How to Build Your Board and Make the Most Out of It

Hi everybody. We're here to talk about the exciting topic of boards. Does anyone in this audience have a board for their company? A few. Okay, so we've got some very experienced people in dealing with boards on our panel today. Maybe we'll do very quick introductions on yourself and on your board.

Hey everyone, I'm Tavet. I'm co founder of Transferwise. I also sit on one other board for a company called Varief right now. And we have a wonderful board at Transferwise where today it's myself, my co founder and two investors.

Great. Luciana.

Hi, I'm. Okay, that's loud. Hi, I'm Luciana. I'm a partner at Accel. We're a global venture capital fund. We invest in the U.S. europe and India. I've been investing in technology companies in Europe for the past decade. Currently sit on six boards. Very happy board member of Tim's board Atession. I'm also on board of companies like Deliveroo, around food delivery and UiPath on the enterprise software side and a few others.

Hi everyone, I'm Tim. I'm the CEO and co founder of Tessian. We're a machine intelligent email security platform. On our board we've got myself, one of my co founders and we've got three other investors, one of which is Luciana at Excel.

Great. And I'm Toby Koppel. I'm a partner in Mosaic Ventures. We're a London based early stage venture capital fund. I was counting up the number of boards I've been on. I'm going to show my age, but it's over 30. My first board I was actually on the operating side was at Yahoo where we had a board of 12 people, half independent and half shareholders. And since then I've been on 30 venture backed boards as well as some nonprofit boards. And I think it's a great topic. I've learned a lot over the years about boards and I think it's some of the assumptions you in the audience may have about how to get the most out of your board, how to build your board. Who are the right board members for you? They may not be the answers may not be the obvious ones that you think about. So I'll start with maybe a provocative question. But you know, great companies I think deserve great boards. And great boards should have a group of people that have experience in building great companies that can really help the founders along their journey and have seen a lot of the challenges and mistakes that can be made. And that doesn't mean it's a board full of VCs typically because VCs haven't always been on those journeys and built great companies themselves. So what do you guys think of that? Maybe I'll start with Tavit, I think. Who has a strong opinion on this one?

Sure. So I kind of start from the point of view that I don't believe has ever been a company that's been made great by the board. If you think about headstrong founders who built iconic companies, I kind of doubt that boards have played a major role in this, in the life of these companies. I don't think about Steve Jobs or think about Zuckerberg or Travis at Uber. You know, can you imagine the board member saying, hey, Steve, you should make that screen a tiny bit smaller or, you know, maybe a board member telling Zuck to worry about privacy or, you know, telling Travis not to be so aggressive. You know, these things obviously are not black and white and, you know, many of these things have come back to haunt these companies later. But. But I'm not sure the boards have played a major role. I'm sure in other cases, boards can make average company better, possibly, but I'm sure they can also screw things up badly. I think the important thing is to think about how do you separate the different elements of governance, advice and so on. The best founders definitely listen to advice, but then they make up their own mind about what advice to listen to. And typically that advice will be best heard if it comes from someone who has been through the same journey and has a few scars to show, not someone who is one of the dozen people who just started another seed fund.

Sure. We'll come back to some of those questions about how you separate, think about governance, how you think about the right advisors and so forth. But maybe, Luciana, you want to go.

So I actually agree with a lot of what you said, so it's not that controversial. I firstly fully agree with the fact that a great company is really made by great entrepreneurs. Absolutely. I will also say that of course, entrepreneurs, and I'm guessing this will resonate with both of you, don't start a company because they want to follow rules or they want to be told what to do. So I fully agree with all of that. The way I think about a board. Well, two things. Firstly, I think the board is an ongoing conversation. I don't think we should think about it as board meetings. I mean, yes, those are a forcing factor to analyze your business and, you know, just have a, have an analysis of what happened in the previous quarter. But I think a good board is an Ongoing conversation and a sounding board, no pun intended, first of all. And second of all, I think that, I think that yes, a diverse board will actually hopefully add a diverse point of view. I think it's a board's job to ask the tough questions and it's the entrepreneur's job to make the tough decisions. So I actually agree with a lot of what you said, but I do think having someone who challenges you, having someone who pushes you to think twice or three times about a really big decision, that maybe is not obvious, I think that's a good thing. Now, is your investor or whatever board member going to make your decision for you? Absolutely not. I mean, all the entrepreneurs I work with are very strong minded people. Right? That's why you drop everything to start a company. But I think it's my job to be there and challenge and listen and of course give my point of view, hopefully when relevant.

