So, how many boards are you on?
Catching up on my reading I found a thoughtful post written by Brad Feld with advice to a friend on managing time for board commitments. Brad's advice is from a VC's perspective but it should raise a question from the entrepreneur for Brad's other blog at AskTheVC:
"How can I determine the amount of time that a VC will spend with me and my company after the investment is made?"
This is an important question. A good VC investor should bring resources to the investment beyond money such as brainstorming business strategy, working through issues as well as the typical assistance with hiring and introductions. This kind of resource comes from a VC that has had a long operating career before becoming a professional investor and so knows what it's like to be on your side of the table.
This kind of resource is especially important for a very early stage company regardless of the experience level of the CEO (in fact, I've found that the more experienced CEOs actively seek out VC investors with these capabilities) and is critical for a less experienced CEO/management team. Brad calls this level of involvement "Lead" – it's a good description and like Brad, I'm usually in this category.
The right "Lead" investor can be a major factor to the level of success of the company so it pays to get to the bottom of how much time the VC will spend with you and your company. Here are two steps to getting an answer:
- Determine how many boards the VC is on and the stage of development of each company.
- Ask the CEOs of these companies how easy it is to access their VC investor and how much time they spend with the company.
Here's my perspective on these issues…
In a seed or very early stage company expect the VC will spend a lot of time with you – one to two days a week isn't uncommon and so places a premium on close proximity of the company and the VC's office. The time required goes down as the company grows and the business/management team matures – so by the time the company has achieved repeatable revenue growth, the time commitment might be down to a day a month.
The number of board commitments and stage of company are inexorably tied together – it's tough sledding to engage with more than a couple of very early stage companies at a time. One of the ways I manage this is to limit the number of investments I make each year – two or maybe three at the most. A year gives enough time for most companies to mature far enough that they need less of my time.
My personal board load where I'm the "Lead" is about eight to ten with the requirement that the companies are well distributed by stage. I found this number through experience to be a good match between typical time requirements while leaving enough capacity to deal with the unexpected.
Don't expect a VC who has much more of board load than this to be anything other than a passive investor – one of my friend's calls such folks "Drive-by Directors" – they show up for a board meeting, ask a few questions and that's about it.
The next time you are out to raise money remember that diligence is a two way street – start yours' by asking "So, how many boards are you on?"