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KP Unpacked
KP Unpacked explores the biggest ideas in AEC, AI, and innovation, unpacking the trends, technology, discussions, and strategies shaping the built environment and beyond.
KP Unpacked
The Silent Killer of Startups: Broken Boards
Founders, if your board meetings feel pointless, this one’s for you. Rethink the people shaping your company’s future.
Private company boards should drive growth, not block it. Yet too often, they become performative, disengaged, or simply wrong for a company’s stage. In this episode of KP Unpacked, KP Reddy and Nick unpack what makes boards work — and why so many founders get them wrong.
They break down the difference between governance and guidance, how private equity’s rigor reshapes accountability, and why boards need to evolve just like product or operations. From “dead board members” to mismatched corporate execs, this episode is a blueprint for building a board that adds real value.
Highlights
1) What Makes a Bad Board
- Unengaged board members: the silent signal of a dying organization
- Corporate mindsets in startup spaces: when governance eclipses problem solving
- Analysts and placeholders: why some seats are signs investors have checked out
2) Building the Right Board
- Functional expertise over resume shine: the power of one domain expert who actually adds value
- Founders as architects of their board: setting expectations, structure, and chemistry
- Evolving governance: how Series A and B boards should look different from pre-seed
3) Dynamics and Chemistry
- Why founder board trust breaks when communication stops between meetings
- The “honeymoon” effect of early boards and how to keep engagement alive
- How to fix board structure without burning relationships
4) The Private Equity Pattern
- Pattern recognition through repetition: why PE backed AEC boards outperform
- Experience as leverage: what seasoned investors see that most founders miss
5) Real Talk on Board Power
- Why many investors lose interest when companies plateau and how founders can counter it
- The hidden tension of “board coups” and replacing founders
- How ego defines leadership longevity from Larry Ellison to Bill Gates
If you’ve ever left a board meeting wondering what the point was, this one’s for you. Learn how to build a board that keeps you accountable and scales with your business.
Join the KPR Co Q1 Event to connect with founders and investors shaping the next generation of AEC growth.
Register for the Owner Training Webinar happening on Nov 20th to go deeper into leadership, governance, and scaling for the real world.
Hey Nick.
SPEAKER_03:Hey KP.
SPEAKER_02:What's up?
SPEAKER_03:I forgot to ask you actually, is that UPS plane anywhere near you? Oh actually, yeah. I mean it's very close to my house. It's um like two miles from where I live. So crazy scene. Like I'm driving home from my office. I live probably two miles from the airport. Um I get a text from my wife and she's like, hey, something's burning near our house. And so like I'm driving home and I see the this cloud of smoke. It looked like I mean it looked like a storm cloud, to be honest. I'm like headed right, you know, right to my house in that direction. And um I'm like, my first instinct is actually to check Twitter or X.
SPEAKER_00:Yeah.
SPEAKER_03:Like if you actually like if you just type in and like search what's going on in a specific city, it's actually like really good. You get like live journalistic takes on what's going on. Um, and so I saw someone mentioned like it's likely a plane that's on fire, like within minutes of it happening. But there was a period of time where you didn't actually like you just saw this cloud of smoke and you didn't actually know what what had happened. Yeah. And but it clip, but it was obviously something significant. And then um, yeah, and then we had we got like a few alerts like shelter in place, like alert text message messages going out. And you know, we've got our our three and a half year old and one and a half year old that are like, what's what's that? Like, what's going on? Um, but yeah, for those who don't know, there was like a massive UPS plane that crashed. Yeah, it was like yeah, about a mile from my house. And um it was it was the the really sad part. So the engine caught fire as it was taking off, and then um it was going to Hawaii. So the fuel it was like 20, 25,000 gallons of fuel. Yeah, and that was what caused the massive explosion. So yeah, really, really sad.
SPEAKER_02:No, it's insane. Um, yeah, it's interesting you brought up like you look on X to see what's going on. I think like minutes after it happened, the the mainstream journalists knew about it, right? They're reporting on it, but they already had experts on because there was so much video footage out there. And they even mentioned they said, you know, if this would have happened 10 years ago, like we'd be waiting to know what happened. But these folks were zooming, you know, the quality of iPhone cameras now, they were able to zoom in. These experts were able to zoom in to this, like, you know, uh, you know, public journalism kind of videos out there, right? And they're able to zoom in and like, no, here's what happened. Like, oh, you can see this, and you can. I was like, Why, you know, it's pretty wild, right? Like within minutes, you had experts watching um all this video taken off of iPhones and stuff, and they knew exactly what had happened.