Tim?

Yeah, I think just tacking onto the back of that, I think the best boards are like coaches to entrepreneurs rather than micromanaging entrepreneurs. And I've had maybe experience in both scenarios. But you really want to have a board that is pushing you and developing you as an entrepreneur. I think it's different in every case. So Tovit, maybe it's different for you guys at Transferwise, but we started the company when we were 24, which is maybe not that uncommon in technology. But we've benefited greatly from working with certain people around the table who've helped us understand what we need to do to effectively grow the business and then also the kind of strategic plays that we can make, whether it's in product, fundraising, sales, to sort of take our business to that next stage and unlock that, the next part of growth. So for us it's been very good, but it's been very good I think, because we've chosen our board members very carefully and we've thought about that dynamic and how the different parties are going to work together and what they're going to bring to the company.

So I think for me, one of the things that Tava said is it's important to separate sort of the governance role of the board, which is very, very limited. At an early stage company, there's very little governance to do other than approving stock option grants and other aspects of new hires. But you know, the key aspects are sort of how do you have assemble a good group of people around you to help the business. And my point of view is the board is there actually to serve the founders, not the other way around. And I Think I've been on boards where it hasn't been that and where the investors are there use that as a way for them to be informed about the company. They, they have the time being presented to. They think they're the. They have. It's for them to tell the entrepreneurs what they should be doing. And to me that's completely the wrong way round. And I've seen many car crashes of companies where, you know, the investors are really driving things. And to me, as a founder, the board should be there to serve you. We as investors, it's what I do today. I mean I spent 10 years operating. But as an investor we're there to help you. We're in the service business. So whatever you guys need. And you should construct your board in a way that it's there to help you do what you want and you set the agenda. So I want to talk about that, which is how do you make the most out of the board meeting itself? How would you organize it, how do you prepare for it, what sort of topics should you talk about? And then we'll talk about sort of outside of the board meeting as a sort of follow up, maybe. Tim, do you want to share your thoughts on that?

Yeah. So we try, we prepare a board pack which is probably pretty standard across what most companies are doing. But we try and share that board package as far in advance as we can. It covers the basic things like financials for the month. So we do monthly boards at the moment we cover financials of the month, sales figures, what's happening in products, what's happening in hiring. So we talk about those key things and then we try and leave as much time really for a discussion about something strategic or like a question or an opportunity or challenge that we've got. And generally we like everyone to come as prepared as they can be. So ideally they've read all of that stuff and then they've just got their questions that we go through.

Have they read it?

Yeah, generally they do test, just check. Yeah, there's a few kind of quiz questions in there. I think someone recently reads. Absolutely, absolutely. Someone recently said to me that which I'm interested in trying actually an interesting way to run the board is to have half an hour at the beginning where you bring in the exec team and the board can just ask questions to the exec team based on the data that's been provided. And then for the remainder of the one and a half hours, two hours, it's then just a discussion about key topics or challenges that the company is having, which can also be a good way to do it, I guess.

Right. Maybe we go to Tavit and then to Luciana.

I mean, agreeing with a bunch of things that Tim said. Totally. You want to send out the board pack as early as possible. It's always a bit of a challenge in my experience, but it's the basics. You want to make sure that operating metrics are understood outside of board meetings. At Transferwise, we now have a quarterly board meeting, but we share our operating metrics on a monthly basis, so really shouldn't be much discussion about these things. And then it, then it's a question of what's topical at the moment. And depending on that, we choose who's going to come and join. Is it going to be the marketing people, the product people who are joining for that discussion? And I think that kind of really defines the theme of the meeting.

And when you've made mistakes in how you've organized the meetings, what mistakes have you made in the past and what have you learned from those mistakes to how you organize your boards today?

