What are the common pitfalls and mistakes for VCs to avoid as board members?

VCs shouldn't be getting operationally involved or pushing the operational team to make certain decisions which may not be in the best interest of the company. They should not impose their decisions and hearsay without having the complete knowledge of the industry / functional domain. VCs are best "enablers" of corporate governance, advise on M&A related activities, funds raising and allocation, and finally connect with their other PF companies.

The term NED (non executive director) discribes the board role pretty accurately. Give guidance, act as sounding Board, ensure governance but do not interfere with daily business and the CEO (chief ->executive (!) officer). Also when appointed to a board one becomes reaponsible for the wellbeing of the Company as a whole. This may - but doesnt have to - imply more Interests than the Interests of a minority Shareholder.

In my exepriemce, I have found that common pitfalls for VCs as board members include micromanaging, neglecting to listen to other board members, being overly aggressive or dismissive, failing to prioritize long-term company health over short-term gains, and not providing enough support or resources to the company. Maintaining a balanced perspective and fostering constructive dialogue is essential.

The duty of a board is to hold the CEO and management team accountable. A lot of venture capital board members do not have board experience and are not familiar with how to hold the management team accountable. The company should prepare an annual plan for the board. The board should track this vigorously. If the company starts missing on its plan, the board should also ask the tough questions. Also look at executive compensation. Make sure this is structured in a manner that aligns incentives. The VC board members are essentially stewards of their limited partners' capital . They need to exercise this fiduciary duty with diligence.

I worked for a National Startup Award winning company and I have observed that my VC has never interacted with senior management like me ( Director Business Administration and Operation). From founder, they may get details but i think interaction once in a six months is necessary

Really depends on composition of the management team, board and other advisory team. In circumstances where there is nothing more to add, and the interest is limited purely monitoring of investment, then there’s nothing wrong with being hands-off, passive and disengaged. But in those circumstances where an investor has a valuable contribution to make, be that sharing relevant skills and experience, making valuable connections to others in their network, or simply offering general support and encouragement, then failing to do so risks the business not realising it’s full potential. To the detriment of all stakeholders.

Il arrive que des membres du conseil d'administration finissent par devenir des supporters du dirigeant par un excès de bienveillance, par ailleurs nécessaire. Ils perdent ainsi le recul nécessaire à l'évaluation objective des performances de l'entreprise et la capacité à analyser correctement sa situation . Pire encore, ils se mettent à manquer de l'autorité nécessaire qui leur permettrait d'influencer le dirigeant dans la direction qu'ils jugeraient souhaitables. Pour éviter ce type de dérive, il est important de mettre en place des systèmes d'évaluation des administrateurs, tant par leurs pairs du même conseil que par leurs mandants.

Being disengaged as a board member is irresponsible from an investment perspective and disrespectful to the management team. You are on the board for your expertise; to shepherd a fruitful investment; and provide strategic guidance. To do these things, you above all are responsible for holding the CEO and management team accountable to the agreed upon strategy. That means showing up, being prepared, following through, asking the big and often difficult questions, and skillfully pressure testing the results from the management team. If you are unwilling or unable to do these things, then you should not be on a board - it is that simple.

Balancing multiple interests as a VC board member requires a high level of transparency and integrity. To find the right balance, be upfront about your motivations and disclose any potential conflicts of interest. Align your interests with the company's long-term vision and act in the best interest of all shareholders. Clear communication and a focus on shared goals can help build trust and ensure effective collaboration.

As is well known, the incentives of venture capitalists (VCs) and founders are not perfectly aligned due to the nature of their positions. Most anticipated conflicts can be managed by agreeing on a business plan and roadmap, but unforeseeable conflicts are inevitable during the process. The best practice for a board member representing a VC is to transparently acknowledge the emerging conflict and strive to negotiate fairly with the founder to resolve the situation. A common mistake is attempting to handle the situation with a political approach akin to corporate boards, which will never align with the DNA of a scale-up company.

Oh, do ensure that the CoB / board / CEO / management team members have clear responsibilities, which are not overlapping and that they are also held accountable for those responsibilities.

I firmly believe that a VC nominated director needs to have a different set of skills than that of a pure investment professional and it should be clear that these are two different roles in the VC firm. As a VC nominated director, the person should be able to understand the challenges of the board and the management and add value and not only question profitability and seek quick value growth. Being a VC nominated director should not be seen as a side role and incidental to what professionals are doing. It needs to be a driver of strategy, goals alignment and growth enhancer.

VC and Board Members are important enablers of change in organizations. Besides their financial impact they could be bonding agents within Top Management teams and leave their scent mark if they pay attention to: 1. Show trust and empathy to Executives 2. Connect with Management without mingling [too much] in their business 3. Observe, think ahead and take action when needed 4. Follow compliance regulations, morale and ethics policies 5. Leave their comfort zones and never stop learning.

Building rapport and trust is essential both with other board members and the executive team of the company. That rapport should be grounded in the responsibilities of each party - namely the board providing oversight and the executive team providing operational results. Rapport will naturally have some personal aspects, however, board members must be mindful that personal rapport doesn't override their board responsibilities. Consistency in approach, showing up prepared, and being a value-add board member will build trust faster than simply a personal connection. Trust creates predictability which makes working through the difficult problems and challenging times easier because people trust you will show up and add value in a certain way.

