Managing your board of directors

Silhouettes of Business People Discussing Business IssuesFirst time entrepreneurs seldom give enough thought to their Board of Directors, many don’t have one until forced to after raising a series A round of investment. That’s what prompted my first post about BoDs. Before we get into how to manage a BoD let’s just spend a minute on the makeup of a BoD. Experienced founders know that the BoD has hiring and firing power over the CEO – the CEO reports to the BoD. That being said, Series A investors will take as many as one or two Board seats if there are two vcs investing. Generally they will allow two founders. Because no one wants paralysis of the venture through a 50/50 split of the BoD its in everyone’s interest to add a fifth independent Board seat. That should be it until you raise a Series B and C at which time you may need to add another investor and/or outside Board member. But I was taught to keep Boards small; the smaller the Bod, the easier it is to manage, which is the job of the CEO.

What is the value added of your Board? That depends on the added value of your investors whom you have chosen. The Forbes article buy Chaka Booker, Your Board Of Directors: Managing Their Gift And Their Curse, provides a good answer:

Board members generally have a depth of experience that has exposed them to a range of problems in a variety of contexts. As a result, their minds move quickly. They understand patterns. They ask questions you don’t have answers to and provide suggestions you hadn’t considered. They have an uncanny ability to poke holes in your thinking and mend holes in your strategy. This is their gift.

Here are Chaka Booker’s tips on managing your BoD, with my annotations based on experience serving on half a dozen boards:

Boards don’t focus on execution.

The role of the board is strategic, not operational. Typically they are freer to explore strategic alternatives because they are freed from the weight of execution. You need to be open to these ideas, even if they generate stretch goals. Keep in mind you and the BoD are typically on the same side of the table: how do we best create value in our venture?

Boards don’t need details. Until they need them.

That means that while you may only present the absolute minimum amount of detail to support your business case, be prepared to have all the details that went into your decision in the appendices to your BoD presentation.

Always “pre-wire.”

I learned to brief each member of the BoD before the Board meeting from Sigrid Reddy, who was the Director of the Watertown Free Public Library where I was assistant director. She either met personally or had a phone call with every member of her Board of Trustees (the non-profit equivalent of a BoD for a public library) to preview any potentially controversial topics and find out where each member stood on them. There should be no surprises at your BoD meeting if you have done your pre-meeting prep properly.

As I’ve written elsewhere, founders need to get their Board members to work for them, either en toto or as individuals. This means you know the experience and expertise of each BoD member as well as how likely they are to help, if asked. Too few founders realize that their BoD is a valuable resource that they should manage just like other resources – capital and human – under the CEO’s purview.

But don’t just rely on a conversation, make sure you send a brief memo along with the list of agenda items to each Board member well in advance of the meeting. Don’t make assumptions that they understand all the issues or even that they are going to back you if the issue comes to a vote. Test your assumption in that f2f meeting or phone call.

Keep in mind that your directors are usually extremely busy people, so get them in the habit of dedicating a block of time with you before your BoD meeting. Also don’t assume Board meetings are simply a formal necessity whose function is to rubber stamp your decisions. You should welcome being challenged on your assumptions by BoD members. And you should work to generate a spirit of camaraderie amongst the directors. Helping the BoD function as a team rather than a group of individuals will turn them from spectators to active participants in your venture – again, at the strategic level. The only operational functions the Board should play are to interview high level candidates – at your request – and to help in raising capital through their connections.

If you have zero experience building and managing a BoD I suggest you mine your contacts for a CEO who has that experience and is willing to share it with you. There really is no work experience that can substitute for the important task of building and managing your Board.

Finally keep in mind that being a director these days probably carries more risk than back in the last century when I was founding companies. You may need to invest in D & O (Directors and Officers) insurance if you have a key Board member who won’t serve without it. Directors have a fiduciary responsibility to shareholders, so if your venture goes sideways they bear some exposure to litigation from shareholders. D & O insurance is expensive, so try to avoid it unless you have so much capital from your seed or first round that it’s a very manageable expense.

To those of you who haven’t raised vc money, keep in mind that your lead investor will also be a Board member, so your due diligence on them and their firm is doubly important.


Looking for the exit sign?


I’ve had firsthand experience with both buying and selling companies. Buying two companies and selling three were great learning opportunities. I know enough to be dangerous. If you are ready to start looking for the exit sign, I highly recommend the article on TechCrunch What every startup founder should know about exits by Benjamin Joffe and Cyril Ebersweller.

