This post is for entrepreneurs as part of a series of observations and tips on building an effective board. This is Part 3.
You should expect the same from an investor whether or not he is a member of your board. In my experience, investor board members tend to fall somewhere on a scale ranging from those that think you work for them (avoid this type) and those who understand that the best results occur when they work in partnership with you (find more of these). A good director will make you a better CEO by knowing how and when to challenge you, but avoid undermining you. He will publicly support your decisions, even if he doesn’t fully agree with the choices you make.
Your company will experience tough times and you will want (and deserve) investors that will dig in, work hard, support you when things aren’t going well, and not run at the first sight of blood.
Do your homework before choosing a venture fund by talking to as many people as you can to learn as much as you can about the person(s) with whom you will share the ups and downs of building your company.
Here are a few of the personalities to avoid:
This is the person who mistakenly believes that by taking his fund’s money, you work for him. Board meetings break apart into power struggles, often to the point of the CEO seeking ways to work around the dictator.
The drive-by director
This person consistently misses meetings, sends an associate in his place, or worse, uses the meeting as an update session to educate himself about the company or the industry. Valuable time is wasted on justifying past actions or conveying information your investor should already know.
The stage hog
These are the talkers and the agenda usurpers who view the board meeting as their personal stage. They stifle productive conversation by consuming valuable airtime in an effort to prove their knowledge and worth.
Typically designated by the founder or CEO, this person tends to be passive and unwilling to disagree with you, which would risk his relationship or his seat on the board. A board full of these types is a ticket on a high-speed train to mediocrity.
This person would rather have your job than be a director. He thinks he can run the company better than you can. At the very least, he is an eye-rolling distraction and someone to weed out at the earliest opportunity.
This is the academic, a person who lacks real-world company-building experience and approaches the boardroom as a living laboratory. Though he’s often charming and articulate, it’s best to let him experiment with someone else’s company.
The often-wrong (but never-in-doubt) investor
Typically, this is an investor director who is quick to pull the trigger on advice by drawing from the playbook he used in previous companies instead of critically thinking about your company. Experience is a great teacher, but it’s dangerous if used indiscriminately.
Over the years we’ve had the pleasure of working with some great investor directors and observed how a bad director can single-handedly poison the culture and derail a company. The very best are great listeners and have an intuitive understanding of how to adjust their style to the needs of the CEO. One CEO may benefit from a softer touch and Socratic style of leadership, whereas another may prefer a no-nonsense and right-to-the point relationship.
The next area of consideration is how to run a great board meeting, which is the topic of the following post in this series. Stay tuned!