SPEAKER_03:Yeah, there's the meme, whenever usually it's referred to whenever there's like a wartime event going on, but it's you know, the meme is you're monitoring the situation where you're just refreshing social media. And the reason it's become a meme is because like the the speed at which information comes at you during a you know, during a a very serious event like a war, like for example, like the I remember the Russia the Russia Ukraine or the first day that um where Russia invaded, like it was um, like you're just getting that you're getting a lot faster information out of like live people on the ground on something like X, like you know, it's it's more like human, you know. Um yeah, it's just like live like live live journalism from from everyday people. So uh yeah, it's become a meme, but like that it's it's a meme because like that's where you're getting most uh most on the ground information today. The media is like probably 30 to 30 minutes to an hour behind it. And a lot, and to your point, a lot of the imagery is that the media is reporting on now is directly from that source, like that boots on the ground source, which just like kind of changes the whole yeah, the the reporting and news landscape. Um it's pretty pretty fascinating. But yeah, but like for very obviously, the for me, I was getting my information not from the news, but from like just querying in X Louisville. Um yeah, fascinating.
SPEAKER_02:Not to go down a rabbit hole. So what's the what's mainstream media for then? I mean, I mean, seriously, like you know, we had the elections this week. I'm like, I'm not I wasn't tuning into CNN or I was just like on X, like who won? Or on the internet, who won? Yeah, okay, cool. I'm done. Right. Like I don't I don't need to know more than that versus watching CNN, the commercials, and then just repeating the same thing, right? Like we're here covering the story, and it's like great, like you haven't told me anything new. It's fantastic that you're there.
SPEAKER_03:Like tell me something. I think it's uh you know, they're they're clearly a secondary source, and I think it's for a generation of people like my parents, for instance, they're watch they're watching the news because that's their trusted outlet. Like they don't have that same relationship that we do with I'm trusting and I know how to use. I know I know how to find a credible source when I'm on a social media platform. And their first instinct is not to go to the social media platform, it's like to turn into the local like to tune into the local news. Um, because they haven't found that crusted, that trusted, credible, fast source, where like me and you can quickly get onto Twitter and X and query, you know, whatever's going on, whether it's in Russia, Ukraine, or Ovalville, Kentucky, and and quickly assess and read the the trust layer of like, is this a credible person or not? Is this a credible video or not? And I think that's a that's a new wrinkle like in the modern age where you know videos can be fabricated and information is um you know widely available, like there is a skill like where you can quickly detect whether or not someone's trustworthy or not. And I think like we've we've seen so many reps, yeah, um, that we can figure that out and can trust someone like that has no followers on the internet when they're producing something.
SPEAKER_02:Yeah, it's interesting as we dig into this rabbit hole. Um, so I don't know if you heard about like at uh Disney World, there's been four deaths in the last 30 days. I have not heard that. Yeah. Um two, I think, were suicides. Really? Something like that. But was interesting, all the early reports were just so fake. It was like someone got run over by a monorail, someone fell out of a roller coaster, like it was all like and it was all coming off of X, right? And it was, I think someone had heard that there was a death, but there was no, no, because it's it's Disney World, like it's its own country, yeah, yeah. Everybody's under NDA, yeah, right. So nobody's leaking like what actually happened, and sometimes they don't know, like the person went to the hospital and died. They don't know what the cause of death is or anything, yeah. Yeah, so of course, there was all this speculation on X, including like pictures, like, oh, here's the person getting here's video footage of the person getting run over by the monorail. To your point, though, right? If your parents were on X, they might have been like, Did you hear? Yeah, someone at Disney World got run over by monorail. Oh, it Mickey Mouse murdered some, like you know, yeah, yeah. Because people without any knowledge, I mean, that's the bad part of the internet is if there are no facts. Yeah, people are so I mean, people are so I mean, I I think like Twitter to me is like half the time it's just funny because people are just so creative and so quick witted with memes or now with AI videos. Yeah, you know, here's a video of Mickey Mouse stabbing a you know, whatever, you know. Yeah, yeah. Um, but your parents wouldn't know.
SPEAKER_03:Well, they wouldn't be, they wouldn't be able to tell somebody. And for what it's worth, that's a good counterexample to my point where it's like, yeah, there would be no way for me or you to verify that either. And I think like what you see in those early, those early moments of a of a big situation where you're checking social media, you see a lot of you do see rampant speculation when people when it hasn't been verified. And in that moment, there was no there's no um way to know or trust the outcome of what happened or trust the speculation on what actually happened, but you can trust that something did happen. Right. Right. Like I remember um like when Charlie Kirk got shot, you know, very obviously the video came out. Like I don't, I mean, I'm sure most people listening to this saw the video, super graphic. Like you can use see him get shot. And you know, immediately there's speculation on like whether he's alive or dead, right? And in that moment, you don't know. Right. You who's who's verifying that? Like, we just don't, I mean, you we don't know. You can guess because it was a very violent um event, but um the two the two other events like that really stand out in that respect would be Charlie Kirk and Donald Trump getting shot. Like those are those are moments where on social media, like it was very clear that the world was watching there versus any, you know, any other location. And you know, you're getting like real time like second by second update where you needed to refresh your feed when they're like hunting down the killer and they're trying to figure out what happened and who's alive and who's dead, right? Like, where else do you look? Because the media certainly isn't getting a shot at a shot at that. You're getting it from from people in the audience.
