Building Your Board: How to Prepare Your Company for Lasting Growth
Join us for an insightful webinar as we dive into the nuances of preparing your company for sustained growth through board composition, leveraging resources, and maintaining a future-focused vision.
Speakers include Sedale Turbovsky, the driving force behind OpenGrants, an innovative platform that uses A.I. to match businesses and organizations with vital grant opportunities. Alongside him, Breen Sullivan, founder of The Fourth Effect, will share her expertise on diversifying boardrooms and amplifying growth through empowered leadership.
In This 1-Hour Session, We Covered:
- Understanding the Power of Diversity: Learn the benefits of a diverse board and how it can lead to innovative decision-making, ultimately fostering lasting growth.
- The Art of Preparation: Dive into best practices for preparing your organization for growth, from securing funds to building a robust team.
- Maximizing Grant Opportunities: Get insights on how to effectively leverage grant opportunities for your organization and why they’re crucial for your growth journey.
- Board Composition for Future Success: Discover the importance of board composition and how to strategically choose members that align with your company’s vision.
- Driving Systemic Change through Leadership: Uncover how forward-thinking leadership can not only propel your company’s growth but also drive change in the broader industry ecosystem.
About the Speakers
Sedale Turbovsky, Co-Founder & CEO, OpenGrants
Sedale Turbovsky is the CEO and co-founder of OpenGrants, a venture-backed startup focused on building modern infrastructure for funding. He has been an entrepreneur since childhood. After honing his leadership skills as an outdoor guide in his younger years, he started his professional career as an independent consultant focused on delivering data products and digital strategies to enterprise clients in South America. He is experienced in independent grant writing and public/private partnerships at the highest level, having worked directly with OpenGrants’ current strategic partner, Momentum.
Breen Sullivan, Founder, The Fourth Effect
Breen is a General Counsel for high growth tech companies turned founder of The Fourth Effect, the only board and board-adjacent marketplace where women have the power to make the first move. The Fourth Effect matches early and growth-stage companies to board-ready women in a trusted, efficient and cost-effective way to disrupt the traditional board search process and overcome systemic barriers that have kept women out of the board candidate pipeline.
Note from Breen
We are a transparent marketplace with 800 startups (mostly women and BIPOC-led) on one side and 1,700+ amazing board and investment-ready women on the other side. We want to help you find the right people to scale and fund your companies and help you advance your own for-profit board and investment career.
for Board Boot Camp on 12/12 at noon EST, use code BBC15 for a $15 ticket price (free for members!).
Please check out our Unstoppable Campaign
to access a 50% discount in exchange for spreading the word, secret code: UNSTOPPABLE23
Read the Transcription
Please note, this transcription is automatically generated and may contain some spelling and contextual errors.
Sedale Turbovsky: All right. Welcome, everybody. My name is Sedale Turbovsky. I’m the CEO and co founder here at OpenGrants. And if you are here for the webinar on building your board, how to prepare your company for lasting growth with Breen Sullivan, then you are in the right place. And if you are not here for that, you should stick around anyways, because it’s going to be super fun.
I’m going to give people a couple minutes just to trickle into the webinar and get all situated in the meantime just so you all are aware. Those of you on the line and listening we do have this fairly locked down for everyone’s comfort and safety, so please use the Q& A if you have questions for us, and you can drop those in at any time.
Other housekeeping items we will be distributing this afterwards, so if you have to leave, there will be a recording and if you don’t get your answers during the Q& A, we will do our best. We will send out an email with a transcription. Links to a lot of resources and so forth. So please don’t feel don’t hesitate.
Throw in your Q& As, even if they all stack up and we can’t get to them all, it’ll be just fine and we will eventually get to them. Once again, my name is Sedale Turbovsky. I am the CEO and co founder here at OpenGrants, and we are the easy way to win grants. And this webinar is about building your board, how to prepare your company for lasting growth.
I’m super excited to have Breen here from the Fourth Effect. She’s the founder of the Fourth Effect. And I’m going to let you go ahead and introduce yourself, Breen. Tell us about the Fourth Effect and what you’re up to and who you are.
Breen Sullivan: Thank you so much, Sedale. I’m so excited to be here today to speak with the OpenGrants community and to talk about the Fourth Effect.
So the fourth effect is the fastest growing first and only truly transparent board marketplace that’s focused on startup and growth stage board and board adjacent opportunities so that women can effectively break into the pipeline and also stage companies can then reap the benefits. So simply put, I like to describe us as bumble for boards.
I feel like that’s a nice way to think about it. We are a place where qualified women can basically swipe left and swipe right, and they can access within reach board opportunities, board and board adjacent opportunities. They might be advisory and governing roles. They can also invest because investing is very much connected to board service and I’m sure we’ll get into the weeds on that.
And of course they can grow professionally because it can be incredibly valuable to to have advisory and governing. Word opportunities on your resume when you’re looking to advance. So we have, we essentially leverage those insights. We’ve been around now for around four years.
