How VC-Backed Companies Can Get More Out of Their Boards
This article was originally published in Start Up
VC-backed start-ups may need to think and act differently, perhaps more judiciously, about effective governance than more established firms. The stakes for start-ups are higher and the environment for failure is less forgiving than for established enterprises. In addition to their oversight role, directors at start-ups should be considered strategic assets. Developing a relation-based model built on a board/CEO partnership can increase the odds for success.
You may also be interested in...
What makes a health care VC stand out in the minds of entrepreneurs? According to a first-of-its-kind survey by Windhover, PricewaterhouseCoopers, Wilson Sonsini, and Applied Information Networks, the answer is value-added services. Entrepreneurs prize VCs who assist them, pre-financing, with constructive feedback and sharing of due diligence results. VCs do pretty well here. But they do less well on the more important post-financing criteria: helping their portfolio companies secure additional financing and recruit customers, partners, and employees.
What distinguishes an effective board of directors of an early-stage biotech company? The ability to walk a very fine line between constructive engagement and outright control. Good boards: small, focused, with an independent, mentoring chairman.
Heartport was the darling of investors when it burst on the scene in 1996 with a new minimally-invasive cardiac surgery technology. The company's stratospheric IPO valuation quickly deflated as cardiac surgeons, proving more cautious than investors, have been slow in adopting Heartport's technique. Armed with new management and a new strategy, Heartport is regrouping, still convinced, in the face of major competitors using a different approach, that its technology represents the future of minimally-invasive cardiac surgery.