I don't think we've figured out the magic formula in terms of how to make most use of the time. And you know, I think especially like, you know, I'm diverging to a bit of a different topic, but it's a little bit of a question of how does the board evolve. So because same people in the same room, I actually think the discussion gets very repetitive and, you know, don't think anyone is getting, getting that much out of it. So I think that maybe a much more important part is to think about how should the board be evolving because frankly, I find it hard to believe that someone who was really good at seed stage figuring out product market fit is going to be that helpful in thinking about later stage capital raising strategies. So I think that's something that everyone should think about. And I think even more importantly, that's a task for the investor to think, investors to think about how do they give up board seats? Because it's, you know, everybody wants a board seat, but then, you know, we think about, first of all, a people get incredibly busy. You know, I find it hard to believe that somebody can actually do a great job sitting on 10 boards. And second of all, the rooms get stale and full of same people. So, you know, it's a question of how do we rotate?

So that's a good topic. We'll come on to that one. Let's save that thought, Lucian, on this question, sort of how to have an effective board meeting.

So it's funny. I sit on a few boards and I've seen everything from very organized teams that will send everything in advance to teams that maybe don't even put together materials that are super detailed. I will say actually the way that Tim does it, I'm not just saying that because he's here, but the way that Tim does it, it's very efficient because we just don't spend time on KPIs. We always know where the company is. The fact that they're doing very well also helps to dig that much into all the metrics and KPI details. But we spend most of the time discussing more strategic topics rather than analyzing. Well, growth was X and your CAC went from X to Y. So I think that's really helpful. The other point that Tim mentioned, which I would encourage actually entrepreneurs to use. Absolutely. Use your board as an excuse to A, give your executive team exposure, but B, just see how your executive team responds to outside factors and outside questions. And I've seen this actually work very well. And I've also seen this in some situations raise some flags where maybe they weren't able to answer some of the questions in the best way. So I think for the entrepreneur actually and the CEO to use the board as a forcing function for keeping their team not on their toes necessarily, but testing them a little bit, I think that can be very helpful as well. And also making them feel like they're part of the strategic discussion. And then in terms of. Sorry, go ahead. And I'm happy to talk about the diversity part after which I think is really important.

I think, you know, I agree with the board setting a cadence. I think, you know, probably even, even more as you're an early stage company, have more frequent board meetings, I think it gets you, you know, could be a good six, eight week cadence. And, and definitely you should get your executives to present and you know, they should be getting good, good and bad grillings. And if they can't do that, then that's also a sign that maybe they're not up to the job. So I think that's an important part.

And the diversity point, I mean, I fully agree. I think a good board is a diverse board. And actually I also agree with you. I think a good board is made of all sorts of backgrounds, not necessarily 17 investors. So I'm actually not going to challenge you on that. Go ahead.

Okay, but then let me ask you here, what's the next board you're going to give up? So you have six board seats now you're going to add, you know, you've added some in what, in three years now? Sorry, you've taken those seats in what, three years?

In the last two. Three years, yeah.

So you're going to add six more. You're going to be overbooked. So when will you give up support of Deliveroo, for example?

I think there is a natural evolution as you invest in these companies. At some point there will be an exit. I think actually six boards is a very good number for me right now and I feel like I have enough time to interact with all my entrepreneurs. May I add something as well? I think that different companies will require a different level of attention at different times. Right. So it doesn't happen that all your companies are all fundraising at the same time or they're all launching a new product at the same time. I think these things come and go in waves. I know you want to be controversial, I understand, but. But there is a natural evolution. I think at some point when you have 10 boards. Yes, I agree with you.