But the first question in this process is how do you know you are ready to sell the company? Surprisingly the article skips over this important step. There are several signals to listen to about selling your company.  Selling the company is a CEO job, aided by your CFO, if you even have one! In my day every VC-backed company had to have a CFO – if only to watch over the millions of dollars in the startup’s checking account. But today?! Uber just hired their first CFO recently! One reason is that there are many CFO’s for hire, either through an agency or directly. So it shouldn’t be a problem for you to find one.

  • Venture is out of cash, can’t raise any more and will have to shut the company down if you can’t sell it. This is the worst case, but not uncommon case.
  • Need more capital to grow. Perhaps you are in a capital intensive business but one that investors are leery of. So if you don’t grow eventually you will have to sell or go under.
  • You and your co-founders have been at it a very long time. You’re tired and worn out. Perhaps infighting and/or staff attrition are creating havoc. People want out.
  • Venture is doing fine but you just were given an offer you can’t refuse. CEOs have a fiduciary responsibility to do what is best for the shareholders. So it’s your duty to bring this opportunity to your Board.
  • You lack the capital to be an acquirer. By building strategic alliances in your market over several years you have seen that growth of companies in your market is largely through acquisitions. Since you lack the capital to be a buyer you will need to be a seller. Look for being acquired by a company that does acquisitions exceptionally well, like Cisco or Thomson Reuters, that you would enjoy working for after the sale is over.

There may well be other reasons, but as you can see from this list three out of five come from negative scenarios, only two from positive.

Ever heard of the Boy Scout’s motto? It’s Be Prepared! In the case of mergers and acquisitions that means from the day you incorporate your venture you should be prepared to be acquired.  That does not mean your goal or purpose is to sell your company! However, it is a highly likely option. In 2016 97 percent of exits were M&As. And most happened before Series B.

As George Patterson, managing director at HSBC in New York said, “Good tech companies are bought, not sold. The question is thus: how to get bought?”

Patterson says it’s important to understand how mergers and acquisitions actually work; how to prepare a startup for an exit; and how to develop a “feel” for the market you’re exiting through and into.

There are five types of acquisitions according to Mark Suster, managing partner at Upfront Ventures:

  1. Talent hire ($1 million/dev as a rule of thumb —  location matters)
  2. Product gap
  3. Revenue driver
  4. Strategic threat (avoid or delay disruption)
  5. Defensive move (can’t afford a competitor to own it)

As you can see, three out of five are driven by negative scenarios for the buyer! This is no coincidence. Evidence shows that most acquisitions fail. That’s a deep subject I won’t get into here. But if you are selling you are best off being a talent hire or revenue driver.

  • Do everything by the book. Your CFO or freelance CFO must have experience in  acquisitions! Your lawyer and CFO will make sure you do things that will make it easy to sell the company, like a clean capitalization table and incorporation as a Delaware C-Corp. Use of an accounting system that is set up correctly and maintained assiduously. NDAs with all employees and significant others.
  • Make sure your IP is as clean as your cap table. That means that someone in the company on the operations side should be in charge of tracking all IP activity on your behalf (trademarks, copyright, patents) and that you are conforming to all Ts and Cs of any business arrangements your venture is part of, from your office lease to a distribution agreement.  Buyers performing their due diligence will want easy access to a complete, well-organized set of all documents pertinent to your IP and that of others, such as software licenses.
  • Manage expectations. Everyone in the company should know that the sale of the company is one of several possible scenarios. Keep in mind, “No surprises!” But you don’t want your staff looking over their shoulders constantly trying to spot the buyer, just as you don’t want them trying to figure out how much they will be worth in the event of an IPO.
  • Know your market. You and your management team should get familiar with possible buyers through your business development or strategic alliance initiatives. In fact this is one of the best way to be bought, as you can date before you marry.

As I wrote about previously, in the post Why I don’t like hearing about exit strategies, …Your job is to build a great company. If you do that, the exit strategy will take care of itself. And if you don’t … the exit strategy will also take care of itself.” So don’t let the idea of an exit be a distraction to you or your team.

Why you need “smart money”


Sunny Dhillon is a partner at Signia Venture Partners in the Bay area. Despite his being a VC, I have to say that I don’t recommend founders follow his advice in the Forbes article How To ‘Hire’ The Right Venture Capitalist.

He groups VCs into two groups: VCs who are happy to just write a check and VCs with experience and expertise. Back in the day this is what we used to call “dumb money” and “smart money.”

Mr. Dhillon writes that:

Founders who already have a complete team in place and minimal risk in their business really only need gas to add to the fire, not necessarily someone to help them put out fires. In this case, the best VC to “hire” is the one who offers the most favorable terms aka the cheap money. You can then bring on people for their experience and expertise later when you really need it.

