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 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 forming a company create a brain trust?
Board-o-phobia: The Fear of Having a Board of Directors
"Often, entrepreneurs don't want a board for fear they won't validate" the current strategy, said Mona Pearl, author of Beyond Strategy, and an executive who's worked with a number of start-ups internationally. "Just because you have an idea doesn't mean the market is ready for it," Pearl said. But, smart entrepreneurs both have boards and listen to them, she said.
Pearl speaks from experience beyond the advisory capacity. Earlier in her career, she had her own experience forming a company, a technology venture that manufactured electronic signage. "My partner was an engineer, and I took care of business." Pearl said. The thought of bringing on a board never occurred to them. "I was the same way. I understand the temptation to go it alone, and I understand that it is wrong," she said.
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 executive who has himself led an online start-up to $100 million in sales, achieving Internet Retailer 100 status within three years, saw 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 rather 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. Krauskopf benefitted from having board members who brought their expertise to Spyglass -- no figureheads here. It's the opposite of a CEO trying to keep the board at bay, 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 to your team members.
Yes, some entrepreneurs forming a company will go-it-alone and survive. But here's one final reason to consider taking the board route: investors are more likely to bite when they know a growth-oriented company has credible directors on a board.