SPEAKER_02:No, at some point someone's gonna start hacking into police body cams, and you're gonna have like literally footage running somebody down. It's not crazy.
SPEAKER_03:So, what do you want to chat about today? We got a riveting, riveting topic.
SPEAKER_02:Is this a hard pivot?
SPEAKER_03:Yeah, hard, hard pivot. Um so the topic is when when board members are out of scope, or uh for for for people who are not familiar with private startup boards, um, basically, like what are the rules of the road when you're forming when you're forming a board, if you're participating on a board, um, if you're in and around the hoop and and investing in something where there is a board, like what's what what's what is the definition of a good board makeup? What's productive, what's not productive? And um we've I mean we've just had a lot of, I think with our recent deal activity, we've had a lot of reps both participating on boards and watching them get formed. Um I even think back to like when we first, you know, when we started the first fund, like our our early involvement in boards and and you know, even our own education on what a startup board in particular should look like and be comprised of, I think is probably very different than what we thought years ago. But yeah, that's the that's the topic.
SPEAKER_02:I think you know what though, Nick, I think we could I think we could expand it to boards in general. You know, I was speaking at a uh this AEC conference in Napa, and one of the um sessions was on board makeup for like an architecture and engineering, like an AEC firm, too. And um, so I think we can talk about that too, because I think it's also fascinating how that's quite honestly being doing being done very poorly. I have not the only boards that are interested, I think are doing being done well in AEC or is when private equity is involved, but private ones are done really poorly.
SPEAKER_03:Why do you think private equity makes boards um improve? Like what do you think the dynamic is there?
SPEAKER_02:I think it's experience, right? They just like for us, right? I mean, if you think about it, we I mean, how many investments have we made? I always say more to 25 now, right? And how many deals we just have so many reps, right? We see so many, we have so many reps. We sit on boards, we're observing on boards. You know, I've been on public boards. I mean, we all we at some point you develop some pattern recognition around what works and what doesn't work. And so I think the private equity people, they're no different than us. They see a lot of stuff, right? Yeah, yeah. Whereas if you're the CEO of a structural engineering firm and you don't really sit on any public boards or anything else, and all you know is your company's board, you you don't know any better.
SPEAKER_03:Let's let's start with um what makes a bad board. What have you seen that contributes to a poorly performing board?
SPEAKER_02:Um much like any uh much like anything, like just like the lack of engagement. Don't show up when they show up, they just hang out. Um I'd prefer uh a highly vocal, over-emotional board member than one that just kind of sits there and doesn't really do much of anything. I and I I think that lack of interest. What do they say about marriages? It's like when you stop fighting, it's the problem. Like if you're fighting, your marriage is probably gonna be okay. It's when you're not fighting and when you're not engaged, right? It's the lack of engagement at all, is probably the beginning of the end of a marriage kind of thing. Yeah, yeah. I think it applies to boards too.
SPEAKER_03:Yeah. There's um, I shared this with you earlier, but there's a there's a a book on this topic that Brad Feld, a pretty famous VC, has written. And I think it's called, it's literally called startup boards, but I think most of the rules to your point apply to any general board structure. And um my big, my big takeaways from the book, I think are that as the as the CEO, the founder, or even you know, if you're participating as a you know, as a common shareholder, so any to any founders and and and C suite execs that are participating on boards, it's a very pro it's a proactive thing that you can control in terms of your board performance. And you should want you should want to spend time and work hard to form the right board. And so less of a, hey, let's do a favor to this person, let's let's um let's just accept this board seat because this investor wants to invest. More about like what is like like start with the question, like what is the right composition of my board? Like, what help do I need? What advice do I want? What skill sets are we missing as a team? Um I think I think like just generally the mindset and the attitude needs to be hey, what what is the what is the best possible composition of the board to support where we are as a company and our specific needs?