The only startups that can take just “dumb” money are very successful serial VCs. This  very small group knows what “minimal risk” is – good luck to the rest of you – and probably has built a great team from their co-founders in other ventures. They have a A+ network of investors, advisors, mentors, and peers. They know that given their track record they won’t have a problem raising multiple rounds of capital or tapping into valuable experience and expertise when they need it. And even they will need it at some point.

But if you aren’t a member of the very select multiple successful startups club I strongly advise you not to take the advice to just get dumb money. There are two major reasons: one is raising capital and the other is access to expertise building successful companies market and domain experience, and ability to recruit world-class talent.

Very, very few ventures succeed with only a single round of venture capital. Uber is on their series G. And yes, just like every other startup that isn’t valued at $60 billion, they started with a Series A. So just because you have a team and think you have “minimal risk” doesn’t mean you won’t need multiple rounds of capital. The best way to do that is to start with a VC with both deep pockets and a strong network of peer VC firms. Because VCs like to syndicate their deals to reduce their risks. Often even if they have enough capital to fund you until an acquisition or IPO they will often bring in one of their network to co-invest in a Series B, C or later round. So founders need to think beyond the first round. All four of my VC-backed startups had multiple rounds and multiple investors, including top VC firms and corporate investors like Apple, MIT, and Reed Elsevier. The bottom line is even if you are fortunate enough to find a VC who is “happy to just write a check” the odds are that you will need more than that from your lead investor.

Beyond supplying capital on terms and conditions you can live with – and believe me, Ts and Cs can be more important than your valuation – VCs have varying experience in elements of building successful companies and the partners have different domain expertise as well. By bringing multiple investors into your company over several rounds you will greatly strengthen your network. Finally, you will never know when you will need help! You can start with a great team and traction, but what happens if there’s a falling out with the team? If an 800 pound gorilla like Google or Facebook decides to clone your key feature ,as Instagram did with Snap? If it turns out you are going to need 5X the capital you thought you needed? Don’t judge a VC firm by how they work with you when things are going well, judge them by how they work with founders when the company has problems. That’s why you need to do your due diligence on your investors.

And there’s another value-add that blue chip VCs bring to the table: their network of former founders and top flight executives. As you grow you will eventually exhaust your own network. That’s where a VC can help you find a CFO, COO or other executive needed to really scale the company. It’s amazing the contacts VCs have. At Course Technology I had the idea (not a very good one) that an investment from Apple Computer would add to our credibility in our core market, education. Paul Maeder of Highland Capital, who was brought in on the second round by Bill Kaiser of Greylock, just picked up the phone and called Barry Schiffman, who was in charge of corporate investments at Apple and a month or so later we had a bank transfer from Apple. When we were looking for an outside, independent board member one of our other investors knew the former president of Dartmouth College. Again, with one phone call he was eager to work with us.

Which brings up a final point. I was taught by our investors to keep the board small. So you don’t want or need to give board seats to all your investors. MIT, for example didn’t even ask for a seat; they were happy with observation rights. Observation rights means the investor can attend board meetings but not participate in the board discussion or vote. It’s a great way to tap into an experienced investor’s perspective without having to manage yet another board member.

I don’t know Mr. Dhillon nor Signia Partners and it’s been many years since I raised capital. So please don’t take my word for why I believe virtually all founders need smart money, not dumb money. Talk to your mentors and advisors before you follow his advice, my advice or any advice you are getting from the web, an article, book or video or even your family.





Even highly successful people rely on mentors


The article in The Wall Street JournalMicrosoft’s Peggy Johnson on Her Trusted Advisers, caught my attention with its subtitle: The deal maker calls on mentors from former Paramount chief Sherry Lansing to Liberty Media’s Greg Maffei.

I think most of us tend to perceive mentors as advisors and guides to startups, perhaps only to first time entrepreneurs. The received wisdom seems to be by the time a company is launched and garners financing the Board of Directors and/or a strategic board of advisors replaces mentors from an accelerator or academic program like MIT’s Venture Mentoring Service.  And while there are examples of startups that do stay with MIT VMS for years, they are by far the exception.

So why is Peggy Johnson, Microsoft’s executive vice president of business development, relying on mentors?

… she largely relies on her gut when making big decisions but then “validates her intuition” by checking in with valued former colleagues, mentors and, first and foremost, her husband, Eric Johnson, an independent investor.

It seems that Ms. Johnson treats her mentors as a personal board of directors, advising her on career moves, like joining Microsoft.

So all you founders out there, don’t think of mentoring as training wheels you can easily drop when you move on to a riding two-wheeler. Life as a CEO is tough. Where do you go for help? Not your Board! They might perceive you as weak. After all CEOs do report to Boards of Directors, who have the power to fire them and hire their replacements. And VC dominated  boards are notorious for bringing in “adult supervision” if they feel a startup they have funded is going sideways.

