You may be a construction worker working on a home— Bob Dylan, “Gotta Serve Somebody”
You may be living in a mansion or you might live in a dome
You might own guns and you might even own tanks
You might be somebody’s landlord, you might even own banks
But you’re gonna have to serve somebody, yes
You’re gonna have to serve somebody
Well, it may be the devil or it may be the Lord
But you’re gonna have to serve somebody
A theme of mine for 2020 is a more intentional focus on building better boards in Birmingham. For-profit and not-for-profit entities need and deserve a higher quality board than I think currently exists in several organizations. As a community, we need to focus on this topic and challenge ourselves collectively on how we can do it better. If we do serve on a board, we need to think individually about what we can do better. More about that forthcoming.
Of course, when it comes to this topic, I am the cobbler with no shoes. If you look on First Avenue Ventures’ website, you’ll find no board members. That’s because First Avenue Ventures has no board. The fact of the matter is that we are too young and too small to justify a board, advisory or otherwise. A lot of startups are in similar situations in which the cost of a board outweighs the benefits. Credible, engaged individuals cost money, and that is often in short supply in startups. A good board member should check in with the CEO on a regular basis (usually monthly) and have a more structured board meeting on a periodic basis (usually 3-4 times a year). A working knowledge of the business and its leader is imperative; the individual board member should be engaged and inquisitive, have relevant domain expertise, and add value to the mission. While a not-for-profit may be able to get such individuals to donate their services for the greater good, for-profits are usually not so lucky. To get this done right usually costs money. Accordingly, a board is left for later, and in truth, I usually cannot argue against that decision.
The functions of the board, however, remain outstanding, so the question becomes what to do in the absence of those roles. Those functions, generally, are as follows:
1. Set the strategy for the organization;
2. Monitor the finances of the organization;
3. Hold the CEO or leader of the organization accountable.
The degree, scope, and nuance of function is one that is unique to the organization and dictated by the organization’s size, the mandate — fiduciary or advisory, profit or non-profit — of board, the organization’s culture, and other factors. However, generally speaking, a board is concerned with strategy, accountability, and financial monitoring. For startups, though, these functions are usually easier in these three ways:
1. The strategy is usually set with the business plan;
2. In terms of finance, if you’re self-funded, you can only steal from yourself. With seed funding, oversight is built into a direct investor relationship (whatever that may be); and
3. The CEO is usually in control, so employment is usually set.
However, startups should not take these three areas for granted. Indeed, in a startup, these three areas may need more attention: your strategy, proposed in isolation, will confront market realities. You are in a race against time before you burn through your money. And you — and only you — have to be your best self to perform. Intention, thought, and process is necessary in each of these areas.
So what to do? While my answer is not complete, I have three relationships, which I approach with some intentionality, that fill the gap before I can have a full-blown board:
1. We meet with a business coach as a team once a month. She helps us talk through strategy as well as the processes we are using to implement the strategy. Because it is on a monthly basis, she has familiarity with us collectively and individually. She helps guide the group dynamics, which holds me as the leader accountable to ensure I am getting the most out of the team. We discuss the processes we are developing and plans for their implementation, and in doing this, we make a checklist with due dates. We know we are going to have to show up next month and explain what we did or did not do, so this holds us accountable. On a semi-annual basis, she coaches us through a SWOT analysis which helps develop and evolve our strategy. We pay for this service, but it is reasonable and well worth the value received.
2. I meet with my accountant regularly. This meeting is like getting naked for the doctor: I do not like doing this, but I cannot hide from the financial statement, and it is definitely necessary. While our team looks at and holds itself to more forward-looking metrics, the rubber meets the road with financial statements. When the accountant and I go over the financials, we do not have to discuss whether it was good or bad; it is all there in splendid glory. This bleeds into strategy, and is usually it is in the context of: what are you going to do about this leaky boat? It is an important and necessary, albeit uncomfortable, conversation.
3. I have a friend/mentor who I (a) admire and respect, (b) likes to talk business, and (c) is in a related but completely separate field. Admittedly, this may be the most difficult relationship to emulate, but I would expect that most entrepreneurs have similar mentors/acquaintances/friends/
colleagues. On roughly a quarterly basis, we have lunch. Over time, we have developed a pattern of checking in on one another from a business perspective. It’s taken some time for this relationship to evolve, but I am always the beneficiary of his wisdom. He has a keen business mind, which forces me to clearly articulate my business principals going forward. He can call me out more quickly than anyone else. He has enough experience that his advice is relevant, but he is completely separate professionally in what he does, so his advice is unvarnished. Because we have been doing this over a period of time, he can detect changes in strategy, e.g “last time you said x, now you are doing y.” Because he pushes for clarity in my thought process, I have to ably defend and articulate the evolution of strategy. The time spent is invaluable.
A couple of points:
1. These relationships have developed naturally, but intentionally;
2. In some cases, a monetary component exists and the engagement is not necessarily pro bono, although I am relying on good will to an extent; it is less expensive than a board, but it still costs money;
3. I respect these individuals, personally and professionally, so I heed their advice;
4. Because they have long-term involvement, their advice is based not just on their own experience but on their experience with us;
5. At least one person is looking at the financials and at least one person has experience with key team members.
As noted, this situation is imperfect. Ideally, these three (or some similar persona) would convene on a regular basis, get around the table, and collaborate in order to advise us on difficult strategic directions. A more formal board would dictate a more formal reporting process, which would push us further in the right direction. Additionally, if I am being honest with myself, a more formal board would push me, as my ego would propel me to look better in front of a board, where I can perhaps hide and disguise my shortcomings more easily in these one-on-one relationships. But a formal board with credible, engaged members is expensive, and capital at this stage is better deployed elsewhere. For now, it works.
That is not to say we are not working toward that, and every startup should as well. If the desire is to grow into a larger company, a good board is a key component. While having a full board to begin with is often impractical, developing one as you grow is essential. They can and will take your organization to the next level. Bootstrapping a board at the beginning is possible, but eventually you will want — and need — to develop one independently.