SPEAKER_02:No, I think it's that. I mean, I I think where a lot of founders get caught up is there's the the governance perfunctory aspect. You know, we I think we've had this conversation several times lately, like about founders saying, Oh, I don't want my board to be too big. Like, okay, well, why not? Like, why and why not? Yeah, right. Um also the transition from maybe co-founders being on a board to when does one drop back to be the observer? Yes. That's another that's another kind of interesting conversation to have, right? And what I always love is when there's co-founders and each of them call me individually to let me know that the other one should probably drop off the board. You know, um, because you know, because they're doing a round and it's like, oh, we're gonna have to give up a board seat. And they're literally calling me like to tell me that the other person's probably, you know, not the best fit for the board.
SPEAKER_03:Let's do a three-way call.
SPEAKER_02:Yeah, it's like just get on a phone, guys. Let's just get on the phone and figure it out. Like, geez.
SPEAKER_03:Yeah, that does happen. Yeah, I think um I think the you know, the the like to play back my own question to you on what makes a bad board, um, definitely inactive, unengaged people. You know, we see it most when a startup is not performing amazing. They could be performing okay. Doesn't mean they're failing. But, you know, for VCs, the the incentive structure is the course to spend the majority of time with your your breakouts in your in your portfolio. So, like, you know, the um the power law math and venture comes into play here too, where it's like we do have a with 30 companies, we have a limited amount of time to devote, um, whether it's uh you know in board matters or any portfolio support um to non-performing companies that are gonna uh essentially return any any money to us, right? So if it's unclear after a period of time that that is the case, that's where you see VCs and just investors in general start to kind of phase out and not not be as engaged. I think generally speaking, whenever an investment is placed and there's a board role, like there's always some there's a honeymoon phase.
SPEAKER_00:Yeah.
SPEAKER_03:And the, you know, the so the job of the of the founder is like one, I think to build a a think of your board as a team. Um, you have to work to keep the chemistry right on the team. In person board meetings, for instance, really help with that. You can do dinners, you can do, you know, you spend you spend time with people. Face to face, face to face really does matter. I think in a world of Zoom, like it is hard to build a you know, a great board team that has a lot of other duties. Like if we're on 10 other boards and we're on, you know, we're doing our own stuff, like how do we engage and find chemistry with the other members? Like, pretty hard to do if you're meeting once a quarter. Yeah. Oh, I will tell you this.
SPEAKER_02:Um, there's a couple of boards I've dropped off of because they've raised their next round and whatever. And I tell the founders, like, look, I'm still around, right? I'm still an investor, I'm still around, you know, ping me if you need something, right? Uh, which I think that's where the dynamic changes. Um, with as many companies as we have, when I'm on boards, it's not so much that um I feel any different sense of responsibility or anything like that. It's just that once a quarter I'm getting three hours with the founder, they're presenting everything. So it's just top of mind, right? It's just top of mind. That's that's all it is. But you know, I'm on a couple boards right now where um one of the board members is now the fourth from the organization. It's like become this like, oh, somebody needs to be on that board because we wrote a check, and so it's every every quarter, every year, twice a year. It's like you have to explain to someone what the company does, and they have no idea. Um, I have another one where it's when I clearly the other investor doesn't believe this investment's going anywhere. And they have an analyst on the board. Nothing wrong with analysts, but they have an analyst on the board, which I don't have a problem with an analyst being a board observer to learn or whatever, but to be on the board, um, but which what does that tell you, right? It tells you that they've they've kind of already written off the investment and that kind of thing. So um so so I think that that the unengaged, I think the second thing that I've seen is people not understanding that it's a startup. I've seen these corporate folks, especially when there's a strategic investment. There's a board I'm on right now that has a strategic investor of a big company on the board. And man, do they they focus on all the wrong things? Like, let's review the meeting minute. I'm like, you won't you don't need to be on the board meeting to have the board minute. Like, you can read the board minutes before you come to the board meeting, right? It's like this is this is precious time to really get a group together to problem solve whatever problems and challenges the startups having. And you spend 45 minutes on administrative stuff. It's like that's not what's important, you know? Uh or um, I've seen board members that come from big companies that just have an unrealistic understanding of the resources of a startup founder and the company. So they say things I was on a board one time, and the guy's like, Well, what you need to do is hire the guy, salesperson that looks like this, and they'll only cost you like a half a million dollars a year. It'll be great, it's easy. And the founder's like, Are you out of your mind? Like, there's that's not realistic. You know, yeah, I'd love to hire that person, not gonna happen, right? And so all their uh ideation around troubleshooting whatever challenges were going on were just all highly unrealistic. Um, just go, you know, things like just go raise some more money. Okay, cool. Cool, like, yeah, just go raise more money, like just like that, right? You know, so I do think that um that's another second dynamic is just like people that are highly qualified on paper, but are not qualified to be on a startup board.
SPEAKER_03:What are the attributes and signals that you've seen that's that that signal a great startup board?