So here’s some advice from a long term mentor: hang on to those mentoring relationships and when the going gets tough as CEO you’ll have some impartial and knowledgeable advisors who not only can give you feedback, but know you, and knew you when you were first starting out. And if you are so successful you are invited to join the Board of another company you just might want to check in with one of your mentors before you do, as Peggy Johnson did with Greg Maffei, President and CEO of Liberty Media (and a former Microsoft executive as I recall).

“Greg emphasized that it was as important for the board to be a good fit for me and my goals as it was for me to fit the board’s needs,” Ms. Johnson recalls. She joined in 2013.

You’ve raised early-stage funding! Now what?


This stage of a startup’s lifecycle seems somewhat neglected to me, as this is the first article I’ve seen that really addresses what you need to do after you have closed your first round. The Entrepreneur article You’ve Raised Early-Stage Funding! Now What? by Candace Sjogren lists four “to-do’s” post-funding.

Raising capital is a totally consuming, exhausting process, even if you didn’t have 225 conversations and 95 investor pitches before you raised capital, like Candace Sjogren. She had 30-second, 5-minute, and hour-long presentations and it took her over a year before closing her final investor. I would suggest that founders do have a 30-second pitch and a 5 minute pitch, as both are critical in the increasingly prevalent pitch contests. I’d only differ on the hour-long presentation. That’s way too long for a presentation. As I’ve written elsewhere the goal of a presentation is to get to a conversation. Presentations are monologs, what you want as a sales person are dialogs. And selling equity is a sales process! Perhaps that’s why it took her so long to raise capital. Obviously hard to say of course. But the goal of a presentation is engagement, you want to get the investor talking. Hard to do if you are presenting for an hour!

Here are her tips, with my  comments beneath each tip and one or two of my own:

1. Communicate early, often and to everyone.

This is very good advice. But more to the point is how you handle bad news. That’s going to happen in your startup and how you communicate it and how you handle it are critical in managing your investors. First, get bad news out quickly. The worst thing that can happen to you as a founder is to have one of your investors find out the bad news from someone else. Your investors will respect you for not trying to hide the bad news. But make sure you have a couple of options on how you plan to handle the bad news, whether it be a CTO jumping ship, a missed launch date, or an employee harassment issue.

Keep in mind investors are very busy people. I still remember Bill Kaiserof Greylock telling me he went through over a thousand business plan to make two investments, one in us and one other company I’ve long since forgotten in one year. So make sure you aren’t getting into that bad social media habit of communicating trivia. Investors don’t care what you ate for lunch or where you ate it! They want to know are you making or better yet, exceeding your numbers! When my partner and I were running HyperVest, a very early incubator, Kevin set up a password protected web site where we posted news of interest to investors. Kevin had a lot of angel investors so self-service leveraged his time and effort.

The most important time to talk with each individual Board member is before your monthly meeting. If there’s an issue that will require a Board vote you want to know in advance how they will vote. Make it a practice to touch base with each Board member at least once and preferably twice between Board meetings.

2. Structure board meetings before you have a board.

Scheduling meetings of investors before you have a board certainly makes sense. But I would advise you to create a Board before you start to raise capital. You need that structure in place and it shows you are a real business, not a hobby! The one thing investors want is predictability. So the purpose of a Board during the emerging company phase is to review the previous month’s actuals versus projected, discuss plans for the next month or more, and ask for the Board’s help on strategic issues, such as should you accept an investment from a strategic investor? Keep in mind the one thing investors want from a founder is predictability. Don’t low ball them on your revenue projections and pay attention to top line, bottom line, and most importantly your cash position.

3. Engage your investors for assistance.

I never had angel investors and I suspect that Candace had many. I’ve only worked with either venture capitalists (Greylock, Highland, Sigma et al) or strategic investors (MIT, Apple, Silicon Valley Bank et al). So her advice may be sound for angels but I don’t advise it for institutional investors. As I said before, they are very busy people. However, where they can and will help you is in recruiting. VCs have giant contact lists and often an acquisition of one of their companies will result in redundancy of roles, with the concomitant layoff of CFOs, CMOS, etc. Also ask them to interview CXO candidates. VCs have a lot of experience in this area. Bill Kaiser in particular was a very astute interviewer. And of course they should help you raise your next round. The best thing you can do for a VC. aside from making your numbers consistently, is to give them an intro to an exciting startup that you think is a fit with their investment strategy.

