When you first incorporated as a C-corporation, probably only you and your co-founder were named as board members. You never really had official meetings or voted on anything, that you were aware of. Your attorney had you sign some documents from time to time, but you possibly didn’t pay much attention to them. After some time and some success, you find yourself reading a term sheet for an equity round of funding from a VC. One thing they require is a board seat and quarterly board meetings. Yikes! You’re having a mild panic attack, because you don’t know what to expect or how to prepare for an official board meeting. And you certainly don’t want to embarrass yourself in front of your new VC investor.
This article is just for you. I’ve participated in more than 200 board meetings over the years, either as a board director or senior company executive. In this article, I’ll describe typical participants, presentation topics, formalities, common courtesies, and other administrative activities associated with board meetings. Let’s get started.
Most founders have an impression of board meetings that isn’t much like what it’s really like. They expect there will be lots of strategic discussions and important decisions. And there is often a decent amount of that, but just much less than most founders assume. A majority of most board meetings involve the company giving a bunch of updates that you’ll see described below. I think there’s a big missed opportunity by not incorporating more strategic discussions, so keep that in mind as you decide what you want to get out of your own board meetings.
I will say that at least half of the company’s value from board meetings comes from the required preparation. What has transpired since the last board meeting? Which new initiatives are worth disclosing to the board? How is the company doing, and what evidence do you have of that?
I remember when I was a rookie enterprise sales rep at IBM. I initially hated the quarterly territory reviews I had to do for my sales manager and branch manager. I thought it was a waste of time to have me give a big dump of information, just so they knew what was going on. But I quickly realized that the questions they asked me that I didn’t have good answers for helped me ensure I was truly on track to closing the deals I forecasted closing. My prep for the meetings got better and better, which meant that I was also maturing in my sales territory management and pipeline management skills. A couple of years later, my reviews only took 30 minutes instead of 2 hours.
This one is obvious, but realize that with your first equity funding round, it’s possible your lead investor will require the board to be made up of 1 member representing the Common shareholders (probably the company CEO), 1 representing the Preferred shareholders (probably the Partner at the venture fund that sponsored the recent funding round) and 1 mutually-agreeable Independent member.
For more information about common strategies for composing your board at different points in your company’s evolution, read my article titled “Early Stage Board Composition“
If you started out with 2-3 company founders as board members, the dynamics are about to dramatically change. And for anything that requires a majority vote of the board members (check your Bylaws or ask your attorney), you won’t be able to “slam dunk” the vote but rather will need the support of either your lead investor or the independent rep on the board. Hopefully you’re recognizing the importance of selecting the right independent rep.
Side note – Even before you raise an equity round and start getting formal about board meetings, you should seriously try to avoid having a 2-member board with only you and a co-founder. Co-founders get into conflicts with each other more often than many startups realize, and sometimes over critically fundamental company issues (see related article titled “Avoiding Co-Founder Conflict“). If one of those issues requires a majority vote of the board members, you’ll be left with a 1-1 tie and be stuck in a stalemate. The company can suffer dramatically as a result. Consider a close company advisor for the third seat. (see related article titled “Selecting an Advisor“)
Side note – If you don’t already have a good independent representative on the board of directors when you close your round of funding, your new lead investor will gladly help you find one. The problem is their candidates might not be as independent as you would like and might rather have close loyalties to the investor. If you already have a good independent representative on the board before the funding round, the investor will have a much harder time justifying the need to replace them with someone else. Six to nine months before raising your first equity round of funding, go ahead and add your own independent representative. Your existing advisors are often a good place to look first.
It’s possible that you and your lead investor agreed to allow one or more of your other investors to have what’s called a “board observer” seat. These don’t come with voting rights, but are allowed to participate in board meetings to get more inside scoop than whatever the company chooses to include in the monthly or quarterly updates it sends to all investors that have “Information Rights”.
The inclusion of board observers for early stage companies can get a little touchy because, from my experience, it’s very unusual for them to simply be an “observer”. That doesn’t mean their comments, questions and advice voiced during board meetings isn’t valuable. But it can change the tone and direction of a meeting. It also can create the feeling of lopsided support or opposition on an issue, versus the way an actual board member vote might conclude. One option is to ask board observers to dial-in to the meeting rather than participate in person. This helps emphasize the role and expected activity of the in-person participants versus the more passive expectation of the board observer.
