James’s Musings

thoughts, photography, and geeky stuff
from an unrelentingly curious Silicon Valley entrepreneur

No Reason to be Board

by James G. Beldock on November 3, 2006

This evening I at­tend­ed a sem­i­nar led by my friend Pascal Levensohn, the name part­ner of Levensohn Venture Partners. Pascal is a suc­cess­ful Venture Capitalist and thought lead­er on board gov­er­nance in ven­ture-backed busi­ness­es, a top­ic which doesn’t re­ceive enough at­ten­tion. Pascal’s blog con­tains a nar­ra­tive his­to­ry of sorts of his de­vel­op­ing thoughts on board gov­er­nance, and it makes for good and im­por­tant read­ing for any­one in­volved in (or think­ing of be­ing in­volved in) a ven­ture-backed busi­ness.

The sem­i­nar was spon­sored by the Business Leadership Council of the Jewish Community Federation of San Francisco, the Peninsula, Marin and Sonoma Counties (noth­ing like a short name) and was host­ed by the Mountain View of­fice of Fenwick and West LLP.

Pascal dis­cussed the dy­nam­ics of VC-backed boards (the fact, for ex­am­ple, that they of­ten vote unan­i­mous­ly; that they can suf­fer from “big dog on the block” syn­drome, in which the “big name VC” of­ten dri­ves all the de­ci­sions; the dan­gers of strate­gic mon­ey in VC deals; and even the ten­den­cy of “name VCs” to leave the board and re­place them­selves with ju­nior part­ners when a com­pa­ny is in trou­ble). Pascal al­so sug­gest­ed that VC-backed com­pa­nies cir­cu­late and tab­u­late a Board ef­fec­tive­ness sur­vey in much the same way that pub­lic com­pa­nies do. It was re­fresh­ing to hear some­one state what many CEOs al­ready know: if CEOs are the sin­gle least re­viewed and for­mal­ly eval­u­at­ed em­ploy­ees in VC-backed com­pa­nies, then Board of Directors are per­haps the sec­ond least re­viewed and eval­u­at­ed as­pects of cor­po­rate gov­er­nance.

Now if the Board is re­spon­si­ble for set­ting the di­rec­tion and the CEO for steer­ing the ship, and they are the least re­viewed and eval­u­at­ed el­e­ments in the com­pa­ny, what’s wrong with this pic­ture? Pascal has pub­lished an ex­cel­lent whitepa­per on Board gov­er­nance which ought to be rec­om­mend­ed read­ing for every­one in­volved in ven­ture-backed busi­ness­es. Suggestion for in­tre­pid VCs: provide a copy of this whitepa­per as an ex­hibit to your Term Sheet!

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