From my experience at both ends of the table, I can tell you that a startup CEO’s primary job regarding his board is to earn its trust and confidence. You earn that by creating a plan, executing against that plan and NOT running out of money. You earn it through your actions and then, just as importantly, by communicating those actions back to the board.
Provide monthly updates
Tell your board members what you are going to do, then show them what you did. Do this every month. Your board members have limited visibility of what is happening inside the company. They meet with you, the CEO, and your team only once a month or, worse, once a quarter. Their view and understanding of the company is based largely on what you tell them at that time. So, good, open communication is critical. Giving the impression that you are not fully forthright can poison your relationship. If the board meets just once a quarter, be sure top email them the update the other months.
Show them metrics
For your monthly updates, a simple monthly snapshot is a great way to communicate with your board. You provide this in addition to the detailed board package you submit at every regular board meeting. The snapshot shows that you are on top of the business and gives notice to board members of any upcoming milestones. In such a snapshot, I like to see (as do many of my fellow board members) monthly numbers for the following financial metrics (with actual and planned numbers for the period, and planned numbers for the full year):
· Gross expenses
· Net burn
· Cash balance
· Number of months of cash and out-of-cash date
· Number of Employees
Additionally, come up with some business metrics relevant to your company. Try to track the drivers of the business, not just superficial vanity statistics. For a web-based startup, this could include:
· Number of visitors
· Number of registered users
· Number of paying users
· Conversion ratios
Share bad news right away
Good news travels fast, bad news travels faster. Whatever you do, don’t try to sweep bad news under the rug. If you have bad news to relay to the board, call up each member directly and immediately to inform them of the issue. Don’t wait for the next board meeting.
The board wants to see you focused on the business, both the nuts and bolts, day-to-day stuff and the longer term strategic issues. If they see that you are concerned about the business, then they don’t have to worry about the business. If they feel that you are not concerned enough, then they WILL worry, and you should start worrying about your job.
Robert Simon is a C100 Charter Member and Senior Managing Partner of the BDC Venture Capital IT Fund. Mr. Simon brings over 25 years of experience as a successful serial entrepreneur and venture capitalist in the field of Information Technology. He holds a BS and MS in Industrial Engineering from Stanford University.