I think the point TAV was trying to get to is. I'm sure you guys know this, but when a company raises money, typically the lead investor gets a board seat. That's sort of the standard practice. Now a lot of entrepreneurs don't necessarily build in mechanisms for that board seat to go away at a certain point. Often the best way to do that is to sort of see set of minimum ownership for that investor. But there are other ways. There are other ways to help rotate board seats. And I think if you end up doing three or four or five rounds of financing and you end up with a couple of lead investors in some of those rounds, you could end up with a board of eight investors and a couple of founders. And then it's very one sided. You often have people who are very good at the earlier stages, not necessarily good when you get to 1,000 people. So I think one of the questions Tavit is getting is how do you encourage investors to step down from the board? What mechanisms can you put in? And as an investor, when do you think about what's the right time? Because again, I have two hats. I always warn investor and operator, as an investor, if a company's going really well, it's sort of one of those bragging rights. I'm on the board of Transferwise and I don't want to get off that board because that's part of my, you know, my calling card of my brand. But actually I'm a see stage investor. What am I doing on a company's board? Of a thousand people. So that's the part of the tension that's created.

So I wasn't being controversial, I was thinking, you know, if you ask six more board seats, have you thought about how will you give it up? You know, Toby was mentioning something like, you know we actually, we don't even have, we haven't thought it through a transferwise either but you know, we've just been lucky that we haven't had to add board members. So we still have board members who came at the seed round and see round but you know as we, we are, we are actively thinking about how do we expand our board now and you know, with a view of adding independence but you know, if we, if we had five board members who would take one at seed A, B, C, D, E. Bloody hell, that would be horrible. So like I'm just you know, curious to know how as an investor you've thought about it too.

So firstly I'll say that typically with a later stage investors they're not going to even want a board seat. So a lot of pre IPO investors, maybe they have the, you know, on paper an observer seat but they're typically not as involved because they have more public markets approach. I'm not sure who your later stage investors are and if that was the case but typically you see a lot of that. Secondly, some of the, the best board members I've seen and something I certainly encourage my entrepreneurs to do is to bring in independent board members and this typically means someone. For me there are three key categories of independent board members that can add a lot of value. Either someone who's very good at go to market in a similar field or someone who's very good at product or someone who was a founder or CEO of a company that's relevant and who's been throughout the entire journey. So actually bringing on someone like that relatively early on, I would even say around series B ish I think can be very, very helpful and I'm happy to give you an example. So I sit on the board of a company called UiPath. It's a software business started in Europe, they expanded to the US relatively early and they brought on board someone very well known in the enterprise software world who was the president of a $10 billion company and ran go to market for the company for a very long time. So firstly that person was of course very helpful in figuring out the go to market strategy. But secondly, it gives you a certain extra credibility, extra stamp of approval to be associated with someone who's really relevant in your sector. So I think entrepreneurs who are open to that, I think that's a great thing. Tim, I don't want to.

Yeah, I mean, the thing that I was going to say as well, I think it comes down to, I think a lot of this is about understanding the investors that you're bringing into the company. So when we, when we're thinking about raising capital and talking to investors for the next round, talking to other founders about their journey with that fund, you know, was there a time when they needed to step back from the board or there was a natural time for them to do so? And I think generally in. In every interaction we've had with investors that we're talking too seriously about that, there's been at least a founder who's described the scenario where they were on the board or they joined the board at a certain time. I think these things are transient. I think it comes down to the fund or the investor being pragmatic and wanting to do what's best for the company. And again, sometimes best for the founders, but should always be best for the company. So I think, again, the right investor will be pragmatic and will be flexible.

In theory. In theory, that's true. In practice, I've been on enough boards now to know that that's not always the case. There's vanity issues. There's someone's inherited a board from somebody who left their firm and they're, you know, they don't always have the best. You know, they want the most efficient approach. They don't always want something that's going to take time to work through to restructure a board. So there are always situations where the ideal situation doesn't come to fruition. And I was going to say, I mean, my best advice to founders on this topic is go find a great independent board member. Go find a great entrepreneur who you'd love to have on your board and then, you know, get them into your board. And if it means asking someone to step down, ask someone to step down. But if they see someone who's phenomenal for that stage of company, for the. For the skill set the company needs at that time, that's a good conversation. It's hard to have in sort of in the abstract that, you know, I'd like to expand my board or I'd like to take you off, it's bring those people in. Tavit.

I even think in practice there might be. The reality might be that the best companies are actually able to negotiate not giving a board seat. The best companies naturally keeps their board smaller and then you end up with the worst companies who end up adding a board member in every round. But you kind of a compounding circle of deaths that comes this way.