4. Know when to say “no.”

The domain expertise of your Board members will vary widely. You should know their expertise and experience thoroughly. Then you will know who to go to for what type of advice. But be very selective, only ask for advice on major issues, like key hires, and prospective partnerships. As said before, VCs and strategic investors are extremely busy, so be very selective in taking up their time. And as Candace writes, just because you are asking their advice doesn’t mean you are committed to following it. Board members may differ on which direction to go in, as CEO it’s your job to set the direction of the company.

5. Use of proceeds

Candace doesn’t touch upon this issue but when you pitch your use of investment proceeds is an important, and usually last part of your pitch. Where will you invest that money? Things change in rapidly startups and in the six months or more it normally takes to raise a first round and close it things can change. So make sure you review your use of proceeds with all the investors in the first round and make sure everyone is in sync with major investments, be they hiring a CXO, capital outlay, or other major expense items. Keep in mind, investors hate surprises! You should have your Board set a ceiling on how much you, as CEO, can authorize before needing Board approval. It’s been sometime since I’ve sat on a Board so I won’t try to give you a number. That’s what your network of peers is for. They should be able to tell you what is a typical spending authorization level for CEOs.

6. Celebrate!

Raising your first round is cause for celebration. Hosting a dinner for all your investors won’t just show your appreciation for their faith in your company, it will give them an opportunity to get to know you and your management team, as well as each other if they weren’t already acquaintances.

Raising your first round is a like a sailing race, where an important part of the race is getting to the starting line just on time, not too early and certainly not too late. The race is now really just beginning. So take a deep breath, replenish yourself and get ready for the really hard work of company building that lies ahead.



Allocating equity in a startup – even to mentors!

davd parker

One of the most difficult and challenging issues facing any founding team is how to allocate equity and who to allocate it to. It’s a zero sum game – you only have 100% of equity to divide up, you can’t generate any more. Issuing more shares just dilutes the ownership of existing shareholders. I’ve written about this issue previously: Founder equity for academic teams turning into companies. And obviously, hot topic that it is, there’s a lot on the Web about it.

However Dave Parker’s article on How Much Equity Do You Give Early Team Members? was the first article I’ve come across that not only addresses allocating equity to advisors and board members, but mentors as well. Not only that, mentors come first! It’s worth quoting Dave Parker in full about what he has to say about mentors, with my comments interpolated.

Mentorship is free – or at least should be. Mentorship is something you do to give back to your community. Yes, there are people that use it to sell their services – but you’ll discover them soon enough. You should plan on buying the lunch/coffee/beverage.

Yes, mentorship is a purely voluntary activity. But Dave Parker’s warning about professional service providers, be they lawyers, accountants, financial advisors, or insurance agents, is advice mentors need to heed. One of the founding principles of the MIT Venture Mentoring Service is that all mentors agree to come to the organization with no agenda of their own. So you don’t have to worry about this issue if you are lucky enough to be mentored by VMS. But accelerators, incubators and other entrepreneurial organizations tend to attract professional service providers like flies to honey.  Their thinking is straight forward: get to a hot startup before it’s hot and have their fees grow with it. Maybe even take equity in for all or part of their fees and really make money if the company strikes it big. You will need all these professional service providers and perhaps others. But the best way to find them is through personal referrals from other entrepreneurs, not by who happens to introduce themselves to you at a networking event or who volunteers to mentor founders.

One way to pay for mentorship is simple: pay it forward. Are you currently mentoring someone coming up behind you? Do they look different than you? The answer to both questions should be yes. You can always find someone that needs help who is a “couple of chapters behind you in the book.” What skill set do you have that you could mentor?

The point about not looking like you may seem simple – but the comment is about being intentional. Selection bias and our own networks tend to keep us insular. Branch out. Here’s a great article on Men who Mentor Women at HBR.

Again, Dave Parker has something new and important to add to the subject of mentoring: diversity. Frankly I’ve been only concerned about diversity amongst the mentor groups I belong to, as they are dominated by white senior citizens like myself. VMS and other mentoring organizations have made concerted efforts to add women and minorities to but in general we’ve let the founders self-select. So if you have are choice in choosing who you mentor, keep diversity in mind and help give women and minorities a leg up the startup ladder.

If you find that you’ve met with a specific mentor on a recurring basis – don’t take the relationship for granted, make it more formal. Especially if mentors continue to show an interest and add value, consider moving them up the ladder to advisors. You want your company to survive and grow – it’s good to have aligned incentives. They may say no, and that’s okay, but the offer shows that you respect and value their time.

I’ve written elsewhere about the value of advisory boards and how to start and manage them (just search “advisory boards” on the blog). And Steve Blank, an entrepreneurial authority, recommends founders put together an advisory board “as early as possible.” So do consider adding your mentor or mentors to your advisory board. But keep mind that while gaining an advisor you are losing a mentor. The roles and responsibilities are far more formal for an advisor than a mentor. And an advisory board advises the venture; mentors guide and advise the entrepreneur.

