What are the key skills and competencies for VCs as board members?

One of the most challenging issues being a VC board member, is that counterintuitively, the founder doesn't come to you with problems first. The board is not just a place to resolve issues, it's a governance mechanism, that means the founder is incentivized to keep you somewhat at arm's length, so they'll go to close mentors before they really ask their board. Heard this great story from a legendary VC that he doesn't like to take board seats himself, so the founder will feel comfortable texting him if something goes wrong.

This is not unique to the VC world. It is true for every board member on any company or non-profit or government agency, regardless of how it is financed. It is also true for the C-suite. The higher you are in the organization, the less likely people are to tell you proactively what is really going on. The answer isn’t to not sit on a board. The answer is to do a better job at being a board member. In particular, you have to get the data you need to know what is going on. The younger and smaller the organization, the less likely they are to know how to do this. That’s why quality board members are gold. And perhaps rarer than gold.

The biggest skills and competencies for any VC nominated Board members will be to stay "quite" on business and how-to run the business operationally, whom to hire and where to hire😊

Communications between the board and founders is where an advisor’s role becomes invaluable when it comes to strategic discussions or uncomfortable conversations. As an impartial entity with a fiduciary duty to the enterprise, an advisor serves as a critical bridge. They offer a safe space for founders to express concerns, brainstorm solutions, and strategize without the formalities and perceived barriers of a board setting. Advisors thus play a pivotal role in ensuring that both the VC’s insights and the founder’s vision are aligned, fostering a healthy, productive ecosystem for the venture to thrive.

To be able to separate what you believe, what you know, what you can prove and understand the implications of each to get to actionable intelligence. Tempered with just because you can does not always mean you should. Positioning the company to be the leader or the alternative and let others be price. They are already in margin squeeze. Set the company as a strategic partner with your customers not a vendor. Understand and solve your customer’s customers issues. Listen and hear what is and is not said. Many times what is not said is critical points to be considered. Oblique questions often provide more in sight than direct questions. Know that because someone asks you a question does not necessarily require you to answer. You can say no.

It’s important to recognise that as a VC board member you take on fiduciary responsibilities for the company alongside your existing fiduciary responsibilities to your LPs/ investors i.e. it’s imperative to strike a balance to support the founders and management team grow the business and make decisions for company’s long term growth and creating value for shareholders vs just expediting exits. So recognising that building trust with the management team and helping them create medium to long term value for shareholders would set the company up for good outcomes to those who sit on the cap table can set you apart as a long term capital partner for the company.

It is a two way street.. Some founders have the attitudes towards their investors as "I got your check, now sit back and shut up" .. These kind of founders are missing big time on the contribution VCs could have as mentors and ecosystem relationships facilitators ... The VCs on the board need to be sensitive to the principal of "nose in - fingers out", thus avoiding micro-managing their founders. If you think that the founders need micro-managing, don't invest, or, hire a more suitable & experienced CEO. An unexerienced founder should accept it as a gift.

Fostering trust with founders and management is essential for VCs, requiring active listening for deep understanding, empathy for genuine connection, clear communication for setting expectations and feedback, and transparency and honesty for open information sharing. Building rapport based on mutual respect is key, enabling effective support and guiding companies towards collaborative success.

Case study : Electrical and Systems Services Co (ESSCO) A joint venture company with SINGER in Bangladesh since 1990. A profitable business and manufacturing company till 2008 ! A Consortium Company (P) Energy Systems Enterprise (ESE) for Clean Energy and Clean Tech Products and Services to Go Green 🌿🌿✅

While some founders may be excellent software developers or engineers, they can be inept in developing strategies for growth or be incapable of crafting a vision for the organisation. entrepreneurs are great engineers, but often not yet great leaders. A VC board member can therefore be in a position to guide such founders on how to build a comprehensive business strategy, create a strong vision and lead the company to scale.

The whole reason that you are a board member - not limited to VC - is that you can help founders outside of their normal range of influence. You probably have the connections they need but don't have, or have the experience they need but don't have. They are looking to you to help them bridge those gaps. Being a board member is no longer an honorary position (if it ever was). It's about helping the company and its founders move forward in a way they are not (yet) ready to accomplish themselves. So it's important to ask probing questions, but it's equally important to ask how you can help (without becoming operational!).