The risk of disruption varies depending on the type of board observer. An analyst or associate that joins to take notes and capture action items for your lead investor is rarely a problem. Rather, it’s an investor that wanted a real board seat, but could only negotiate an observer seat that causes the biggest issue, in my experience. The same thing can happen with pre-seed and seed round angel investors that are nervous about the limited influence their equity provides them.
Side Note: I strongly recommend setting proper expectations with any board observers. This should start before even granting them the observer right, by asking what they are hoping to accomplish from having board observer rights. In most cases they’ll report wanting to keep closer tabs on the company than they otherwise could by just getting monthly update emails. With that response, you have an easy opening to make it clear that they can observe, but should be very careful about influencing the conversation or accidentally distracting the conversation. That also gives you the opening to suggest conference call access instead of at-the-table.
It is common to have select co-founders or company executives participate in some or all of the board meeting. It’s often beneficial to have the responsible executive present certain sections in the Functional Updates part of the presentation (more on presentation content further below).
It is common to have your corporate attorney or a more junior attorney from their office present. They will take notes to be used as the official Minutes of the meeting, and they will be helpful for questions and legal guidance during the Board Business section of the meeting (more to come on this shortly). Many attorneys don’t charge for their participation in quarterly board meetings. If you do get charged, you might want to ask if a junior attorney that is familiar with your company’s legal matters can be the one to participate. Their billable rate is considerably lower than your attorney (see related article titled “10 Tips for Controlling Legal Costs“). If this isn’t practical, ask your attorney if they would charge less (or none) if they dial-in versus participate in-person. With this, they can listen with one ear while doing other work when you’re presenting information that’s either not of interest to them or highly unlikely to generate a question for them.
I only recommend having advisors at board meetings if there is a specific reason. The less active they are in actual company operations, the less valuable they are for the board meetings. If they are also serving in a part time operational role or were very active in a recent strategic initiative, then they might add a lot of value to the meeting.
Meeting Frequency & Length
Board meetings are usually quarterly, unless there’s something like an acquisition taking place that calls for more frequent meetings. After finishing a fiscal quarter, the company needs time to close the financial books and prepare the presentation material. This means board meetings often happen ~3 weeks after each fiscal quarter close.
As for meeting length, it varies based on situation. I find that most board meetings for early stage companies last 90-120 minutes. As the company grows, has more moving parts, and the size of the board expands from three to five and later five to seven, the length of the board meeting also seems to grow (3 hours or more).
Most companies choose to walk through a structured presentation. But that doesn’t mean the board meeting should involve a one-way dump of information from company to board members. The more interaction you have in the meeting the better. Brad Feld has an interesting idea that involves no formal presentation but rather only dialog. You can read more about that here. I’ve never experienced anything like this and don’t know how practical it is, but I understand and agree with the spirit of the idea.
Another way to think about ensuring a reasonable level of interaction is to strive for a 65/35 mix of conversation. In other words, the company executives consume 65% of the board meeting time with their presentation and answers to questions. The board members and other meeting participants consume the other 35%. This means that f you end up with 85 slides for your 2 hour board presentation, you’re already in trouble and need to re-calibrate.
Since you have so much more information than you could possibly present, I have a strong recommendation. Before you even start drafting your first slides, identify the 2-3 most important things you want to cover, beyond the standard stuff. Don’t start with filling up the standard stuff (ie – functional updates and official board business) and then figuring out how much time might be left over for non-standard strategic stuff. Do it the other way around.
A couple of companies I serve as board directors for minimize the time needed for functional updates by sending a reasonably comprehensive board update a few days before the meeting. With that, even though there are obligatory slides for the standard stuff, it doesn’t all need to be repeated during the meeting. Instead, only the most important highlights might get presented, to make sure the board members fully understood what was previously communicated. Also, the board members can come with questions and concerns already prepared.
