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Money is fungible, experience is not

Fred Wilson of Union Square Ventures posted an interesting article to his blog on how to build an effective board of directors for a company.  There's some great points in Fred's article that mirror some of the best practices I've seen in the boards of which I've been a member over the years.  It's well worth a read.

While Fred lists a number of great points that deal with the composition of the board and how it works, I'd like to add a point 0 to this list.

  • Pick your investors based on what they bring to the board beyond money.

If you have a good business plan for your company with a founding team that has good experience, targeting a market of size, you have a good prospect of getting funded. Before you start fund raising you should think about what you want from your investors besides money.

Earlier this year, the National Venture Capital Association (NVCA) published a survey they had done asking venture backed CEO's a set of questions about their VC board members.  One of the more interesting questions was the CEO's view of what the VC board member brought to the table contrasted with what their ideal contribution would be.

The results were illuminating to say the least!  The CEO's view of their VC board members look like this:

 

Simply stated, most CEO's look at their VC board members as a source of financing - a cash register so to speak.

The survey also asked the CEO's what their ideal mix of expertise would be for their VC board members:

The interesting shift is that the CEO's want folks on their board who have operating expertise that can help them build their company and act as a sounding board.  To be able to contribute this kind of expertise you need to look for investors who have deep operating experience and know what it's like to be in your shoes.

All money (at least in the U.S.) is green - pay careful attention to what comes with the money and how its going to help you build out your company.

That's really the first thing to consider when looking to build your board of directors.

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STU PHILLIPS
MENLO PARK, CALIFORNIA

Intense Brit, lived in Silicon Valley since 1984. Avid pilot, like digital photography, ham radio and a bunch of other stuff. Official Geek.

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