20150416 Board and Advisors: how to get real value

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  1. 1. or this aint just you and your buddies anymore Board and Advisors: how to get real value
  2. 2. Agenda Board of Directors Advisors & Advisory Board A few last words Introduction & StrategyIntroduction
  3. 3. Me 3 Career Proprietary and confidential NOT EXHAUSTIVE Investor venture and angel IPO Sold IP Sold Merged
  4. 4. Strive Capital provides a unique solution to app makers to scale their businesses 4 Check size of $500k-1 mn fills gap between angels and VCs Institutional money easier to handle than a group of angels Lead and follow-on financing available through fund Compatible to syndication and subsequent funding from other VCs Strategic LP partners are a default exit option, limiting downside volatility Capital User management technology Storage & sync technology Monetisation technology, including mobile ad network Global cloud infrastructure and operations 24/7 Other resources from strategic LPs Technology Channel relationships with OEMs, chipset vendors and carriers Deep market access to JP, CN, IN, EU Business models for advertising and subscription Mobile industry insiders Distribution Proprietary and confidential Capital Technology Distribution Growth
  5. 5. Strive Capital is a quant micro-VC that derives most of its deal flow from a proprietary analytics-engine 5 Larger # of deals, any investment size Smaller # of deals, smaller investment size Angel VC Traditional Traditional Strive Capital Super angel Micro-VCs create some of highest returns in industry Proprietary and confidential
  6. 6. Before we move on why should I listen to this guy on *this* topic? 6 *Strive Capital also counts wiih the support of two Entrepreneurs-in-Residence in San Francisco and Tokyo Proprietary and confidential Member of the Board of Directors of 10 companies all in Tech Investor, Independent and Executive Board member experience Currently in 4 - 2 in SF and 2 in Portugal Advisor or consultant to 20+ Board of Directors of companies ranging from a few Million to tens of Billion in market cap Board experience Advisory Board member to 5 companies all in Tech Currently in 1 I dont like being an advisor anymore...ask me why at the end Advisor & Advisory Board experience
  7. 7. Agenda Market Opportunity Advisors & Advisory Board A few last words Introduction Board of Directors
  8. 8. Lets start at the beginning 8Proprietary and confidential A board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organization. () A board's activities are determined by the powers, duties, and responsibilities delegated to it or conferred on it by an authority outside itself. These matters are typically detailed in the organization's bylaws. () Typical duties of boards of directors include: governing the organization by establishing broad policies and objectives; selecting, appointing, supporting and reviewing the performance of the chief executive; ensuring the availability of adequate financial resources; approving annual budgets; accounting to the stakeholders for the organization's performance; setting the salaries and compensation of company management What does the Board *not* do?
  9. 9. A taxonomy for the people attending your Board meeting 9Proprietary and confidential Key executives, e.g. CEO, COO, CPO Non-executive: Investors representing their own personal investment, fund that has invested (VC, PE, super angel fund, etc), or representing company/strategic investor Independent board members normally neutral parties that do not represent investors nor are executives Other nomenclature: Inside (executives, investors) and Outside Directors (independent) Q: Why do I sometimes see co-founders who are no longer executives still on the Board? Board members Company secretary / lawyer for minutes and legal matters Board observer normally representing smaller investor; does not have vote as Board member, but... may still be an investor. Sometimes associate for fund with Board seat Other company executives presentation and participation on specific topics Outsiders subject matter experts (e.g. advisors), other investor representatives, etc Non Board members
  10. 10. Board structure in general 10Proprietary and confidential Birth, through friends & family round... maybe angel round(s) No Board, or... Just co-founders/majority owners After first institutional money Most Boards are of 3-4 people 1-2 Executives 1 Lead Investor 0-1 Independents Time Size Start-up through B, C... rounds Most Boards are of 5-6 people 1-2 Executives 2-3 Lead Investors 0-1 Independents How about after true growth rounds?