Official Board Business
There will always be some official business to be handled by the board. This is usually done either as the very first or the very last topic on the agenda. The reason for that is only official board members and the company attorney should be present (sometimes board observers too, but think about that first). It makes it practical to ask the other participants (ie – execs that aren’t on the board) to either delay their joining or to depart just before the Official Board Business section (if reserved for the end of the meeting). Examples of Official Board Business are as follows:
- Approving the prior board meeting’s Minutes
- It’s best to circulate the Minutes 48 hours before the meeting so the board members can review ahead of time for accuracy and simply give verbal approval during the meeting
- Approving new stock option grants (see related article titled “Compensating Your First Employees When You’re Cash Poor“)
- Reviewing the current capitalization table and remaining available stock in the option pool
- In order to show the cap table ledger on a slide, it can be simplified somewhat by grouping various equity holders by category. The CEO and other major shareholders (ie – co-founders and major investors) are shown individually. This usually translates to any individual equity holders with 5% or more equity. But the general employee population, advisors, early friends & family or angel investors can be grouped together. And you’ll want to show the option pool separately.
- A second slide can be used to break down the option pool. A pie chart is convenient and should have sections for issued versus available. If you want to further impress your board members, break the issued section into issued-vested versus issued-unvested.
- Discussing or approving changes to CEO or other executive’s compensation
- Approving the results of a formal company valuation (ie – a 409A) and/or approving a new Common share price (whether resulting from a formal valuation or otherwise)
- Read related article titled “Pricing Your Stock in the Early Days“
- Approving a new round of fundraising – both the key terms and the total amount authorized
- Discussing or approving the sale of the company (see my related articles on M&A here)
- Discussing or approving an acquisition of another company
This might seem too trivial to mention, but there’s a reason I want to. Board members can really disrupt the flow of a meeting by bringing up topics that are already planned to be covered later in the agenda. If they don’t know it’s going to be covered later, then the disruption is your fault, not theirs. Don’t dive into any real details during the agenda review, but do let the participants know what you’re planning to cover. Just creating the agenda slide best helps you ensure a logical flow of topics rather than accidental whipsaw.
The other benefit of reviewing the agenda at the start comes when a board member’s question or comment jumps into a future agenda topic. Rather than engage in the conversation right away, you can diplomatically remind that you’ve got a place on the agenda for that topic.
This section can also be a good one to include a slide with a list of dates for upcoming board meetings. Participants can double-check that their calendars are marked and without conflict.
In this section, I like to use just one slide each to cover all of the items listed below. Just be careful not to drift into a full conversation on any topics you also have covered in more detail in a section later in the presentation. Instead, try to set the stage and tone for the rest of the meeting and subsequent supporting information that follows. If you find that your board members are too impatient and can’t help but want to engage in deeper conversations during this section, then skip it and consider giving some brief stage-setting verbal remarks at the beginning of each of the following sections before turning things over to another member of the team (for some of the sections).
- Current org chart
- Hiring plan – perhaps just key positions rather than every position being recruited; this might be notated on the org chart mentioned previously
- Financial – P&L and balance sheet for past quarter (1 slide each). Show deviations from the official plan and add some comments, where needed.
- Operational – whatever 3-5 key metrics you track and have messaged to the board as significant operational metrics (ie – a SaaS company might present MRR, CAC, churn, # new customers and select conversion rates). Most operational metrics should be graphed as a trend over time, and with inclusion of the target for each.
- Select from the key financial and operational results presented in the prior section and project them through the end of the year or the next 4 quarters (depending on your planning horizon).
- For early stage companies, it is common to show the “cash fume” date (the date you expect to run out of cash). Sometimes two dates are presented: 1) based on achieving the sales forecast 2) with no newly-generated revenue
Each of these sections is an opportunity to showcase your co-founders or other executive team members. Create functional sections that make sense for your organizational structure and company stage (ie – sales and marketing, product, operations). But please advise your coworkers to avoid crawling through tactical details. Keep the presentation topics at “board level” and let the board members dive into details, if needed, via their questions.
Most board meetings I attend have at least one presentation section that goes into far more tactical detail that I need in order to 1) best advise the company 2) vote on important matters 3) maintain my governance and fiduciary responsibility.
Non-Traditional Topics or Strategic Topics
Often, it’s beneficial to have time allocated to discuss an important matter that doesn’t otherwise fit nicely in the previously-described sections. If so, consider messaging this ahead of time and sending preparatory material to the board members to maximize effectiveness. An example might be a significant company pivot or M&A discussion.
Most early stage company board meetings are informal. That doesn’t suggest lack of needed preparation, but rather refers to the conduct of the meeting itself. The one exception is the Official Board Business section. Some investors or board members prefer to be more formal for this section to help make it clear that a particular item was actually approved or rejected.
