Founders should choose investors like key hires

Transcript

Transcribed by machine (Whisper) from the episode’s audio, so a word may be off here and there.

1. 37:12

   Early on, I always told myself and my team that your first board is your investors right um and uh i would treat that relationship as a hire you can never fire and in fact they can fire you and have been on the other side of that So, it really puts pressure on finding the right person that you'd actually want to work with at the company, knowing that you could never fire them. And again, they can fire you.

2. 37:41

   And for me, it was around, you know, I think a lot of young founders kind of go for the brand names, especially around VCs. But I always wanted to go for the person. um and you know that's why uh roloff um you know we were we were optimizing for for him to be on our board and be an investor but like it was it was a fact that like he would up level our conversation up level our execution more than anything else and challenge us along the way um so even as you think about adding independent board members like the the core function of a board is to ensure that the company has the right CEO like that's their one job they have all these committee responsibilities and but the ultimate fiduciary duty is like do we have the right CEO going forward and I think you have to build a board that has different perspective on that

3. 38:39

   and that is open to wild ideas the things that are going to just seem like crazy in the moment which like this one might might be um but it can be rationalized if we talk through it and we like really document it and paint a picture of like where the where this could go and like what the opportunity cost is if we don't do something um because like if we didn't do something like this i just imagine like every year it's a 10 riff or 20 riff or whatever it is and like that is just the most demoralizing like crappy like non-creative building of a company ever and it's all you know with your backs against the wall and like it just feels like losing constantly um and i you know i had a conversation with the board like i don't want that like that's not i don't want to be at a company like that like it's just it doesn't make sense it's soul crushing you know and it's just not

4. 39:38

   not inspiring and uh i don't feel good about it so here's here's what i do feel good about and like let's let's go let's let's challenge it a little off you're on a lot of boards you're on some really good ones advice for ceos how to build a board i think the first financing when you get an investor if you're getting an investor board member you should treat it as a recruiting decision, not a financing decision.

5. 40:06

   Because they'll have a much bigger bearing on the ultimate outcome of your company. And then I'm generally a fan of getting a very good independent board member within a year or two. Certainly by the time you get product market fit. And I think there's a different relationship that the founder has with the investor board member by virtue of what Jack described. That sometimes that person may come to the conclusion that the founder is no longer the right person to run the company, maybe rightly, maybe wrongly.

6. 40:34

   If you can get an independent board member, there's a different relationship that the founder has with that board member. And especially if that person has previous experience, it can be a fantastic mentor relationship to help the founder on that journey, depending obviously on their level of experience. I think boards are often built too late in a rush, especially in the run-up to an IPO where people suddenly realize, oh, I've got a four-person board and I need nine, or whatever the case is.

7. 40:57

   and you suddenly assemble people who have no context, they have no history, and they have no chemistry because you will be tested. You're going to have a situation where there's a short seller report or you're dealing with a hostile situation with an activist investor or a tricky financing that really tests the mettle of the team. And you want to understand the dynamic between the board members and just their willingness to go along and their alignment with the core values of the business.