Venture Boards: From Startup to Unicorn in 80 Board Meetings

What boards do at startup, seed, series A, etc.?

I think I am the only person I know who measures the startup journey from seed to unicorn in board meetings. How many board meetings does it take? What boards do at every stage of growth? And what better boards do differently?

For me, it has always been important that every startup forms a ‘proper’ board early on from the inception, at the seed stage. Looking over the growth journeys of unicorns, and the last time I googled, we had data on over 1,200 unicorns globally, my view has only been confirmed. Below I’m sharing my insights and reasons why this perspective of thinking about the board journey from zero to exit is useful, especially for founders in their first two years of the journey.

*Board Deconstructed. Real UK Unicorn. Board Composition From Startup to Unicorn, to IPO

How many board meetings does it take?

A simple calculation shows that it takes just over eighty board meetings to get from a startup to a unicorn. This is assuming boards meet monthly and have twelve meetings a year. (Monthly board meeting is a good practice and a reasonable starting assumption. In reality, in the UK, I have seen boards meet up anything between four and twelve times a year). And also assuming that it takes seven years to achieve a billion-dollar valuation, according to the data.

From my previous life as an academic researching venture boards, I know that startup to unicorn transformation happens over three stages of company development:

• Early stage, typically the first two years and up to 24 board meetings;

• Growth stage, the next three years and further 36 board meetings; and

• Late stage, the last two years of the seven-year journey, or 24 more meetings.

I’ve illustrated this journey in board meetings:

What do venture boards do at every stage?

The unicorn data, academic research, and experience tell me that what boards do differs significantly from stage to stage. However what happens throughout each stage, the challenges that startups and their board have to deal with, are actually predictable, and, at the board level, they are also the same across companies.

Early stage: the first 24 board meetings

During this stage, boards typically oversee just two activities: product development and product market fit. Naturally, first board members help founders with product building insights, connections, and knowledge about getting new products to markets.

The main things that distinguish better boards at this stage, include deep understanding of the startup's business, markets, continuous communication with founders, and a razor-sharp focus on getting to growth. This last part is very important, because as we know from the data, only about 30% of startups get from seed funding to a big round (i.e. Series A). On average, getting to Series A also takes 18-24 months, or, if measured in board meetings - also 18-24 board meetings.

I would even go as far as to argue that during the early stage, the ultimate purpose of the board is to get startups to growth. The board's effectiveness then can simply be measured by whether the startup raises its next round of funding, or not. (This is where I wonder, by the same logic, the remaining 70% of startups that don’t get to the next round, does it mean, their boards are ineffective?) In my experience, and, what research tells me, a razor-sharp focus on growth, and the next round of funding, as opposed to monitoring, checking in on progress, or reporting, is what seems to distinguish better venture boards.

One more point to add here is that better venture boards also know that getting to the next round of funding is not just about the growth of a startup. It is also about the growth of the founders, and, crucially, about the level of trust that develops between founders and their boards (and, therefore, investors, since most early boards consist of just founders and investors).

And this is when seemingly ‘boring’ board management bits such as board papers, what goes in them, when papers are sent, how prepared everyone is when they turn up, the way meeting agendas are structured, questions or contributions during the meeting, communication between meetings, etc., all these bits play a crucial role. This is because trust is, simply put, a consistency of interactions over time. During the early stage – this is over the 18-24 two-hour board meetings, especially if founders and investors do not spend much time together in between the board meetings.

In a simple way then, trust, if measured in board meetings, means high-quality papers, sent in advance, with board meetings run well, directors prepared, and continuous communication, sharing good news/bad news as they happen.

So, I would add a third activity that I notice better early boards do differently. On top of helping with product development and getting to market, better boards help founders figure out and optimise the foundations for effective board management: the right level and quality of information to share, better ways to run meetings, engage and extract value from board members.