We bootstrapped this marketplace to over 20 countries. So we have companies and individuals that are coming from really all over the world at this point and also 237 cities. And so right now there’s around 800 startup and growth stage companies that are using our board marketplace and there’s around 1700 candidates on the other side and then a subset of those companies are and and a subset of those Women who are qualified and looking to sit on boards are investors and they’re investing.
Sedale Turbovsky: Awesome. That is super cool. Let’s dive in a bit. I do want to like touch on a few things. So I imagine a lot of the folks listening in today they’re here to talk about like how to prepare your company. For success through leveraging a board and like, why do you want a board in the first place?
And maybe we can just touch on that really quickly. I know as a founder when you first start, it’s oh, you don’t want anybody else on your board because you want to be able to move fast. But as you grow, it makes sense to bring on those board members. But I wonder if you could just touch on this real quickly, like the basics of.
Why having a board is a good thing and really quickly like when you think When are the kind of like the ideal times to start building that board?
Breen Sullivan: That yeah, no, I love that. It’s a great question. I so okay. So just to back up It is literally never too early to start building an advisory board And so this is something we say a lot we’ve heard a lot and it’s just really true so wherever you are along the growth Stay along the continuum, whether this is literally idea stage or, you’re further along and maybe you even do have a formal a governing board in place, it’s never too early and it’s never too late.
So an advisory board, it’s a contractual relationship. It’s actually not, those advisors that take those seats do not have a fiduciary obligation. It’s a lower standard of, risk and exposure and obligation. It’s a different relationship. So the reason why this is so relevant is because, Yes, strings are attached, but it’s less strings attached.
Just as you will enter into relationships with consultants and other service providers, you can with advisors, you can switch them out. They can typically, have two year terms, sometimes one year terms, sometimes longer terms, but I feel like A lot of times advisory boards are overlooked and just under leveraged and underutilized either right at the outset of a company getting going or even, just along the process, you can always have an active advisory board, you can switch out those advisors they can really help you hit key, KPIs and metrics that you need in order to de risk your business as you scale.
They can also indirectly help you get connected to sources of funding and then sometimes they can very much directly help you get connected to sources of funding, especially if you’re talking about angels that might be more inclined to write that check if they’re also serving on your advisory board.
Or of course, if you’re talking about your governing board, a lot of times. Those seats, get taken by VCs that are writing you larger checks. And, in my experience for a lot of startups and early stage companies, Frequently, they’re not even really thinking about boards until they’re talking to that BC.
And and there’s a lot of strategic reasons why that might not necessarily be the best way to approach it. If you are going into funding rounds, being able to avail yourselves of the strategic advantages of building out a governing board in advance of starting to give away those seats when you take in a series A and a series B.
That can be beneficial to you as the founder, as the founding team to retain control. So I know that was like a lot packed into one answer, but hopefully that was a good place to start.
Sedale Turbovsky: No, that was great. I love a couple of the thoughts that I heard that I think are super interesting. One is, I think it is, always great to have that advisory board in place early on. Those are tend to be like very strategic and interesting folks who can help you move the company forward, but they’re not, voting on matters of the company. They’re giving advice and there’s those contractual relationships.
And then there’s your governing board where they have much more influence on the direction of the company. They’re voting on things like. Raises and issuing stock and so forth and major decisions that have impact in regards to the company. And one of the things I heard you say that I think is interesting is the idea of, bringing a stacked board to the table for a raise where.
You can, make sure that you have allies or an interesting, folks who can advance the maybe your position forward before you end up in those discussions where you also have VCs coming and taking board seats as well. So let’s talk about, that board makeup. I think the advisory board is interesting.
Definitely like a less of a. Less of an impact and correct me if I’m wrong, but it’s less of an impact than like a governing board. Where do you see you mentioned a bit in terms of the mission of making sure that you have getting women access to this space. And I’d love to get your thoughts on just like the power of that diversity.
What are the benefits of having, a board with a variety of experiences over. Maybe more kind of monolith a monolith looking board at what we tend to see. It’s just like old white dudes. What’s the, what’s all the fuss about
Breen Sullivan: Okay.
Okay. So love that question. And and literally in what you just said, there’s probably like 10 different things I could respond to and talk to for, 20 minutes, but I’ll try to contain my answer. Yeah. Starting with the last thing you mentioned about diversity. So if we start with what’s the landscape and that might be a good place to begin, this was not something I knew.
So my, and I’ll actually let me back up even more. Let me begin with usually how I introduced myself is by mentioning that my background is as a general counsel for high growth midsize tech companies. And I did this for three different tech companies. And it was during that experience where I had two different insights that led me to create the fourth fact.
And they really boil down to number one, no clear path to board service. And this is true for women. This is in fact true for everyone’s is not, just women, but it is especially true for women because there is no air traffic control, directing people into for profit board service.
