BoardMatters Quarterly, September 2013
Leading to succeed
Venture capitalist and board member shares his perspective
For the last three years, Bruce Golden of Accel Partners in London has been recognized as one of the top 100 venture capitalists in Forbes’ Midas List of tech investors. He serves as Chairman of the Board of Qlik Technologies, which was one of the best venture funding stories in European history.
Bruce has been a board member of a number of international companies, from early stage, through growth and IPO. He currently holds board seats on public and private companies, including Forgerock, MindCandy and Responsys.
In a recent discussion with AJ Jordan, Growth Markets Leader for the East Central Region of Ernst & Young LLP. , Bruce shared his perspective as both a board member and investor, and explained how communication and measurement are the keys to good private company governance.
It is important to measure everything that matters so you can anticipate issues and preemptively address them.
Jordan (AJ): What are some of the lessons you’ve learned that might help position private boards for success?
Bruce Golden(BG): There are many. One that immediately comes to mind is that it’s important for all boards – but especially those of early stage companies – to anticipate issues, as the business and market dynamics can change rapidly. I think it’s very helpful for boards to openly discuss challenges that may be around the corner.
Similarly, boards need to get ahead of situations that can be anticipated with any reasonable analysis. It is important to measure everything that matters so you can anticipate issues and preemptively address them.
Another lesson is, if there are known disagreements at a board level, work them out. Boards are organic systems with people and personalities, and there may be conflicts or diverging points of view. Don’t let things fester. If there are misalignments or disagreements about important matters, work them out or they can paralyze a company at critical junctures.
I also think you need to make sure that everyone has a chance to speak their mind. A danger on some boards is that you have a dominant personality that suppresses other views. It’s very important in high-performing boards that you hear from all the relevant voices at the table.
AJ: What skills or characteristics do you tend to look for when building out the board?
BG: We evaluate the needs of each individual company and then seek out board members who can make a major contribution in that particular situation.
For example, there are times we may recruit a product or technology executive with experience in building similar types of businesses because this executive can help shape the product road map at a pivotal stage.
Serving on a board is not easy, so all outside directors have to be good communicators, collaborative and willing to take on difficult issues. It’s crucial you have independent directors prepared to confront important issues. A board requires people who can speak the truth and be active members.
We really only win if the management team wins, so collaboration is crucial.
AJ: In the early stages of a business, do boards need to be focused on supporting the development of a strategy for this business?
BG: Yes. Good boards are constantly asking themselves where they can have the greatest impact on the business. As we often get involved with pre-revenue companies, our work as board members includes focusing on product strategy, clarifying the company’s market insertion point and building a repeatable sales model, creating operating leverage through various kinds of partnerships and recruiting for key roles.
Because we are primarily focused on early stage tech investing, we are not only board members but often also serve as the lead investor in a company. Our job at every stage, as board members and as investors, is to help our management teams be successful.
As investors, we are highly focused on outcomes. We look for companies where we see the potential for greatness. Because we often invest in very young companies, we know there’s going to be a long journey to help nurture them to an IPO or significant M&A outcome. In fact, our average investment period is greater than eight years.
As a venture investor, we are always minority owners in companies and, therefore, aligned with management to create a highly valued business. We really only win if the management team wins, so collaboration is crucial.
I think the most important words for an investor/board member to speak are “How can I help?” When I walk into a board meeting, I’m focused on, “Who can we help recruit? Which potential customers can we open doors to? What partnerships can we help facilitate?”
AJ: What you describe sounds like the right benchmark for what early stage boards should look like?
BG: I hope so. In many cases, we’re investing in a company with just one founder or a very small team, and we choose to do so because we think they are exceptional. However, it is not unusual to find that these teams can be asymmetric in experience and knowledge.
Therefore, as we develop the company, we strive to build on strengths and fill in gaps where needed, with the ultimate goal of creating a high-performing, self-sufficient team. This allows the board to take on an increasingly strategic focus.
An important success factor for any company and board is the rate of learning. The companies that have been the most successful in our portfolio are the ones that have very high rates of learning and that have the ambition to pioneer a new market or reshape an existing one.
These companies develop efficient feedback loops with customers and act on information quickly to enhance their product capability, their go-to-market strategy and overall market positioning. They are also adept at evolving their product offering to increase their strategic value over time.
AJ: Can you explain what metrics the board should use to measure success?
BG: It’s absolutely crucial that the board establishes clarity with the management team around what metrics to measure. Every functional area should have a health check.
I personally believe that everything that matters needs to be part of a dashboard. For example, I want to understand metrics on whether we can hire and retain people effectively, or how quickly it takes a company to recruit a new salesperson and make them effective. The more data driven we can be as board members, the better.
AJ: What do you see as some of the similarities or differences between private and public company board service?
BG: Boards of private and public companies can function quite differently as they face different pressures and requirements. For instance, early stage company boards tend to be smaller and may not have the same formally staffed committees that are required for public boards.
Additionally, there are typically more frequent board meetings and more contact between the board and management in younger companies, particularly in the venture-backed world. These more frequent and often informal touch points are crucial when the rate of change is dramatic, as is the case with most high-growth tech companies.
However, while smaller private company boards may be more informal, being small or young is not an excuse for being mediocre at governance or for not establishing a very high standard for internal reporting and analysis. There are a lot of things that venture-backed companies have to do exceptionally well, to position themselves to grow quickly and mature into category leading businesses.