Bill Merchantz, founder of Lakeview Technology, has done pretty well. His first company went public after he exited and his second sold to a big PE fund. But he told me he had one regret in forming a company – he wished he’d had a formal board of directors early on.
An active board filled with diverse skillsets can save an entrepreneur from himself.
Successful entrepreneurs forming a company have to master the paradox of being both stubborn and thick-skinned while simultaneously listening and being open to change. The best vehicle for that sounding board is a board, so why don’t more entrepreneurs create a brain trust?
Board-o-phobia: The Fear of Having a Board of Directors
Having served on a number of boards, I’ve found a variety of reasons founders resist or reject the notion of a board.
First and foremost is accountability. Its just easier to rationalize actions and results – or lack of action and lack of results – when you don’t have to report or be held accountable.
Nobody likes to be told what to do, especially maverick entrepreneurs forming a company, and that perception – that the board will issue orders – keeps many entrepreneurs from accessing the wealth of expertise a board can bring.
Friends Don’t Let Friends Go Board-less
Jeff Parnell, an interim executive who led an online start-up that skyrocketed to $100 million in sales, watched an e-commerce concept he believed had significant market potential fall apart when the tech founder couldn’t adjust to the demands of the market place. “The concept was too unique, and missed being easily grasped by the consumer,” Parnell said. The problem demanded expert business analysis. Instead, the founder “valued the insights of his friends. They weren’t bringing expertise, but telling him what he wanted to hear,” Parnell said. The investor voted with his feet and pulled out.
The hard reality for entrepreneurs is that they can’t do it all. Especially in the early days without funding, it feels like the only way to succeed is by doing everything yourself. The problem occurs when the concept grows into a living, breathing, viable business – but the entrepreneur is stuck in go-it-alone mode.
Planning, Accountability, and Home Runs
Parnell says a 30/60/90 day planning structure is essential for a start-up, and needs to happen with board oversight to keep people on task. We’re not talking reams of spreadsheets, but creating strategic markers and accountability. “Many times, entrepreneurial shops aren’t afraid of risk, but they’re afraid of accountability,” Parnell said.
Tim Krauskopf, founder of Spyglass, credits his board member Bill Kaiser from Greylock Partners with the strategic push that helped Spyglass create one of the original web browsers, Mosaic, eventually purchased by Microsoft and now known as Internet Explorer. Tim was content to keep on working on scientific imaging applications, convinced that network software was too difficult. The push from Kaiser was critical. As Tim says, “luckily we changed our minds.”
Having a board alone isn’t the full story. Like in the Spyglasses example, Krauskopf benefitted from having board members who brought their expertise into play—no figureheads here. It’s the opposite of a CEO trying to manage the board, a situation Keith Enstice, an executive with 20 years in the enterprise software/SaaS industry, has seen repeatedly. His advice to entrepreneurs: get a mix of board members with complementing skillsets and treat them as partners.
And be like Krauskopf, willing to listen and adjust.
Some entrepreneurs thrive with the go-it-alone program. But eventually, most every business requires outside funding to achieve significant size and scale, and that’s the biggest reason for founders to consider the board route earlier rather than later. With significant or professional investment a board will become a mandate, a must-have required to proceed. Far better for the founder to prepare early and have the benefit of wise counsel, which in turn makes it easier to raise additional capital.