Read Dave’s article in full for help how to allot equity to board members and founders, and additional valuable advice on the subject.

Mentors, Teachers, Coaches & Advisors

human resources

Steve Blank, noted educator of entrepreneurs, has a superb video series about startups which is available on YouTube. One video in particular very clearly delineates the differences amongst mentors, teachers, coaches and advisors, and explains the value of each to the startup.

Mentors, teachers and coaches advance your personal career. If you want to learn a specific subject you find a teacher or take a class.

If you want to hone specific skills or reach an exact goal, hire a coach.

The one that founders sometimes forget is the mentor. If you want to get smarter and better over your career, find someone who cares about you enough to be a mentor.

A key point Steve makes about mentors is, “Mentors are a two-way street.”  They think they can learn something from you in addition to liking you. And having been a mentor formally for over eight years and informally for many more years, I can’t emphasize this enough. I’ve learned a lot about fields I never would have entered myself, such as medical devices or bio-engineering and even more about founders and how they develop through the process of building a company. As Steve says, many founders will themselves eventually become mentors.

A favorite topic of mine is advisory boards and I often recommend that founders form and advisory board once they have solidified their business model enough to use it as filter in choosing advisors who can help their business be successful. Teachers, coaches and mentors help the founder to develop and succeed; advisory boards help the company to succeed. Boards may provide generic advice to the founders, VPs and even staff.

Steve recommends putting together an advisory board “as early as possible.” This is one point where we differ. Having formed advisory boards for each of the four venture backed companies I founded, my experience was that if you create an advisory board before you solidify your business model you can end up with advisors who don’t fit your company.

But his reasons for forming an advisory board are quite sound: get experienced advice to help you soft out whether or not your vision is a hallucination or not. Expand your circle of accumulated wisdom past your investors.  Your investors or Board are not necessarily your advisors. They may lack the domain expertise you need. And the Board is your boss, not your advisory board.

Steve doesn’t really address how you find mentors, teachers, coaches and advisors. Much like finding your first employees, this comes down to using your personal network and the networks of your founders to find previous employers, professors, retired executives, and even peers who are willing to act as mentors or advisors. These days virtually every incubator or accelerator comes complete with a mentoring team. You can find many useful courses via MOOCs – Massive Open Online Courses – from edx, Coursera, Udacity and others. Generally you will need to pay coaches. MOOCs are free, but exec ed courses from places like Harvard are decidedly not. Mentors and advisors are generally compensated by small stock grants.

You can get a detailed roadmap on how to build an advisory board from my post Strategic Advisory Boards. You may also want to read the post comparing and contrasting mentors with advisory boards.

Find the forcing function!



I’ve hijacked this term from mathematics for use first as a product manager, now as a mentor. In math it’s restricted to a time dependent process, but in startups there are several other processes where it applies.

Inside the Venture

Two enemies of the product manager are scope creep and thrashing, two related problems. In scope creep engineers who want to get their favorite feature into the product, no matter what, and marketers who insist customers must have feature x both contribute to uncontrolled growth in a project’s scope after its spec has been set and the project has begun.

Thrashing is a computer science term referring to a computer’s performance degrading or failing due to constant paging – constantly switching data from memory to disk excluding application processing. But again I’ve taken that term to be used in project or product management when the team is constantly going back and forth on some feature or major aspect of the project, unable to finalize a decision, which ends up paralyzing the product development process.

Finally, the product manager’s biggest issue is missing deadlines – commonly known in software development by the euphemistic term “schedule slippage.” So how do you fight scope creep, thrashing, and schedule slippage?

Outside the Venture

One of the biggest problems startups have is creating a sense of urgency in other companies they are doing business with, usually ones that are more established and wield greater market power.

My most common experience with this is with investors. VCs never say “no,”, but getting them to “yes” can be very time-consuming and frustrating. Without a forcing function, if they have some interest in your venture, they will sit on the sidelines and observe your progress. Are you hitting milestones? Growing your customer base? And otherwise reducing risk? That’s what they want to see and they will wait until they do and even longer.

The other classic problem is getting partners to move to action: to deliver on a service or part or come through on a marketing or distribution agreement.

Competition or the threat thereof can be a great forcing function for getting investors to move. Most investors hate losing deals; they are extremely competitive. And competition is also market validation. So don’t settle for a single interested investor or even a single term sheet. Competition not only creates a sense of urgency, it can also drive valuation. Competition is also classically used within large, established firms in marketing, where ad agencies and other service firms have to compete for the firm’s business. Don’t forgo this forcing function just because you are a startup.