  11. 11. Thoughts on Board composition 11Proprietary and confidential Only have executives that can really contribute at Board level: Not all co-founders need to be Board members consider ownership *and* contribution will this person contribute on the governance of the company?, does he/she really need to be on the Board? Control matters, but your investors likely have special rights... anyway Not static... execs change, ownership changes Board of Directors Only significant investors, which normally means: Largest from last round 1-2 from rounds immediately before ...investors do need to / should leave the board (or stay as observers only) after they are no longer significant or as new investors may ask for it/ need extra board seats Get the partner you want... If you can Independent members may be needed because..: They have expertise that is needed at Board level that no other board member could provide New investor wants to avoid that previous investors or the company executives have majority control in numbers... independent can act as buffer
  12. 12. Tips for successful Board meeting/call 12Proprietary and confidential Dont just show up for it... prepare it Key action items from last Board meeting/call Items that *need* Board approval, normally governance related (note: in Portugal, some of these items still need to go to Stockholders Meeting) Items that *should* have Board approval, e.g. strategic direction of the company, potential significant resource allocations/reallocations, etc Risks that have emerged internally or externally cover my a$$ Achievements for the business since last time get credit Dont spend much time on beautiful presentations (or maybe only every 6 months or so), but on content except for financials, most can be in a memo Prepare your Board members Firstly, prepare your Chairman, if is not you. He/She will (likely) lead the meeting/call Share materials *before* the Board call/meeting Prepare other members individually *before* Board call or when major decisions need to be made (if monthly, not needed before *every* single one) IMHO, only board members should attend the entire meeting... All the rest, come in when and only if absolutely needed and then out. Observers normally entire time, but do not vote Observers should represent smaller strategic shareholders, not associates of fund
  13. 13. Typical Board Agenda 13Proprietary and confidential Approval of minutes from last meeting Items that *need* Board approval or oversight Financials and capital needs Other governance items option grants for approval, major deals & partnerships, etc Strategic discussion Summary update since last meeting tops and flops, or other construct Customer/User-side metrics, e.g. customer/sales pipeline in enterprise companies, user traction/retention/engagement in consumer companies People/team hires, fires, changes Product evolution, plans/roadmap High-level strategic discussion vision, strategic objectives (every once in a while, but certainly not every call/meeting) Any items that have significant risk or have come up IP issues, trademark, etc AOB (any other business) normally to let others raise points that they want to make ... Normally, minor points, otherwise should be a topic on its own right Book next Board meeting/call some companies do this upfront on an annual or semi-annual basis; others do it at end of each Board meeting/call NOT EXHAUSTIVE
  14. 14. Tips on how to manage your Board 14Proprietary and confidential Respect and nurture your board members Not your buddies and will sometimes not agree with you and show that in their decisions. This is not always bad, because... you are not always right!!! Always listen to them and then... decide whether to pursue their recommendation or not Socialize beyond the Board room and get to know them, their aspirations and current focus; with investors, understand what is going on with their Firm *Do* get value out of them Prepare them the best you can for the meetings / calls you need to have make sure you share context Engage them on their areas of expertise outside of the Boardroom, like you would do with advisors or, even in some cases, with consultants Access their network of connections in a wise-way specific on who/what company to engage; make sure the intro needs to be now One size does *not* fit all: customize your approach to each board member. Every single one of them will likely be very different in what they want and what they can give back Use independent members or more neutral investor members as buffer when issue arises with other board member, investor/investors, etc
  15. 15. Agenda Board of Directors Past Performance & Portfolio A few last words Introduction Advisors & Advisory Board
  16. 16. What advisors are *not* 16Proprietary and confidential Consultants Consultants would normally fulfill a role the company cannot or does not want to hire for at this stage specialized area of engineering or ops, PR, HR, etc Duration of engagement is normally in weeks or a few months Engagement intensity is significant 1-day a week, all the way to full