Growth stage - the next three years, or the next 36 board meetings

By this stage, startups evolve into scaleups, and their boards shifts focus. Scaleup boards understand that the company is still 'on the clock'. Scaling fast becomes operationalised at every level. This means searching for repeatable business models, whilst refining products, and maintaining growth velocity.

And this is when behind closed doors, over 36 meetings or so, to the backdrop of rapid change and growth, and decreasing founder ownership, the actual boardroom dynamic of monitoring vs controlling vs helping gets very complex.

A lot of boardroom learning happens rapidly over these 36 board meetings or so, for all parties involved. VCs can implement these learnings immediately with other startups in their portfolio. Founders have to continue with the boards that they got and learn to work with the boards they have.

In this context of high-speed change, boards help with navigating increasingly complex issues (such as, for example, regulations, going international, developing a great culture, etc.), fine-tuning the scale dials of the business model (margins and costs), and acting on early signs of failure: unstable revenues, increased spent, customer and employee churn. Better boards, however, also help founders with understanding and managing diverging investor interests.

Scaling also requires further investment, which at this stage may be needed as frequently as every 12-18 months. At the board level, new investment also means changes to the board composition, as every new investor inevitably comes with a board seat. So, during the growth stage, the size and composition of the board might actually change annually, if not more often. Figuring out how to do board well at a growth stage seems already too late.

Late stage - the following two years and another 24 board meetings

In reality, the growth stage and the late stage are hard to distinguish. Sometimes, the late stage is simply referred to as the last two years before the exit.

At the board level, another shift in the dynamic is highly noticeable. Whilst overseeing complex and even international business operations, boards are coming under increased pressure to find an exit for investors, to sell, or to go public.

Different investors are likely to have a different classes of shares, as one study shows, a unicorn, on average, has 8 different classes of shares. Two pressures inevitably begin to influence board members and their decisions (a) complex share rights and order of preference and (b) exit horizons of different funds, investors, and founders around the boardroom.

At this point, the quality of the relationship often determines the quality of the boardroom dynamic. At its best, the relationship is trusted, and the board is an equally safe space for positive and tough conversations. At its worst, boards spend less time helping, and more time managing their individual interests.

It is worth noting that throughout the startup-to-exit journey, better boards recognise the value of diverse perspectives, independence, and principles of good governance.

Why is it important?

Venture boards play a very important role in getting startups to growth. Knowing what boards do, what better boards do, and what to expect over the 80-odd board meetings, in my opinion, helps shape good board habits early on as a foundation for complex inter-relationships later.

Research shows that what you do as a board early in the journey, i.e. monthly things such as how board papers are put together, how board meetings are run, how board members are engaged, how good and bad news is shared, how board input is acted upon, or whether it is ignored, etc., all of these things have a long-lasting effect on the people involved, and the quality of founder-investor-board relationship as startups evolve.

This is because of what academics call path dependency and lock-in. Path dependency in this context means that individuals’ attitudes towards boards, and the way they think about boards, whether you are a founder or an investor, is very much dependent on processes, i.e. the board papers, the agenda, the whole board meeting and communication routine, and vice-versa. Board relationships are particularly susceptible to having difficulties from ineffective processes since boards come together only periodically at month-long intervals. And lock-in occurs when once any kind of a board routine sets in, it is very hard to break it. And if the routine is of poor quality, boards get trapped in a vicious circle of ineffectiveness, and a lack of trust in each other.

Learning to play out and contrast business priorities, market challenges, investors' interests, and protective rights, as well as decision-making in the boardroom is difficult. It is also not something you learn by reading about it. It takes years to master.

In my opinion, early-stage boards and early board meetings allow for this essential learning to take place. There is a lot to master – how to package a vast amount of objective and subjective information in a succinct way, how to form narratives around difficult situations in a credible way, how to build trust, appreciate different views, accept critical challenge, and extract value from NEDs and investors. Better boards help founders with this learning.

Getting good at the art of board relationships and the art of managing diverging investor interests takes time. That's why early board meetings really matter. On the accelerated journey to a unicorn valuation, every board meeting counts.