I’m with you on this one, Norman, but I also understand where Khosla is coming from. There have been a number of occasions where overconfident investors pushed distract-able founders into startup doom, usually be investors who themselves were founders with a successful exit in a different type of business (success in one sector often seems to lead to the belief that the own experiences are universally valid for any type of business and in any sector, which isn’t the case). And it’s really the founder’s job to run the business, not the investors, and to achieve great things the ability to act unilaterally and quickly is often critical (which is also why solo founders are generally more successful than co-founders). Also, early stage startups rarely have anything like a “board”.
On the other side, the hands-off approach to governance has also delivered a number of startup failures where founders used the investment money for personal enrichment (such as buying a mansion) while running the business into the ground and where the investors were left empty handed. Not completely surprising, seeing that a shockingly large number of founders I met see investors as little more than walking check books, and once the check has been handed over they essentially have fulfilled their purpose. So, clearly, some extend of governance is necessary.
Board meetings are very useful as cycling snapshots of a business’ progress, challenges and issues and a record of decisions made. As you wrote, it forces founders to face all aspects of their business, but it’s also a chance to get on record agreement from a founder’s business partners (which is what investors really are) on major decisions, which may seem overly bureaucratic at first but can be life saving in case of later disagreements. They really serve a purpose (also from a legal perspective). And it’s really up to the founder to use them and make them useful.
Also, as a founder, if I accept an investment then I enter into a partnership with someone who will own a part of my business and who will be a stakeholder in my business’ affairs (i.e. in how I run the business), while at the same time I’ll become a stakeholder in their business’ affairs (i.e., to make sure the investment is returned at the point of exit). For this to work, both sides have to be on the same page, which is reflected by being part of the board.
Hi Benjamin, thank you for your thoughts! I agree that board involvement can damage a company, rather than help. My experience in launching companies from SRI was the basis of my belief about the “heartbeat.” We might start five or ten companies in a year, and without our reviewing the companies on a monthly basis for continued funding and progress, many of them inevitably slipped.
I’m with you on this one, Norman, but I also understand where Khosla is coming from. There have been a number of occasions where overconfident investors pushed distract-able founders into startup doom, usually be investors who themselves were founders with a successful exit in a different type of business (success in one sector often seems to lead to the belief that the own experiences are universally valid for any type of business and in any sector, which isn’t the case). And it’s really the founder’s job to run the business, not the investors, and to achieve great things the ability to act unilaterally and quickly is often critical (which is also why solo founders are generally more successful than co-founders). Also, early stage startups rarely have anything like a “board”.
On the other side, the hands-off approach to governance has also delivered a number of startup failures where founders used the investment money for personal enrichment (such as buying a mansion) while running the business into the ground and where the investors were left empty handed. Not completely surprising, seeing that a shockingly large number of founders I met see investors as little more than walking check books, and once the check has been handed over they essentially have fulfilled their purpose. So, clearly, some extend of governance is necessary.
Board meetings are very useful as cycling snapshots of a business’ progress, challenges and issues and a record of decisions made. As you wrote, it forces founders to face all aspects of their business, but it’s also a chance to get on record agreement from a founder’s business partners (which is what investors really are) on major decisions, which may seem overly bureaucratic at first but can be life saving in case of later disagreements. They really serve a purpose (also from a legal perspective). And it’s really up to the founder to use them and make them useful.
Also, as a founder, if I accept an investment then I enter into a partnership with someone who will own a part of my business and who will be a stakeholder in my business’ affairs (i.e. in how I run the business), while at the same time I’ll become a stakeholder in their business’ affairs (i.e., to make sure the investment is returned at the point of exit). For this to work, both sides have to be on the same page, which is reflected by being part of the board.
Hi Benjamin, thank you for your thoughts! I agree that board involvement can damage a company, rather than help. My experience in launching companies from SRI was the basis of my belief about the “heartbeat.” We might start five or ten companies in a year, and without our reviewing the companies on a monthly basis for continued funding and progress, many of them inevitably slipped.
Yes, starting a business is a bold and careful process.