In my experience Strategic thinkers on the board help startups develop long-term plans, capitalize on market opportunities, and overcome obstacles. They provide a perspective on market entry, business model pivots, and innovation to drive growth.

A derisking approach may be needed, seeking to take the start-up to a safe financial operating area. The ability to develop market and technology partnerships may also come from a VC directors added value.

As a VC investor you gain insights and build a network that gives you access to sector specific trends, competitive landscape and in some cases might be well placed to help founders articulate their business in financial terms better or more realistically. You get to play a role where company fits your investment thesis ie you see merit in the founders vision but are independent to have a realistic perspective, avoid confirmation bias, challenge assumptions, explore untapped market segments to help founders strengthen their value proposition.

Board members knowledgeable in corporate governance ensures that the board operates effectively, adheres to regulations, and upholds ethical standards. They provide a perspective on legal compliance, board composition, and oversight responsibilities.

It will be beneficial if the VC board member has experience with board governance acquired through prior board roles. The VC should also appreciate the difference between the role of the board and that of the management of the company so he/she does not interfere in the day to day running of the organisation.

This underscores a VC board member’s dual fiduciary responsibilities, those that do not just limit to their LPs but extent to the broader stakeholder spectrum of the company. I have had a chance to leverage my prior governance experience to help start ups and NFPs build sustainable, balanced and effective practices for the company that do not inundate the management but put functional processes in place that help the company operate optimally which in turn can lead to higher employee engagement, better customer confidence and translate to better outcomes for investors.

VC board members can help balance company’s visions with its actual needs, sometimes it may mean encouraging a founder to find and help them attract talent or skill that is missing on the management team and can propel company’s growth prospects while at others it might mean helping them navigate tough personnel decisions. Most VCs also prefer to set defined terms around employee option pools, vesting schedules etc. as it not only directly impacts their dilution but also helps with retaining talent. Lastly, given how diverse most VC portfolios are board members can help set a tone for the management that fosters collaboration, culture of respect and accountability to meet milestones in between capital raises or in preparation of an exit.

In the context of startups, the VC board member role to foster talent development and growth and help to anticipate and plan for crucial future expansion. You work closely with the management team to anticipate future talent needs, identify potential skills gaps, and develop strategies for scaling the team effectively. This may involve recruiting new talent, upskilling or even demote existing employees, and fostering a culture of learning and development to support the company's growth trajectory.

One of the key benefits of venture capital partner and boardMember should be the design of the ultimate playbook around exit and capital management. In many instances, founders come with little to no experience in strategy, financing, or exit and as such, the “dream” to hit this futuristic exit, needs to be supported by a good board partner, that can design, pitch, and plan the overall financing roadmap.

Couldn’t agree more with Roy, once an investor accepts a board seat in addition to being on the cap table they become a key resource that can help and guide company’s capital efficiency and future fundraising efforts, experience in deal structuring, acumen on recognising when it is important to break even vs burn for growth, expected next round valuations, timing a raise based on business needs and on macro economic landscape are key aspects that founder can sometimes lack perspective on. Additionally, given how network based private market investing tends to be a VC board member can be a key resource in introducing capital sources, synergies with other portfolio companies, help set terms could be some of the ways to value add.

As we saw with SVB, founders and businesses really need a strong support network in times of crisis and change. We experienced first hand some VCs and key individuals stepping up and providing a range of help and guidance to those in need. There will be many times throughout the lifetime of a business, that a group of supportive board members and advisors will provide the clarity and vision to help the founder and management team to navigate any change needed to cope with unexpected events

In times of crisis and change, it would be useful to have a VC board member that can identify potential risks, recommend and implement preventive measures, and devise plans to minimise the impact of risks. The VC board members competency can also extend to include having knowledge or experience of auditing practices, organizational controls, and compliance measures as these would be crucial for startups in a crisis situation.

Balance Unfortunately VCs have to play both sides, without taking side. - The entrepreneurial side bringing financial discipline - The LP side bringing risk appetite And staying in between doesn't make them leaders, they are simply not allowed to take the extra mile. If they do they lose balance.