SPEAKER_02:I think either people have some really deep functional area, right? Like they're really good at marketing, um, they're really good at say like really, really good, understand it, and can you're almost getting a very expensive consultant for for cheap, right? Um as companies grow, it was kind of interesting when my company went public and we kind of reformulated the board. We had someone that had been like the former VP of HR at some company. I'm like, why don't we have this person on here? I mean, it was like a name brand company. I was like, why do we have this person on here? They don't want to be like some startup guy, right? Like, what is this person doing there? That person ended up being the most valuable people person on the board because at that point in my career, I thought of HR as just being like running payroll and benefits, like that's what HR is. But he was so good at understanding like the culture and understanding the people and how to recruit and when to fire and how to deal with HR issues, right? And and mitigate and um just all the things like as a founder, you're not when you're trying to hire at scale, you know, when a founder you're hiring onesie to see, maybe using some recruiters, but you know, we were 1200 people, and I was still trying to run it like it was a 20-person company. And I think I was like shocked by how valuable I thought that was. But you know, it's during that season of time that that's that type of skill set's very valuable. I think for the world that we live in, I think board members have like three three jobs, right? Help for with help with recruitment when needed, so they have to have a network, helping with customers, they have to have a good network, and helping with follow-on investors, they have to have a good network. So um, and I think we can say like have a good network, that doesn't mean having a half a million Twitter followers, but I think people that have good networks that have credible networks, um, tend to there's a reason why they have credible networks, right? It's not because they're a bunch of schmucks. But I but to your point too, I think it's a founder's job is to be very clear on what their expectations and why that person, you know, here's why you're on the board, right? Here's why I want you on the board. Yeah, here's what I'm gonna, you know, have you responsible for. I think there's something that public company boards do well. I don't know how to scale it down to startup boards, but you know, you have committees. You have comp you have a compensation committee, you have an audit of fine, you know, and there is something to spot to be said about having that focus of like, hey, you're really good at the details and finance. You own reviewing the board deck for the finances as a board member, right? I think the the way we kind of do team ball on boards, it's like great, everybody's on the board and everybody's involved with everything, which means there's probably some things that people are missing, you know. Yeah, yeah.
SPEAKER_03:I think one of the things to call out related to um, I guess, yeah, this is the I was gonna say startup boards, but I guess this applies everywhere is you know, there's this dynamic of being of being in the business and then out of the business, right? Whereas like the, you know, if you're the if you're the founding team, like you're living and breathing this thing every day, like you know, you know, you can you can read the board report in your sleep because you know you're reviewing these metrics every single night. Um, for your board to get up to speed, it takes, you know, it does take time, right? Like, like, you know, to review a 40, you know, uh a 40 slide board deck every quarter and really study it and understand actually what is happening in the business. Um, I think there's two ways to do that. One, you give your board ample time and and set expectations for how they can get up to speed. But two, I think just like regular check-ins, you know, like are when I think of of boards where I where that I'm on, where I'm where I'm clear on what's going on, it's because there's like I'm getting calls from founders um and other board members about particular situations that um are happening in real time, not just you know, we're we're going down a checklist during the board meeting and reviewing them, you know, in in a two-hour session once a quarter, right? Um, so there's like this, there's this dynamic of how do you get how do you keep your board engaged, you know, on a on a on a on a bi-weekly or monthly, you know, cadence with really important issues. Um and I think I mean, just from my experience, like the best way to do that is literally just pick up the phone. It's not like it doesn't need to be a our formal thing. Um with some of our companies, I have like you know, regular recurring meetings where we just check in and some, you know, some weeks it's there's nothing to talk about. Other weeks there's a lot to talk about. It could be a board meeting in and of itself, but um, having something on the calendar that we can just commit to like cat, you know, catching up uh has has been something that at least has been effective for me. But I think that that is like a thing that I've noticed that you need to solve for is like how do you get your board your board members um into the business a little bit more often? No, I I think that's a good point.