In general

J.D. Meier has a great post on his Sources of Insight blog entitled Forcing Functions – How to Make Action Happen.

Here’s how he defines forcing function:

A Forcing Function is any task, activity or event that forces you to take action and produce a result.

By putting a Forcing Function in place, you create motivation for taking action, whether it’s to meet a deadline or to respond to social pressure.

If you have areas in your life that you’re finding inertia, try adding some Forcing Functions to get better results.

Here are his examples of forcing functions:

Where I differ from J.D. is my focus is on apply forcing function on others, not myself!

This is a great list. I’d just be a bit more specific about events and meetings. Public facing events like conferences and trade shows are great forcing functions, as those dates virtually never slip and the cost of not showing up can be very high. So setting schedules around shows where marketing plans to have a company presence is a great forcing function for product development schedules. But there are also internal events, one of the best ones being Board of Directors meetings. Another is an all-hands meeting. Your team doesn’t want to miss a scheduled demo for the Board or the entire company, that is for sure!

One of the major forcing functions is peer pressure. Software engineers and other creative talent are particularly prone to be subject to the assessments of their peers. So making sure your projects goals, especially milestones and most importantly ship dates are publicized throughout your venture – just having written goals is necessary, but not sufficient. Used diplomatically and subtly, peer pressure can be one of the most effective forcing functions. But used in a heavy handed way it can backfire on you. So be careful.

Budgets are another great forcing function.  Budgets don’t just have to be about money, they can be about resources of any kind. The threat of losing an engineer to another project can light a fire under a development team, just like the threat of running out of marketing funds can galvanize a marketing team.

Time and money are two of the most important resources in any firm. But if not strictly defined and controlled they won’t help you as forcing functions, so make sure they are tightly boxed-in from the get-go.

So whether you are trying to get a product shipped or an investor to offer a term sheet or a vendor to deliver a need part on time, dip into your toolbox of forcing functions. But remember, a forcing function is often most effective if it’s carefully thought out and applied before a project starts – not applied post facto.

Forcing functions can help turn activities into results. That’s key to success in your startup.


The pros and cons of taking corporate VC money


Way back in the last century I had extensive experience garnering corporate VC funding. Investments included two direct investments by MIT (where I had worked as Director of Information Services), Apple Computer, Ernst and Young, Reed Elsevier, NACSCORP (National Association of College Stores) and Silicon Valley Bank.

Back then VCs frowned on their companies taking corporate venture as outlined in the article ‘Dumb money’ and other myths about corporate venture capital by Igor Taber of Intel Capital on VentureBeat. However, my experience was uniformly positive, though not nearly so much as we expected. For example, at that time Apple dominated the education marketplace and we expected our investment from Apple to really help our company, which was focused on the higher education market. But while we did manage a bit of co-marketing, on the whole there was little benefit.

The investment from The National Association of College Stores was by far the most beneficial as they became our distribution arm, which worked out well for both companies.

At Throughline, Silicon Valley Bank was also helpful, setting up a meeting with startup CFOs (our target market) for us.

But the investments from Ernst and Young and Reed Elsevier were very passive, mainly resulting in a lot of meetings with their staffs who wanted to understand how we could develop a far better web site than their’s at 5% of the cost. A time sink for us.

So the bottomline in my experience was that the upside is where the corporate investment can galvanize the investing company into providing true added value as NACSCORP did as our distributor or at least provide warm introductions to target customers as Silicon Valley Bank did.

None of these investors asked for or were given a board seat, though we gave Allan Bufferd, Treasurer of MIT, visitation rights which worked out well. We got the benefit of Allan’s wisdom without increasing the board size.

Here are some salient quotes from Taber’s article – keep in mind you are getting the viewpoint of a CVC, not that of a VC or an experienced founder:

CVC is a large and growing player in the venture industry. According to CB Insights, corporate VC firms invested $18 billion in North America in 2015, which is roughly 25 percent of all venture investments that year

…. 900 collective deals in 2015 — a 15-year high 

He lists and debunks three myths about CVC:

  1. It’s dumb money – I agree this is not always the case.
  2. CVCs aren’t involved enough to build great companies – while this may not be true in Intel Capital’s case, I think it is still true. Most CVCs don’t take board seats and their companies lack the startup DNA of traditional VC firms.
  3. CVC’s limit a startup’s strategic options – Many entrepreneurs fear that if they take capital from a corporate venture fund, it will limit their potential partnerships, customers, and exit options. Again, while this may not be true for Intel Capital, I would caution founders that it could well be true for their companies. I know our VCs had one major concern: that taking CVC could cap our upside in an acquisition. They argued that if the CVC’s parent company didn’t acquire us then other acquirers would assume we were somehow “tainted” since the CVC was assumed to have insider information on the value of our company.


