Chapter 17: Do you have a board of directors or are you bored of directors?

Chapter 17

Do you have a board of directors or are you bored of directors?

Another important decision for a founder is who will sit on your board.

Your choice of directors and/or mentors is crucial.These are the people you may want to turn to when the going gets tough. Do they have both the experience and commitment to support you when you need it most? Commitment, trust, relationship quality and director/mentor competence are the real ingredients required to support a founder’s developmental growth.

I have already shared my views on sitting on a public company board – it’s clearly not for me, as I could never see the value that I could add when I was so far removed from the day to day. Once again, this is only my view. There are many successful board members who have made a massive difference to the management teams and shareholders they serve – I’m just not one of them. To me, the most important decision that a public company board can make is choosing the right CEO. In my opinion, once they have done this, their role – aside from involvement in the normal governance and regulatory matters – is to ensure that they have provided the CEO and the management team with all the resources they require to execute on the strategy that the CEO and leadership team have defined.

To my mind, formulating strategy is not part of the board’s role. If the board has to set the strategy, then clearly you have the wrong CEO. The board should be a sounding board, helping to validate the executive leadership team’s strategy and providing input where past experience may provide some valuable insight.

As a partner in OIF Ventures, I sincerely believe that our biggest challenge is picking the right founder, as opposed to picking the best idea. Once you have identified an exceptional founder, you then evaluate both the idea and the size of the opportunity – and whether or not it is worth deploying capital into that opportunity. The right idea with the wrong founder will generally lead to a subpar return. How do I know that? I’ve made this mistake myself!

Once you have made the decision to back a founder, you are often given the opportunity to appoint a director to the company. From a founder’s perspective, as always, you want a director with whom you are culturally aligned. Bob Mansfield (former McDonald’s Australia CEO), Bob Dwyer (former coach of the national Australian rugby union team), Ian Chappell (former Australian cricket captain) and Michael Traill (Macquarie Bank) were all external directors of Com Tech. They were not there because of their status. I am still mates with all of them today because we were and still are culturally aligned, and because they brought complementary and diverse skills to our board. Bob Mansfield was my chairman and mentor and we remain both friends and business partners today – Bob is an investor in OIF’s VC fund. I tease him that I’m still making money for him 25 years after we first met.

The reason our board worked was that we all knew each other’s strengths and weaknesses. Nobody was expected, nor is anyone expected, to know everything. The fact that Bob had been CEO of McDonald’s and then first CEO of Optus (Australia’s second telecommunications carrier) didn’t mean that he knew everything. Like me, Bob was extremely customer- and staff-focused, and that’s why I chose him as my chairperson. We thought very similarly. However, Bob had run companies way larger than Com Tech, and I believed I could learn how to scale without compromising on our levels of staff and customer satisfaction – so important to our success. Sometimes, the close working relationship between the founder and the chairperson/mentor means it may only be the founder who recognises the value of that chairperson or mentor. In my case, as a founder I was always aware that the buck stopped with me. If Com Tech failed, it wasn’t going to be Steve or Jon Shein who had failed, it was going to be David Shein.

I must admit, I did fear failure. It was nice to know that I always had Bob in my corner, and while I can’t say that he came up with any part of our strategy, he was always there as a sounding board – someone to bounce ideas off and, importantly, to share my challenges with. When Com Tech eventually sold to DiData, they said the fact we could attract someone like Bob to our board gave them even more confidence that we were the right partner to lead their Asia–Pacific growth plans.

There is a huge difference between private equity and venture capital. I have seen private equity companies attempt to move into the VC space without recognising the difference. In private equity, you want to be the major shareholder, looking in some cases to replace the CEO, make acquisitions, cut costs and position the business for sale in a few years time.

With venture capital, you are generally a minority shareholder, and you want the founder and leadership team to own the majority of the capital – especially in the early stages. ‘What share of the company do you own?’ is one of the first questions we ask a founder. If it’s not enough, we don’t invest. We back founders, not managers. With venture capital – while you should always be conscious of the burn rate and how much runway a company has to get to their next stage of growth – the role is to grow the business, not cut costs.

Regarding appointing directors, I’m going to discuss what I know: venture capital. To me, the role of a director is to support a founder in whatever way they can – it’s important to recognise that this could be a founder’s first gig and that they may not have all the required skills. I know that I didn’t have them when I founded Com Tech (and I still don’t have all the skills today). This is the opportunity for you to make a difference and really add value. Can you help the founder attract staff to fill any gaps they may have in their company or find the anchor tenant that could be a company-changing opportunity? Can you assist with back-office tasks such as accounting, legal and HR until they have the resources to implement these services in house? We see an OIF VC director’s role as giving the founder whatever support they need so that they can focus on what they are good at, without ever forgetting that the founder is the CEO. At OIF Ventures we ask ourselves every day: what value (aside from a cheque) have we added to our portfolio companies today? What difference did we make to a company? What did we contribute to each investment that helped them succeed? Would it have been possible for them to achieve the same outcome without our involvement?

What is key here is that the board’s role is not to run the company – its role is to support the founder/s and the leadership team. If you, the board, are running the company, you should not have backed the founder. The founder/board relationship is not a manager/employee relationship, it’s a team effort where both parties are working towards delivering the best outcome to the founders, staff and investors. It’s that simple. So, my advice is for a founder to find like- minded people who bring diverse skills to an organisation. A tech founder appointing a sales-orientated director makes a lot of sense, and vice versa.

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