I mean, it's two things, I think. Firstly, sometimes the entrepreneur actually wants an extra voice around the table. And of course diversity is important. I will also say not all investors are created equal, just like not all entrepreneurs think the same. I don't know that all investors think the same necessarily, firstly. So I actually see a lot of investors who will want to add that extra person until some numbers. By the way, I agree with you. At some point it's just too much. And I lost my train of thought for the second question. Sorry.

I think we were just talking about how you restructured the board and how do you bring on new people and how do you migrate people off.

But did you think about diversity when building out your board and who were the best? What was the background of the best board members you've seen in action?

So, as I said, our board has been pretty stable and we haven't really put that much effort into it. We're now thinking about it.

Yeah, bringing an independent, you mean?

Yeah, we have somebody from our seed round and then we added Andreessen Horowitz in our seed round. And these are the board members. And we're now going through the.

Sorry, if you were to blank slate today, you were to design, just pick your board members, what would be your ideal board size and who would you have on in terms of profile, terms of where you are right now? And maybe you guys can both think of that as well.

I think adding independents earlier on would be the right thing. I'm happy that we have two investor board members, but maybe balancing that with two independents would be really good. And I think the other issue which we haven't mentioned yet is the question of board control. So maybe a question of figuring out the structure where you can add independence without giving away the board control, which is not hard to do, you know, even.

Well, if you get the. You can appoint those independents, then you can kick them off the board and replace them if they don't vote for you.

Yeah, sorry. And to your earlier point, I remember what I wanted to say. Apologies. I think sometimes companies that have the luxury to choose whether to give out a board seat or not, what works pretty well is to give an observer seat and then not a lot changes, A, in terms of control and B, you have the optionality to see how the relationship goes with that particular observer. So. So I've Seen that work sometimes as well.

Yeah, I think just to echo the. One of the comments there was that I think sometimes it's too narrow just to think about boards being effective within board meetings or around board meetings. We do a lot of work with our board outside of those meetings. It depends on what we're doing as a company. But we have a board member who's very good. He's a former cto, so he has great product knowledge. And our engineering team is spending a lot of time, you know, talking to him about stuff at the moment. So I think, you know, there's, there's value there. But then also, yeah, we have some board members who are, you know, they're, they're going to be less helpful in those particular scenarios. We have an angel investor who's fantastic but has never founded and run a company before. So, you know, we see, we see both sides.

I think you're right. It's important to distinguish again between the board. I think when we talk about the board, we're talking about the people who are most involved in working with the founders. And that doesn't always mean you have somebody who say, has a board seat. It could be some folks who are around the table who are involved, who are angel investors, who are former entrepreneurs and so forth. So maybe share. We've got a minute or two left or thoughts on how else to surround as a founder, how to surround yourself with the best help?

Yeah, again, I think it's about thinking. It's about thinking about the dynamic of who you've got around the table in terms of surrounding yourself by the best people. I think generally what we've seen is that the best people to have on the board work for the best funds. If you're raising from venture capital funds. In terms of independence, we haven't been through the process of appointing an independent at the moment, but again, the connections and the exposure you get as an entrepreneur, a lot of that comes from your investors, a lot of that comes from your customers, et cetera. So it's that kind of ecosystem that you're building for yourself as a company and as co founders.

I don't have to go far to find an example. I mean, Toby, you're an angel investor in Transferwise and you haven't been on the board, but you've been incredibly helpful. And we definitely, we thought about our seed round with a view of how do we kind of have a 360 degree map. And you know, we need somebody with marketing, somebody with banking, somebody with us. So we put that together in our seed round. And actually we've been adding investors. We've been adding individual investors pretty much in every round. Even in our last round, we added individuals who didn't have to write big checks. But we've taken people who are just going to be helpful and valuable to the business and sort of time when marketing is important. We added Christian Wolfenden as an angel investor who was super helpful in some of the things and so on. So different topics at different times. And I think the idea of letting people invest is really good because then the kind of incentives are pretty well aligned as well.

Well, on that note, thank you guys for a great panel, great discussion.

Thank you.