Sample Board Package
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Transcript of Sample Board Package
Startup BoardsPreparing your board package
Why we created this frame-workTo help founders / CEOs
• Understand what information should be covered in a board-meeting• Think objectively on how investor board-members assesses your
startup’s progress• Balance the flow of information and stimulate a honest discussion• Understand how decisions are made
Mahendra RamsinghaniMahendra is the author of “The Business of Venture Capital: Insights from Leading Practitioners on the Art of Raising a Fund, Deal Structuring, Value Creation, and Exit Strategies (Wiley Finance).
By:
Startup Boards Book Overview
An essential guide to understanding the dynamics of a startup's board of directors Authors:
• Brad Feld, Foundry Group• Mahendra R., First Step Fund
Released in Q4 2013.
Addresses:• The importance of having the right
board members on your team and • How to communicate and engage with
the board. • How the board can support you, and
hold you accountable.
Startup BoardsEssence of a good board meeting
• Information: CEO provides update on business progress• Two-way discussion: CEO and board members are able to address
challenges in an open, honest manner• Decisions: Board members make decisions effectively, in the best
interests of the company• Time: Meetings are on-time and succinct. No “death by meeting” • Tone: Congenial, yet intellectually honest.
Startup BoardsBefore your first board meeting
• Agenda: Develop the agenda with assistance of your lead board member. The meeting could be a general update, or requires decisions / approvals
• Attendance: Are all the board members in attendance? Do you have a quorum?
• Board Package: Does your board package offer enough level of detail? Is this sent ahead of time so that board-members are prepared?
• Takeaways: What is one thing you want to get out of this meeting? Did you ask for help?
Sample Board PackageFirst Board MeetingDateVenueConference Call Line:Time: 10:00 am to 12:00 noon
Attendees• Board Members• Name (Title, VC Fund) In Person• Name (Title, Organization) In Person
• Observers• Name (Title) Via Conf. Call
• Management• Name (Title) In Person
• General Counsel• Name (Law Firm) In Person
Agenda• Welcome 10:00 am• Business Goals 10:10 am• Discussion: Performance Metrics
• Board Discussion 11:10 am• Alignment of goals• Checks and Balances
• Other business 11:40 am• Closed Session 11:45 am• Feedback to CEO
Welcome• Board introductions• Lead Director welcomes / opens the discussion• Each member introduces themselves and touch upon:
• Class of shareholders represented {Preferred / Common/ Observer}• Describe their reasons for investing in the company• Potential value they can bring to the company
Business• Start with a brief refresher / overview of the business.
• You should describe the stage of development of product, identify key team members, market trends and competitive trends
• State facts with minimal usage of flamboyant adjectives. You are no longer selling – treat this as a working session of your key team members.
• Pause often – ask “Any questions ? If not, let me move into the next part of our discussion.”
• Lead the discussion towards the top 3 goals for the next 12 months
Business: Your goals and metrics• Your goals should be measurable, simply stated and achievable• Have no more than 3 / 5 goals• Establish clear metrics for each goal.
• Baseline and Stretch metrics should be established• Break these down by quarter or month. In a startup, a lot can change in
a matter of days.• You should
• have the resources (cash and people)• and be able to impact each goal and its metric
• Know that the CEO’s performance will be measured against these metrics
Business: Your goals and metrics• The Lead Director and the CEO should lead any discussion to a
satisfactory conclusion• All members have been heard / had their inputs• If necessary, align everyone via “Just to make sure we have everyone’s
inputs and agreement on the metrics….”• Stay on schedule – if discussions stretch out, politely remind everyone,
“In interest of time, we should lead to a conclusion, or have a separate meeting to address some of these items.”
Business: Resources• You need sufficient resources to meet your goals.
• Resources are of three kinds: Cash, People and Time• Cash and People are inversely proportional to Time. Faster to market is only
possible when you have adequate cash and people. • Factor in all three resources conservatively – it always takes 2X long and 2X
the amount of cash• When new product features are being added, consider costs for product
development as well as launch timing.• If your launch dates are pulled ahead, you will need additional people for
development, QA, testing and design pivots• If your adoption targets are raised, you will need more cash for customer
acquisition
• Your board should factor in resources required to meet your goals • Entrepreneurs on your board have more experience and will be
realistic. Watch for opportunistic behavior.
Sales and Marketing• Present your sales pipeline (See format in Appendix)• Be Realistic / Conservative • Factor in delays and unforeseen challenges. Stuff happens!• Missteps / delays in revenues can lead to cash challenges• Cash challenges can lead to CEO challenges
• Marketing• A measurable marketing plan that demonstrates outcomes
• supports sales / lead generation • Brand building / awareness creation
• Budget includes expenses for AdWords, PR Firm, Conferences / Trade Shows, Blogs etc.
