

Alex Levin: Yeah, yeah, we make sure it's there in advance. We even give the opportunity for the board members to comment on the deck that way there can be some interaction in advance. We don't have to handle the simple questions live. So then, coming out of the board meeting, again, if I'm putting on the investor's hat and I'm speaking not as an investor, but on somebody who's worked with investors, but , they have a lot of different companies , they're working with, they're probably on.

Six to 10 boards at any given time, and their fund probably is in, each individual fund is in 20 or 30 companies and they may have multiple funds. So, you have to believe that they're thinking in their head, where does this sit in my companies? Is this , a fund returner, something that's going to like result in us making all our money back and our LPs being very happy, or is this kind of in the middle or is this sort of a problem child?

, I think the way an investor friend of mine described companies to me once is , look, 80, [00:12:00] 90 percent fail for one reason or another, they go away. There's some amount that if you everything right, they kind of barely eat it out and those are kind of the ones that you can get, at least your money back, the money you invested back, but the companies do everything, but, and it's really hard.

And that's actually where investors. Sometimes they end up spending a lot of time because they have to help that company survive and still make some money back. And then there's the few that just are rocket ships and outstanding successes. And to some extent, they don't need that much help because everything is going right.

So I think it's, it's interesting to think about which of those three categories are you in and how much of your investors time are you getting? And if you're not getting the time you need, how do you sit down with them and say, I know I'm in this category, not the other, but I really do need more of your time.

Because of X, Y, and Z. And so coming out of that, make sure you're getting what you need from your board members. Very common things that can be helpful with are, certainly introductions to other entrepreneurs or other people that can help you in specific topics, customer introductions, hiring fundraising, like we were saying before, Rebecca, and [00:13:00] also, if you don't have a founder, they can play that role of sort of a co founder almost.

And even if you do have a founder. They may have expertise in certain topics that you just want to talk about off the cuff, just to sort of, get their opinion because, your co founder may not have that expertise. So I think depending on the relationship you have with them, like, you may be talking with them every day, even if it's somebody that's very close, early stage.

Rebecca Greene: I do think it's important to remember they're not your co founder though, and they do have different incentives. So that, that's a relationship I think that makes sense. Early on in the life of a company when you're really trying to get it off the ground and it's a seed and so many things are up for wrap and you just need skill sets and help.

But I think it's important to, like, wean off that relationship as the company grows a

Alex Levin: yeah, I'll get, I'll put it in a slightly different term to make the same point. People come to us often and ask, should I do a, an accelerator or an incubator or an EIR, right? Or, any of these things. And this is definitely not saying, you shouldn't ever do it, but I just try to remind people that , there's real [00:14:00] signaling risk to doing some of these things.

So, if you go and, become an EIR and you work really closely with an investor and they choose not to invest, well, guess what? , everybody else you go and pitch to is going to go back and ask that investor, why didn't you invest? So you're basically giving that person a free option.

Or, if you, are part of an accelerator, like. Again, you're going to be working very closely with those people, but they're going to tell everybody they know what they really think of your business. So I think, in some ways those tools or investment mechanisms can be very positive.

But yeah, in some ways you have to be careful about, not mistaking the relationship with your investor. To Rebecca's point, with a , relationship with a co founder, it is quite different. And, I, I find mostly, honestly, the, the skill sets are different. , the, the majority of investors that we work with are professional investors.

, a few of them have had operating roles, but the majority of them have not. And so, or if they have, it's been a while since there's certainly not, been operators recently. So the type of challenges that we're asking them to help us solve are different [00:15:00] than the ones we're asking operators about. Yeah. So, let's take, I guess, last couple of minutes to go in a slightly different direction with the board. So as you sort of progress , you, you can have different Expectations of the board, let's say. And so I think each founder needs to decide what they want. , we have some friends who have basically a board of two, it's them as a solo founder and one board member and that's it.

And then we have other friends who have, very large boards. And so I think you have to decide as a founder, truly, what do you want to get out of it? Remembering that everybody who sits around the table gets a voice, even if not a vote. So if you add five observers, even if they're not voting to what we said before, it's very rare to actually go to a void.

Sorry, actually to go to a vote, so what you're doing is you're adding voices that may take a position that you may or may not like. So be very careful about thinking about, the full board members and the observers and the independence you're adding over time to make sure that their voices. [00:16:00] Are, representing the positions that you want them to, it's important to have contrary positions, but make sure they're not all sort of bundled in one area as you grow.

And, I think, we, for us, like, it's been important to make sure that like we have people around the table that can help us at this stage, but I think it's pretty normal as we continue to mature that some of the board members will probably step off and we'll add more later stage board members that can help us get to the next. So I guess, anything, you've seen founders, Rebecca do particularly well, with the board that you think like, others should repeat.

Rebecca Greene: I think the most important thing is no surprises. Like, you've said it already, but I think, I think of the downside risk of when there are surprises with your board. And that's like, the most important thing to avoid.

Alex Levin: So that's our time today. So this is Alex Levin and Rebecca green. Thank you very much for listening and go to regal.io. If you have more questions. Thanks.

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