I am not a huge fan of all the “Best Of” lists that come out just after Christmas, but I just read one that is absolutely worth a look. It is a full compilation, broken down by practical categories, of the best startup blog posts of 2012.
Here it is – Best Startup Blog Posts of 2012. It is like a startup textbook! Enjoy.
I recently engaged in a conversation (over a few days) about the need for a seed stage company to have a board member other than the founder. There is not a “right” answer to this, but the positions are worth exploring. For clarity, a company with one founder can have a one member board (assuming a corporation). Might be kind of lonely, but completely legal.
There are many angel investors that rarely take or want a board seat. It is not their operating model. Dave McClure (500 Startups) and David Lee (SV Angels) are 2 examples, but there are many many others. Their model is invest relatively small amounts in ($50K to $200K) in lots and lots of companies. No way to be actively engaged with all of them day in and day out with board seats.
And there are some angel investors that know that even with “light” preferred stock terms (sometimes called Series Seed), there is enough control built into the terms of the preferred stock that the company is still mostly restricted when it comes to making key decisions. So why need a board seat when the control already exists? Fair point.
My subjective view is that once a company raises money from a few institutional investors over $400K – $500K in total that the company should have an investor representative on the board. This is particularly true if the founding team is new in terms of “running a company” experience. I think that the founders will benefit from the oversight and hopeful board partnership and I think that the investor board member benefits by being more engaged and learning more about the business.
This can be a tricky line. The decision to have an investor on the board is really one for the founder. If the investor insists, the founder can turn them down (if other investors are waiting in the wings). And the other investors not taking a board seat should defer to the founder’s desires too. If the founder is ok with an investor board member that is the what counts.
One final thought – what about the VC’s fiduciary duties to its own investors (called limited partners). We are investing other people’s money. Let’s say a seed stage company raises $600K from a group of seed stage VCs. It is reasonable to think that the limited partners would expect their money managers (i.e., the VCs) to have a board representative to better oversee the investment and hopefully help build value at the company? I think many limited partners would answer “yes”.
Love to hear your thoughts on this. Happy holidays too!
I was supposed to have a guest lecturer in my class talking about the new crowd funding act (which is not yet legal), but he was coming from NYC and Sandy messed up the travel plans. BTW, in Ithaca, Sandy was basically a drizzly rain. No damage up here.
So, I covered crowd funding (thanks to Doug Gorman for giving me a good deck to teach from) and then showed one of my favorite Guy Kawasaki videos – he classic Art of the Start. It is 40 minutes of purely good advice for startups. I had not seen it in a while. It is so spot on! And the best part is that it pre-dates all the current lean startup/business model canvas teachings and completely complements them. I really encourage you to find the time and watch the video, particularly if you are starting a company and hope to raise capital from outside investors. And Guy is really funny too.
Enjoy.
Charlie O’Donnell posted a great set of startup questions yesterday – I just read them this morning. Things that founders need to discuss with each other RIGHT AT THE BEGINNING:
Some of these are tough questions, but they will cut down on founder fights. And founder fights are the leading cause of startup death.
What is the secret to success at a startup? I am convinced (and so are a lot of other people) that the team is the #1 success factor. Trust among team members is a critical element. The ability to argue productively is a critical element. Respect among team members is a critical element. Team issues account for most of the troubling days in my VC work. Quoting Mike Moritz from Sequoia Capital, “Judging people is more difficult than judging a market or a product. Markets rarely deliver big surprises. People will always produce surprises.”
A CEO of one of the companies in our CVF portfolio today sent me a post entitled “What Makes a Great Cleantech Team”. Check it out here. It contains some conclusions based on what I would call semi-rigorous (not academia quality) research. The summary, “Great founders hail from every age, background, and school. What differentiates winning teams is their relationships. Successful cleantech companies tend to be bands of brothers and sisters – including the core inventor – that come together on their own, form a complete team, and have a leader fit for the long haul. In contrast, here’s the recipe for a failure: Find an interesting technology, assemble a team of competent people around it who didn’t previously know one another, and don’t worry about bringing the original inventor along.”
I don’t think is at all limited to cleantech.
You will likely enjoy the post. To me, the trust and respect among founders who know each other prior to starting a company is a huge leg up towards achieving success.
Not always easy to find the right people!
ithaca VC 