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!