What should a board look like? And what should the members of an advisory board bring to a startup? Fritz Oidtmann, Managing Partner at Acton Capital Partners, shares his experiences from his time as a co-founder of OnVista. He outlines how an advisory board should be structured, has created a checklist for you, and explains how wrong decisions can lead to a nightmare.
A guest article by Fritz Oidtmann
Some time before becoming a partner at the VC Acton, I co-founded the financial portal OnVista. In my role as CEO, I once told a client as I was leaving that I had to go to a board meeting. He replied: “You poor thing, in board meetings I always feel like I’m taking an oral exam and failing.” I was completely surprised, as I've always valued the exchange with our advisory board. I learned something new each time and subsequently had a clearer view of our business. I've always greatly appreciated the constructive support from our supervisory boards. Since then, I've served on numerous boards myself. Not all of them were pleasant. The collaboration wasn't always characterized by trust. Here are my tips for getting the most out of a board:
Be open
Use your board as a trusted sparring partner. No startup is complete without disagreements among founders—regarding strategic direction, organization, priorities, etc. Many founders see it as a weakness to address such issues in board meetings. I consider it a sign of sovereignty. If there are issues that can't be resolved between the founders, time is lost, and in the worst case, even more. Bring up critical issues. You need to build trust between you and your board members.
Small but nice
Ideally, an advisory board should have no more than 3-5 members. Large boards are rarely productive. Many members simply don't feel accountable. Discussions become lengthy and lose sight of the goal. If you can't reduce the board size, create small teams—not just for financial or personnel issues, but also for strategic discussions. If you can't trust all the members, select one or two board members you trust and discuss critical issues with them before addressing them with the larger group. If you don't have anyone you trust, find an independent board chair or at least bring an independent member onto your board.
The same direction of view
If you're bringing a new investor on board, get references and research other startups the VC has invested in. Always ensure there's agreement on key issues between the new investor, you, and the existing investors. If there's no agreement, don't bring the investor on board in the first place. If you're unsure, critically examine their position beforehand. Bringing the wrong investor on board just to get the money will inevitably lead to a nightmare down the road.
Looking for board members who ideally
• are willing and able to question strategy and important decisions
• to urge the team to be more courageous when necessary and to slow down when the path seems too dangerous
• are intelligent, committed and challenging rather than comfortably quiet
• are decisive
• Understand the workload of the founders and are therefore pragmatic in their requests
• have operational experience or industry expertise
• do not invest in competitors
• are good listeners
• are easy to reach when needed
• Read documents when requested and provide timely feedback
• Keep confidential information secret
• Give personal feedback in private and not in front of others.
No sugarcoating
Whether a board is successful also depends on you. You need to be open and transparent with your advisory board. That's easy when the sun is shining. But when things aren't going so well, you need an honest discussion with your board. The board is usually aware of the problems. And if you don't talk about them, your board members will think you're either not being transparent or, worse, that you're unaware of the situation. Neither is good—for you nor for the company. Problems grow when you don't talk about them. It's always better to find a solution together than to be forced into one. Be open to advice. If you show that good advice is welcome and valued, you'll get more of it.
Preparation is half the battle
On a practical level, you should prepare your board meetings with a clear agenda and clarify in advance what you expect from the meeting: What kind of decisions do you need? What topics would you like to share information about? And where do you need feedback? Ensure that the most important topics are addressed first and that there is enough time for them. Don't prepare decks of 80 pages or more. This is a recipe for frustration, as you'll spend too much time discussing details and likely miss important points.
In good times, a bad board is tedious and unpleasant; in a crisis, it's dangerous. So use your board as best you can and make board meetings something you can look forward to.
About the author
Fritz Oidtmann is Managing Partner at Acton Capital Partners. He combines analytical thinking, human touch, and operational experience. As co-founder and CEO of OnVista, one of Germany's early internet success stories, he understands the ups and downs of building a company and has a high level of empathy and respect for the challenges facing young companies. Today, as a mentor, he guides and guides founding teams to success with a steady hand.
