Building a Great Startup Board: Pt 1

Key ideas

Hoffman argues a startup board should oversee rather than run the company, explains how members harm or help, and why its role shifts at each stage of scale.

1. 1

   Boards oversee; they do not manage

   Hoffman writes that a board's job is oversight of management, especially the CEO, plus review of key decisions such as an office lease that could exceed the cash in the bank. He says members put in one to two hours a week against the team's 80 to 100, so a board is more likely to break a company than to make it. His image is a passenger-seat partner who helps navigate but does not drive.

2. 2

   Replacing an early-stage CEO rarely makes sense

   Hoffman argues that at seed or Series A the investment is a bet on the founders, and a VC who wants to fire the CEO should really be asking whether to sell or shut down, since a hired gun rarely has a founder's belief. Later in scale he says the calculus changes: a board's duty is to the company, so a CEO change may be needed. He also cautions that hiring a CEO has a poor record even when done carefully.

3. 3

   Disagree by questioning, not by asserting

   Hoffman recounts SocialNet board members ordering television advertising, and a LinkedIn board member insisting advertising would be the business model, which cost him time defending a strategy he says was right. He says the fault is vehement disagreement without facts, often driven by ego; a good member asks about your assumptions and data. He warns too against the opposite type, the passive yes-person who never challenges the CEO.

4. 4

   Match board members to the stage

   Hoffman uses the Blitzscaling stages, from Family to Nation, to argue that what a board contributes changes as a company grows, from help choosing concentrated bets early to downside risk management at City stage. He says a member who does an amazing job for three years and rotates off beats one who does an okay job for ten. He suggests tours of three to ten years, with a few exceptions at the long end.

5. 5

   Independents should make the board work

   Hoffman says he learned that one of the most valuable jobs for an independent director is making sure the board runs well, rather than leaving that to the chair. He notes management and investor interests diverge on matters such as equity grants. He recounts stopping an investor who asked a CEO for a valuation-comparables report, telling him afterward that his own firm's associates or analysts should prepare it if it truly helped the company.

In Reid’s words

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