There are a couple of other issues with CVCs that are important that aren’t mentioned in this article. CVCs rarely, if ever, lead an investment. They like to have a VC they know both set the valuation and lead the round. That saves them the cost of due diligence and they don’t get into the often contentious negotiations over valuation. So as a raw startup don’t go after CVC money. Wait until after your A round at the earliest and preferably your B or C rounds. Then your CVC can simply follow your VC investor(s).

The other issue with CVCs is they tend to have shallow pockets. None of my CVCs participated past the first round. So don’t expect your CVC to keep investing past the first round or you may be disappointed.

I do agree with Mr. Tablor’s conclusions to his article.


When an entrepreneur comes to me seeking funding, here’s what I say: Do your due diligence, consider all your options, and don’t fall prey to stereotypes. Most of all, do your homework on the partner who will champion the deal and sit on your board, regardless of whether it’s a corporate or traditional venture firm.

In other words, seek a smart, active, and savvy investor who can help build the company you’ve always dreamed of running.

Igor Taber is a director in Intel Capital’s datacenter investment group, which focuses on artificial intelligence, big data, analytics, and cloud investments.

Do you measure up? Down? Sideways?


There’s a great quote from management guru Peter Drucker that “if you can’t measure it, you can’t manage it.”

But what exactly do you measure? Users, clicks, click throughs, page views, churn? Obviously the key measurements in a mature business are revenues and profits but the key measurements in a VC-backed business revolve around growth, not necessarily revenue and rarely profits.

I find metrics to be a real struggle for many of my mentees, especially those early stage companies in a B2C market. Back in the last boom there was a frenzy of measuring “eyeballs” (page views).  Today founders seem fixated on their number of users.

But as David Chang, who was an executive at, shared with me about his conversation with one of my MIT Venture Mentoring Service mentees:

I mentioned to him that the space [B2C mobile/social] is very tough to get initial traction and shared our experience at lWHERE/PayPal with him. Despite our 50M users on the WHERE network and later access to the 160M PayPal user base transaction data, the intersection and engagement with mobile users nearby was still sparse.

So what should a B2C startup measure? One good source of metrics is Snap’s IPO plan. Here are the metrics they plan to use according to the article Snap’s IPO Roadshow Message: We’re the Next Facebook, Not the Next Twitter in The Wall Street Journal by Maureen Farrell and Corrie Driebusch.

Snap also is expected to focus on its “stickiness,” or time spent on its disappearing-message app, and its share of the highly coveted 18-to-34 demographic, according to people familiar with the pitch, which echoes a message the company has delivered to potential investors in meetings that began last month.

To that end, Snap’s IPO team plans to highlight metrics they believe show Mr. Spiegel can design breakthrough products that attract a loyal customer base.

One measure they plan to tout is the company’s daily active user rate, people familiar with the deal said. More than 150 million users access Snapchat at least once a day, the company has said in recent presentations, more than some recent estimates of Twitter’s daily active users. They also plan to highlight the roughly 25 to 30 minutes a day users spend on Snap, company executives said in these presentations. While Facebook has far more daily active users—1.18 billion in September—Snap plans to argue that a higher proportion of its users are in lucrative areas. Facebook’s U.S., Canadian and European users generate most of the company’s revenue but make up about one-third of its total user base. A much higher share of Snap’s users, around 73%, are concentrated in those regions.

So here are the metrics you can extract from the above paragraph:

  1. Number of users who access your app or web site per day.
  2. The amount of time users spend with your app or site each day.
  3. What percentage of your users are in the 18-to-34 demographic coveted by advertisers.
  4. What proportion of your users are in the most lucrative geographic areas

Of course there are virtually an infinite numbers of things to measure in a startup. Choosing the right ones to highlight to investors or your Board is critical: too many metrics and their eyes will glaze over, the wrong metrics and their eyes will wander.


Two metrics I encourage companies to present are the cost of customer acquisition: how many dollars are spent in marketing and sales to acquire a new user? And what is the lifetime value of a customer to the company? There’s plenty of good info on the web about how to calculate these metrics.

As I was finalizing this post in my head I happened to read this post by veteran VC Brad Feld on Medium:  Get Your Metrics Together. Brad concludes

There are tens of thousands of words written on the web about SaaS metrics, consumer metrics, recurring revenue metrics, and all kinds of other metrics.

As part of getting your metrics together for 2017, I encourage you to go read some of these articles. And think hard about which metrics really matter and where the change in them will impact your business performance in 2017.



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