• Outcomes and variances
Your Budget and Financials• Ensure your budget planning factors in your key goals / milestones• In first meeting, present your 12 month budget• Provide details by month (See Sample Annual Budget in Appendix)• Seek inputs / discussion• Board should approve annual budget
• In subsequent meetings, provide highlights • Cash at hand will last for XX months
• Calculate how long the cash will last before you need to raise additional round of financing• For example, if your burn rate is $50,000 per month and you have $500,000 at hand, you
will run out of cash in month #10. Thus, you need to start planning for the next raise at least 4/6 months ahead of time
• Describe any unexpected expenditures / variations from budget
• Include detailed financials in Appendix• Income Statement, Balance Sheet, Cash Flow Statements
Top Challenges• Be prepared to discuss your startups top 2/3 challenges• If you don’t have any challenges, you are not thinking hard
enough• Your board may not necessarily know all your challenges – make
no assumptions• State these challenges without being defensive – every business
has challenges. Your board knows that !• Come prepared with some possible solutions to these challenges.
The board cannot do ALL the work but can guide • Stimulate a healthy debate, welcome opposing views
• Ask for help – your board members WANT to help• Finding experts to help explore solutions• Accessing some potential customers• Attracting key team members
Board Action Items• Formal Portion• Chairman moves a motion• All in favor say “Aye” – any discussion?• Motion “seconded by” and “approved”
• Board approval may be needed for:• Your 12 month budget and operating plan / metrics• Option Pool / 409A Procedures• Appointment of Independent Director
• Minutes are recorded by Counsel / Secretary & approved in next meeting
Board AlignmentMake sure all your board members are aligned on• Business• Agreement on 12 month goals • Agreement on Key metrics• Mitigating top 3 challenges
• Board Related Matters• D & O Coverage• Decision making process: Options grant / 409A Valuations
• Board Meetings / Communication• Lead Director role• Frequency of meetings• Format of communication• Annual CEO performance review• Annual board performance review
Close the meeting• Thank everyone• Remind them of next meeting date / time / venue• List your follow up action items• De-compress, chillax and take some time to reflect of key discussions
and your board dynamics• Productive discussions and clear outcomes• Board members willing to roll up their sleeves• Healthy participation / 2 way communication• Team spirit/ collegial environment
Post-meeting actions• Talk to the lead director and ask for feedback• Quality of meeting• Quality of information / board package• Areas of improvement
• After each meeting, ask yourself if:• Board members believe in the CEO’s leadership• Are energized about the future potential of the company• Are convinced they made a good investment decision
Conduct a post-mortem• A good board meeting• Covered relevant information / progress updates• Stimulated healthy discussion on key challenges• Board members were prepared, engaged and willing to help
• Non-defensive, open discussions• Honest – No pandering or “false emergencies”• Team spirit/ collegial environment
• Adhered to time
Appendix: Sales PipelineCompany Current Status PO Value Target
Closing Date
Probability
Company A Approved for 200 users. In legal / contractual department.
$250,000 March 30, 2014
90%
Company B In financial negotiations. Strong competitive overtures
$1,500,000 March 30, 2014
50%
Company C Completed demo. Need to develop specific technical module for users
$500,000 June 30, 2014
50%
Company D Initiated contact. Awaiting demo date confirmation
$50,000 Oct 30, 2014
20%
Appendix: 12 month budget
Revenue Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Total
Ad Revenues $0 $0 $0 $0 $0 $2,491 $4,507 $12,096 $16,006 $21,870 $30,348 $27,297 $114,615
Subscriptions $25 $75 $150 $300 $600 $1,200 $2,400 $4,800 $7,200 $10,800 $16,200 $22,680 $66,430
Sponsorships $0 $0 $2,700 $2,510 $1,450 $3,172 $3,945 $4,826 $7,411 $16,750 $22,480 $26,165 $91,409
TOTAL $25 $75 $2,850 $2,810 $2,050 $6,863 $10,853 $21,722 $30,616 $49,420 $69,028 $76,142 $272,454
Expenses
Development $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
IT $2,858 $2,763 $2,763 $2,953 $2,953 $3,511 $4,050 $4,708 $5,671 $7,081 $7,989 $8,818 $56,114
Marketing $2,000 $2,000 $2,000 $2,000 $2,000 $7,950 $13,985 $15,072 $15,962 $11,892 $13,853 $14,564 $103,278
SG&A $21,066 $21,232 $21,407 $21,591 $21,783 $25,516 $25,728 $25,950 $26,183 $26,427 $30,413 $30,682 $297,977
Rent $2,050 $1,854 $1,863 $2,288 $2,299 $2,520 $2,954 $2,968 $7,021 $7,038 $7,885 $8,320 $49,060
Salaries $27,000 $27,000 $27,000 $27,000 $27,000 $27,000 $27,000 $27,000 $27,000 $27,000 $27,000 $27,000 $324,000
Support $0 $0 $0 $0 $0 $0 $4,840 $4,840 $9,680 $4,840 $4,840 $5,950 $34,990
TOTAL $57,674 $61,215 $61,672 $62,457 $62,567 $78,233 $90,420 $92,587 $104,477 $98,321 $106,517 $110,506 $986,646
Series A Investment $2,500,000
Total Spend to Cash Flow Positive $806,085
Cash on Hand $298,918 $241,269 $180,129 $121,307 $2,561,660 $2,501,142 $2,429,773 $2,350,206 $2,279,340 $2,205,479 $2,156,578 $2,119,090Months of cash at
hand 5 4 3 2 42 35 31 33 31 45 58 62