SPEAKER_02:I mean, I I think for us, you know, especially when we're on the boards, you know, we've gone through, you know, we got pitch, we've gone through diligence, we've spent so much time with folks, it's kind of like we know the business pretty well, right? I I do think there's another thing that um and we we had a call earlier today, and I was just like, you know, look, um, I try to optimize for is the founder spending the time their time on the right things, right? Um, versus like let's review the you know, it's like budget reviews, I think are fascinating. This is when you have like a very corporate person on the board and like, yeah, we need a review and approve the budget. I'm like, you mean that piece of fiction? Yeah, that's not that productive, really, right? It's really not that productive, you know, how they allocate their budget. It's like if they don't allocate their budget in the right way, they're gonna run out of money. Like, there's nothing, you know, the founders um it's kind of built in, right? It's not like uh a big corporate. Um, but I do think really understanding, um, because I do think for founders that are day-to-day doing whatever, you know, just running um for once a quarter, you know, to to meet with the board and the board to really kind of understand like what the founder's been working on and how they've been, you know, spending their time and optimizing their time for for what benefit I think is like because I I've been on board. I'm like, you did what? Like you have three months of cash flow, uh cash, you know, cash left, and you were busy recruiting someone, like what are you doing here, you know? And um and sometimes founders get kind of caught in La La land, right? They're like, no, dude, like you need to be focused on fundraising. Like, what are you talking about? Um, but they just you know, if they're not good at fundraising, maybe they're avoiding it. I'm not sure what they think sometimes, but but yeah, I think I I think there's a benefit of having structure. I've had board members, I've been on boards with some kind of corporate people, and like it's so disrespectful that the founder sent us the board deck two days ahead of time. And I'm like, I don't get disrespected. My view is if you don't get me your board deck early enough, I don't have time to provide any real value. So when you ask me, like, hey, what do you think about this? I'm like, Yeah, fine, whatever. You didn't give me time, right? You need like you're not gonna get the best out of me if you don't give me the time. Right. Um, it's I don't get I don't feel disrespected. Like if yeah, like you you lost your opportunity, right? You're getting three hours with me and a bunch of other people that hopefully kind of been there, done that, know what they're doing, and you've just like pissed it away because you waited till the night before to send out a board deck.
SPEAKER_03:Yeah. One um, I think there's uh, you know, you're talking about like when a company moves to a later phase and there's like a lot of governance activity happening where it's like, hey, we're approving minutes and we're appropriing, you know, the budget, and we're, you know, having a lot of financial conversations. Um, I think there's so I have two, I have two follow-up thoughts there. One, I have seen there there are companies in our portfolio that have not effectively made the transition from being a scrappy pre-seed seed stage startup to a series A or series B startup in terms of organization and and structure. And like, or this, you know, where it's where this is evidence is, you know, or where you see this live is when a company is raising money and they don't have any of their documentation in order, for instance, like you got to get approval on that, you know, on that million dollar safe you raised, you know. um you gotta have you gotta have signatures, you gotta have like your your you know your your company docs in order. And when that stuff is out of order and you're like trying to raise a you know a meaningful step up in terms of uh in in terms of you know cash size and you're trying to raise your your next series of financing and it's like a more sophisticated group of investors, that's a signal in a lot of cases that you're not ready to take that step. And so I do think there is a I so like when it's all when a board is all about governance, huge problem. When basic organization is not being conducted and you're moving into later phases, that's also a problem. And I think there's like so so you know there needs to be um I think just recognition that boards are in evolution and things are changing over time and that you do need to get your house in order as you move you know out of precede and seed. And while yeah you don't want to spend any of your time talking about budget and minutes and you know the boring stuff um your your next series investors do want to see that you have organization. And I mean I'll I'll just tell you like you know there's a few deals we've worked through recently it's kind of night and day with fixed signal it sends when if when a founder is on it everything is everything is perfectly documented. They're not scrambling you know in and and in the diligence cycle and getting back to you five, six days later, you know, with really basic documentation or answers that you would expect them to know. They don't have to go call their counsel and spend money on that like having that stuff in place matters. But to your point if you're only talking about like high level governance and you're not not solving the most critical problems of your you know of your business with your most trusted group of advisors every quarter you are not doing boards right.
SPEAKER_02:Don't don't you think that that fun that applies to every part of the business though like I would I would argue that if you treat board function like any other operations, right? It's like yeah early days maybe you're running on QuickBooks and you're doing your own books you don't have a controller and CFO but then the business evolves and you need a controller and maybe you need something other than QuickBooks. You know what I mean like early pipeline is on a spreadsheet and later on you need a CRM and you need a process and methodology. So maybe what you're kind of even saying is that how a board operates and board functions and governance needs to evolve just like the rest of the business evolves. It's like it's like another functional group in the business that needs to be taken just as seriously as you know hey we can't you know run our entire sales pipeline off of Google Sheets. We need some you know we need more process to it or accounting or whatnot. Absolutely yeah I think that's 100% true maybe it's that functional area that founders don't really spend enough time really you know I've been um I've been going down a Larry Ellison rabbit hole are you are you a fan? I'm a huge fan of Larry Ellison you know why I'm a huge fan of Larry Ellison is I love competition. You know how I am what I think you just you just found out the other day that one of our former colleagues uh Anastasia used to call me petty ready yeah I found that very funny I did not know that yeah because I'm just a such a competitor like I just I hate I just hate losing I hate like I just all of it right just tears me up right and um but Larry Ellison I know is from back in the day when it was him you know Larry Ellison versus Bill Gates. Yeah yeah yeah Larry Ellison was like I've studied I've I've studied this a little bit yeah like samurai bro like studying martial arts and yeah like his office was a dojo like it was just very much that and then he had like super nerd Bill Gates right yeah who by the way like he characterizes as an absolute killer like yeah yeah like he you know there's a there's a biography on Ellison that talks about his interactions with Bill Gates and he came back from a I think it was like an hour long phone call with him when they when they were more on consistent speaking terms and maybe were more uh partners early than they were adversaries that flip that switch flipped later but um he had like an hour long conversation with with Bill Gates and Bill Gates um he he he came out of it and said he has zero sense of humor like the most like impossible like impossible to interact with him and and like as a as a person who values like lighthearted humor Ellison's like I can't interact with him.