Taking this to an extreme, you could follow some parliamentary procedure like Robert’s Rules of Order, which is the gold standard for making motions, allowing discussion, and seeking votes. But very few early stage companies take it that far. Here’s an easy substitute to consider, using a stock option grant approval as the example:
- (CEO) “Listed here are the stock option grants we need approved for recent hires. All are within our normal guidelines for the stated positions.” (the CEO might add commentary about certain option grants, if needed)
- (CEO) “Is there any discussion needed on this?” (pause to see if anyone has questions or comments)
- (CEO) “Are all in agreement?” (pause and look for head nods or verbal confirmations)
- (CEO) “OK, the stock option grants are approved.”
These formalities are only needed for items that require board approval. In other words, not items just being reviewed or discussed (ie – showing the current cap table or mentioning the percentage of the stock option pool still available for grant).
Another important formality is capturing official Minutes of the board meeting. Your attorney can best advise how to do that. If they attend the board meeting, they will do it for you. There is a trick to capturing and recording certain discussion topics, but without too much detail. If your attorney takes the minutes of each meeting, they’ll know exactly what to record. Usually the official Minutes of each board meeting are approved and logged for due diligence by future investors or acquirers.
- Advance Material – Send the presentation deck and prior meeting meetings to the board participants at least 48 hours prior to the meeting, so they have a chance to review and digest. It will help the meeting be more efficient, and if you’re lucky you’ll get some quick feedback prior to the board meeting and can use that to better prepare.
- Time Management – If you schedule the meeting for 90 minutes, try to finish on time while remembering there might be a lot of dialog during the meeting. Your presentation material should only consume about 50% of the board meeting timeline (if it were presented without interruption). You MUST allow time for dialog, first because it’s necessary and second because it’s the most valuable part of the meeting for all participants (company and board members). I can’t tell you how many board meetings I’ve been in where 25% of the material gets presented in rushed fashion during the last 20 minutes because of too much material and/or poor time management.
- Level of Detail – As I mentioned before, it is very common for early stage company execs (actually, most company execs) to present at a level that is too detailed for the board members. I’m not suggesting that you abstract everything to such a high level that it’s not meaningful for them, but at least give the final draft version of a board presentation deck a review in which you ask yourself if the content is at the right level for the discussion you want to have with board members. Over time, you’ll get better and better at this.
- Food and Drink – Depending on the time of day for your meeting, have an assortment of light snacks and drinks available for the participants.
The CEO Runs the Company
The main purpose of having board members is Governance and Oversight, not Operational Management. It’s true that for many early stage companies with first-time founders, the board members also serve as advisors. And many board members are selected based on their extensive experience, former success, and strategic thinking. But as the company grows, or if the company has an experienced management team, the role of the board should mostly be governance and oversight.
Exceptions to this happen somewhat regularly. But that’s because the CEO decides to put a strategy topic on the agenda and asks the board members to temporarily swap their governance hat for a strategy hat. My friend and mentor, Joel Trammell, describes this general topic well in his article titled “Creating the High-Performance Board”.
The way you interact with your board members and the material you decide to put in front of them should help support this. You run the company, not the board. If a board member has a strong opinion and appears to be giving direction rather than advice, I recommend acknowledging their recommendation in such a way that makes it clear you’ve heard them, but also makes it clear that you’re running the company.
Here’s a narrative example to demonstrate the point. “That’s a very interesting idea. The team and I will definitely discuss it in more detail and take it into consideration.” or “I’m not sure if we will ultimately go that direction or not, but I will definitely spend more time thinking about it.” If your board members lose confidence in your ability to run the company, they can make an effort to replace you. Otherwise, they need to let you run the company and be accountable for the results of all decisions.
Something to keep in mind with all this is the fact that board members have legal liabilities as a result of their governance and oversight responsibility for the company. If your shareholders, business partners, employees or competitors decide to lodge a lawsuit against the company, there’s a decent chance the members of your board of directors will also be named. As a result, nothing I’m describing in this section should cause you to feel you can be disrespectful or dismissive of your board members. I’m mostly trying to make sure you remember that your head is the one that hits the pillow each night with the full weight of the company’s issues and opportunities.
If your meetings are fully virtual, you’ll want to follow virtual meeting best practices to make sure the experience is professional and supportive of everything else written in this article. Even if the meetings are a hybrid of in-person and virtual, several of the best practices still apply.
For the suggested best practices, read my article titled “20 Tips for Virtual Investor Meetings“.