VC board members should not advise founders and execs. They should raise good questions instead. This is much more difficult to do, but it brings so much better action plans and commitment in implementation!

As a VC you definitely will want to get to know the founders and the executive team because someday you will exit this position and you may want to leverage these people in future companies. Many VCs, and other investment-held board directions, don't really bother getting to know other board members. People are busy, I get it, but getting to know them will make decision making and debates easier and more productive.

Venture capitalists (VCs) and board members are pivotal in directly engaging with founders, who often face the challenging and solitary aspects of entrepreneurship, with many doubts and fears. Therefore, it is crucial for VCs and board members to consistently be accessible, offering guidance and support to the founding team when needed. Additionally, VC also play a vital role in providing strategic direction and facilitating valuable industry connections that can be crucial for a startup’s growth and success.

There is a hard battle, every startup has to fight: on the one hand, new companies need to be disruptive in order to create a new business model. Sometimes this means pushing the legal boundaries (eg Uber, Tier etc.). On the other hand Start-ups like everyone else need to obey the rules. There is a fine line and start-ups should get legal consultation from the start. This might be by using the resources of an incubator or by installing an advisory board very early on.

In addition to legal liabilities and reputational damage, VCs lose investor confidence and founder's trust. This lack of ethics can sometimes percolate into the startup and ruin the culture. Remember, "EVERYTHING (positive or negative) STARTS AT THE TOP." Once the founder realizes VC ethics are in doubt, he can imitate and fudge financials and cheat employees and customers. This will result in employees quitting the company, ceding customers to the competition. Thus, the company cannot raise a follow-up round at a higher valuation. All these consequences will impact VC's investment.

Legal and ethical standards are non-negotiables for board members and the executive team (everyone really, but especially these leaders whose behavior others will mimic). Nothing ruins a company's standing faster than a failure of legal or ethical nature. These can ruin the brand, reputation, customer confidence, employee loyalty, investor confidence, analyst perceptions and more. No upside exists for legal or ethical lapses. Many believe the are 'too small to be on the radar' or 'unlikely to get caught so the risk is then justified'. But remember, every large company was once small and these lapses never go away.

Board members, including VCs, owe a fiduciary duty to the company and its shareholders. This duty requires them to act in the best interests of the company, rather than in their personal interest or the interests of specific shareholders. Failing to fulfill this duty can result in lawsuits and reputational damage. Start ups need to establish a culture of being law abiding form the beginning. Establishing policies and systems that are followed to the latter ensures that institutional culture is established.

In the Lojas Americanas case, contracts for advertising funds and other incentives were identified as being artificially created to improve financial results, leading to significant and unaudited balances and improperly contracted financings without due approvals, exposing the company to significant legal and financial risks. This highlights the critical importance for board members to be aware of the legal and ethical implications of their actions and decisions, emphasizing the need for transparency and compliance with laws and regulations.

I think this is an extremely important point specially in recent economic times as Covid changed everything and now the current 'recession' has its own challenges. If one fails to learn and grow it will be impossible to navigate these waters and add value to the company as a board member.

Curiosity is, in my opinion, a key element of success. This applies to board members as well. What works and why? What could be better and how? What isn't working and what is driving that? Which emerging trends could be interesting at certain tipping points? Are we talking to enough people with a variety of experiences and perspectives to learn the most possible in the quickest way? These questions are more should be visited often to stay at the forefront adding value as a board member.

Forgetting to learn and grow as a board member means missing out on a golden opportunity. Being part of the board is more than just holding a title; it's a continuous journey of development. The tip? Always keep your curiosity ignited. Learn not just from successes but also from failures. Every meeting, every decision, is a lesson. Don't get comfortable. Challenge yourself to grow and contribute more and more. #ContinuousDevelopment #LearningOnTheBoard

Cross-industry idea exchange and staying abreast of market trends are crucial. Embracing feedback and sharing knowledge can enhance their contribution and leadership within the venture community. This mindset not only enriches their board participation but also amplifies their overall impact in the venture capital ecosystem.

Il est essentiel de se servir de ses propres retour d expérience mais aussi de ses pairs pour continuer d’apprendre et développer ses compétences et connaissances. Le partage est l’un des facteurs clé ?? de succès les plus importants.

VCs have one task -> push the entrepreneur to think bigger. When founders decide to take VC money, they subscribe to accelerated growth. At the board, VCs and founders sync on the status and next steps to achieve this goal.

As an investor and board member, I have learned to be empathetic to the management team as they are the ones on the execution side and face daily challenges most of which board member do not get to know and experience.

A good gauge of whether you are doing a good job as a board member is do the founders come to you for advice before they make important decisions. Be their listening ears when founders come to you for advice or share their grievances. Quite often, they cannot share their challenges with their colleagues or family. Be their friends!

As a BOD, it is important to help the management team set well-defined quarterly and long-term company goals. Ensure management is bought in and that the goals are not easy but definitely achievable. Equally important, the BOD should help management devise incentives that pair with the goals to ensure employees and management are properly rewarded for their success.

Think through the places where you don’t know what the CEO and Execs team don’t know that they don’t know you don’t know. Relevant example for today, a team that has only known growth may not know how to model and cut effectively to survive a setback and not start missing numbers again.