SPEAKER_03:But the other thing is his ego is so small they talked about a really specific issue that Larry Ellison got heated about related to micro like a Microsoft integration or something. And he's like hey Larry hey Bill I think here's how you fix the problem like you're not you're not thinking about it right. So Bill Bill hung up and said all right let me think about it. He called him back five hours later and he said you know what Larry I think you're right. I thought and you know I thought about it like here's how I would architect the solution and he and Bill Gates played it out like four to five chess moves further than than Larry Ellison had expected. And he's like wait Bill did you just think about this problem all day like did you just go in a hole and think about this problem and he was like yeah it's it was an important problem. And in that moment he realized that Bill's ability to drop his ego and not win the argument but to win the long term game was better than any CEO that he had ever interacted with. Wow and like that attribute is like when you look at Microsoft what is Microsoft great at they're great at execution they never invent they never innovate they're always the fastest to copy a great feature and that attribute is is what Bill Gates's biggest strength is which is like he doesn't he know he's not going to invent it. He's not the most creative he's not the most original but he's like a killer engineer and he's a killer operator. And if he see and he's if he recognizes a feature is going to be great he can drop his ego and just say like hey let's just go build it.
SPEAKER_02:Yeah. That's wow. I'm a big Larry Ellison fan.
SPEAKER_03:Yeah so anyway the the rabbit hole is going down so Ellison um he um I mean yeah I mean there's like a lot to be said about uh you know about his his strategy but the the other thing he used that feud for was publicity right like the dojo and the office makeup um like the the press was loving it they would give Oracle so much coverage and they were the underdog here yeah and so he like he rode that as far as he could especially in tech right like if you think about it at that time these weren't person it's not like now like now you have all this like cult of personality stuff that goes on in tech. That's just a bunch of nerds right we're all the people that no one wanted to talk to in many ways right like what are they talking about you know um so no it did it did create good uh fodder so to speak yeah I think um another another board topic that I think is is relevant to hit on um I think there's like a really basic rule like if you're a if you're a founder or you're a you know a a chairman of the board or CEO of a company that's running a board I think the um like what's your level of excitement interacting and going to board meetings like that's a like to me that's a really basic test of if you have the right chemistry in team and if people are actively engaged in the right way. And if you don't like what why right?
SPEAKER_02:So here's my thing right for most of our the boards I'm on by the time I always tell my founders this if I get to the board meeting and learn something new like shame on you right because I'm on I mean I'm probably a hundred text messages a day I mean it's there's always you know and that's what I want right it's not like I don't want my I want my founders I want them to learn something on their own maybe the hard way but generally I don't want them to it's like hey we're trying to negotiate this contract like why didn't you text me like just and so I think because I am so open and accessible I feel like shame on them if I show up to a board meeting and I don't already know what's going on right so the board meetings I generally despise have more to do with the other board members. I feel like they're wasting my time I don't learn anything from them I don't they don't add value there's one board member um it's just like every board like I already know what's going on right I already know what's going on but I know what I can say to get them riled up and then I'll say something get them riled up and then go off camera because then it's like I'm being entertained. But outside of that it's just like most of them it's it has everything to do with other board members very little to do with the founder. And I think what drives me insane besides like not being entertained so to speak is that they show up and they ask them questions. They don't add any value um there's one board I'm on where the board observer is a very um I'm not even sure why he's there like he's not an investor but uh from a big venture firm and he's like so smart and I just learned so much from him every time we have a board meeting I look forward to it right so I think there's there's very it's very rare that like whether I'm excited about getting going to a board meeting has anything to do with the founder or the business it has to do with the other board members.
SPEAKER_03:How do you how do you um as someone who cares about a company is on the board is loyal to the the company you're serving how do you affect a change or you know or talk to the founder about fixing fixing the board structure and maybe that that member who's not actually adding any value can't you can you it it's it's it's hard right I mean what I what I you can only coach right you're not in the game you're a coach um I'll kind of there's there's two things I'll say is like hey like where you're at in the company you might want to think about a board member that can offer more support around these areas right fundraising or whatever whatever's going on in the business.
SPEAKER_02:So I try to make it about that less about that person. Hey that person isn't any good I try to make it more like hey I think you might have outgrown that person or what you need now is this type of person. So I try to usually position it that way um sometimes I've had to just say like hey this person is just you know borderline incompetent you need to do something about it. The other thing I do is really to try to prepare them for their next round like look on the next round here's what the board needs to look like you know and I'll put myself in the bucket whether I should be involved or not in the next after the next round of funding. So so I usually try to position things that way a little bit but I think there's also an interesting dynamic uh I have a we have a situation with one company that's raising a round and they've asked me to like step off the board because the new investor wants a board seat blah blah blah I don't you know I don't I'm not I have no ego about being on the board and I said like just so you know this new investor that's coming in um there's a really good chance they're gonna fire you. And he was like really I'm like yeah like I I I know I I know the type I know the type right that they're like hey you didn't you didn't execute uh we're we're gonna fire you and and I'm gonna be the new CEO because I've seen this several I've had it so happen several times you and I are never vying to be CEO of any of our company you know what I mean we're not we're not on the board nuking the founder because we want the job like that that that's happened never at Shadow Ventures it's never happened right but I have seen it happen a lot and and I you know you kind of know the personalities you know you know like the type of things they're asking for and all that and he was like really and I'm like yeah he's like how do you feel about that I'm like honestly if he can do a better job than you I'm an investor I like I don't know that you know I don't know that I have a strong opinion but if this person you know does a coup d'etat on you and gets you fired and can run the business better then I like I don't know that I have to have an opinion right it's at that point. And he was just like really I'm like what the fuck you're saying like that's the reality like maybe and so I think there is an interesting tension between hey you're the CEO and yeah you might have some control stuff and all to to keep your job but a board that's not challenging you to do better and like earn your job every quarter I think is also you know is also problematic. I mean I think you have to be supportive and you know and you know we're usually small investors right we're not you know we don't own 50% of the company or anything but I do think some founders get very um like would you rather have someone smart that's gonna be questioning your abilities or would you rather have someone dumb that thinks everything you do is amazing. Yeah I mean I think the goal is to get better over time right yeah I had a board member once who was a McKinsey partner oh my god what a jerk they just beat the crap out of me at every every which way right we're raising around and he's like it's taking longer he's like you know why it's taking longer because you're not putting a deadline on people that's why it's not that's why it's taking longer if you don't put a deadline on people they won't commit and I'm like well I think if I put a deadline on they're just all gonna say no right that's always the fear yeah right but man like he be like it was just brutal like I just I still don't like him.
SPEAKER_03:But he made you better but he made me better I still don't like him he made me better though yeah I mean it's like the it's like the you know the coach the coach or the manager the CEO that is relentless sometimes an asshole but pushes you every single day and it's really you know you're depend you whether the relationship survives or not depends on your ability to deconstruct and you know re remake yourself when you get really harsh critical feedback, right? Um I think it's like yeah the I think it's like fairly obvious that you want someone who's gonna push you and make you better and you don't want someone just like you know being being a yes man every single in every single meeting. I think you want to have have people who are critical and can can think objectively um I don't think you want someone who's just like generally adversarial. But I think it's helpful to be pushed and it's helpful to have to be heavily cr critiqued and and basically shown a mirror every single quarter. I think that that is a helpful thing especially for founders who don't get that very often from their team.
SPEAKER_02:Yeah I agree with you. I need to run but I think that this is a good topic I think it's also a great topic for people because I think we're we started publishing this on Substack all of a sudden I'm a Substack fan. You're obsessed I'm all about Substack lately. But I think this would also be a good thing if uh people want to put comments in Substack or wherever they're watching this I'm sure there's comments we usually have comments on it could be a great one to do maybe in a couple months again after people give us some feedback. I because I I don't think it's an everyday thing. You know it's just like there's like wartime peacetime CEOs. I think there's wartime peacetime boards. Yeah and I think I think it's kind of this should probably be a topic we talk about regularly than just like once and done.
SPEAKER_03:Should have a board meeting every quarter on the topic.
SPEAKER_02:Yeah there we go we'll just you know what we'll do is we'll just do like anonymous readbacks of all our board meetings it's it's also pretty I always I also recognize that most of our founders listen to this I don't know if you know this but because they'll they'll ping me and be like were you talking about me? Yeah of course of course I'm like yeah I was get your shit together all right man see ya until next time see ya