What that means is that you stumble into these kind of under the radar baby board opportunities because it’s someone you know, it’s a tap on the shoulder it’s an insular network thing. And so as probably many of you on this call know, the statistics when it comes to the venture landscape and the private equity landscape and the people who are writing checks and making investments.
Who oftentimes are GPs or they’re in the position of knowing when a company needs an independent director or could use a certain skill set on an advisory board. Those people. Are 90 percent men. So what that means is that whisper network like with the lack of air traffic control and no marketplace and no credentialing and no oversight, no transparency and no place anyone can go to find these seats.
It just turns into I have a buddy. And that’s how so many people get into the board candidate pipeline and it’s not sinister. There’s no malintent. It’s just, it just happens that way. And so I realized this from my spot, being an executive in tech companies and noticing at one point, okay, why are so many of my male colleagues at these companies serving on advisory boards?
And maybe they’re also writing angel checks here and there. Maybe that leads to a director seat as a company scales. Maybe they’re an observer, they’re, what is that and why are they doing it? But my female colleagues are not. And then, I looked at myself and I’m like, okay, I’m a general counsel.
I built out legal functions for three startups. Like I’m advising. The executive team about how they should leverage and make use of a board, but I’m not sitting on a board and I don’t have that on my resume. So like, why does Jeremy have it? And I don’t. And so that, that was the first insight of just, Oh, because there’s no clear path.
And Jeremy happens to know someone that knows someone. And usually the people that know someone are in the investing world and the investing world is almost always met. So that was my backing out to, okay the world needs air traffic control, and this will help because then, there’s more access for everyone, men and women, and there’s like a path and, my focus is women.
I want to help women find that path. And then the second insight that I had was really very specific to being a general counsel. And so this one is a little more nuanced, but to the extent that anything is happening in the boardroom for early and growth stage companies, I had a front row seat.
And what, and another thing that was very surprising to me was to realize that for so many startup and growth stage companies, there’s empty seats. There are independent director seats that go unfilled year over year. Maybe the companies don’t know what they don’t know, so they’re not strategic about it before they take on the funding rounds.
They’re not stacking their boards, so their board’s really small. They are not leveraging their advisory board. They’re not prioritizing it, because they don’t really know how to paper it, or like what compensation they should be giving, or what the term should be. So I was really shocked to see, okay, there isn’t that much happening.
In these boardrooms are like there could be more happening. And so then that was the second insight of realizing. Okay you have all these people and my focus is women. They want to get on boards, they have no paths to get there. But then also, there’s this artificially small pool of board seats that anyone knows about that are ever available because you have all these companies sitting on unused board seats.
So I felt okay, if I can gather all these growth stage companies on one side of the marketplace and help incentivize them, help them realize I’m sitting on this under leveraged resource, they start creating advisory boards, filling those independent director seats. Really, it creates millions of board opportunities that then can be made available to women who can then break in and actually become part of this board candidate pipeline.
Get in where the sausage is made so that they are actually sitting on bigger and bigger boards as they go through their careers. And so I guess the thing I didn’t answer at all is what is the statistics? And and so when I had these realizations and then I peeled back the onion and I learned all of this, I was just horrified to find out that, because of that whisper network and that lack of transparency no one knows.
what the actual demographics are for private company boards, but the little bit that we have insight into the stats, it’s very likely that it’s north of 90 percent of all of those private company growth stage boards in this country are men. And that, and yes, they’re almost all white men. So that’s really alarming because It’s not balanced.
And so it’s not saying that men are bad or white men are bad, but it’s just they’re 14 percent of the population. So it doesn’t make sense. That all of our companies, all of these private company boards, which is really the, it is the, this is where you learn how to be a board member is by serving on advisory boards and early stage governing boards of growth stage companies, because it’s very different from not for profit and there’s no other way to get that experience.
And so this is how you learn. And if it’s only one part of the population that has access to those opportunities, then we all lose out. So that was right there.
Sedale Turbovsky: No, I love it. That’s great. So I want to touch on a couple things really specifically you mentioned one thing, because we, the webinar that we set out here, it’s about preparing these companies for success.
And I think, what we’ve discussed so far is obviously this very strong argument of Yeah. You would, we have a problem and we need to fix it. But I, one thing I heard you say that was really interesting and I’d love to get your take on this is you mentioned that there is a unused board seats and that there’s, founders who don’t really understand how to start to bring those, start to leverage that opportunity.
For folks who want to build a better board what are a couple of like the Things they should read up on or dig into to really start to understand that are there some resources out there that they can dig into to start to understand, one, how do I build a good board and how do I leverage this under this available and underutilized resource?
Breen Sullivan: Yes. Shameless plug. They should join the fourth effect. And for 250 a year right now, because we have a promotion that’s 50 percent off. So it’s very cheap. Come to our board boot camp that we do every six weeks. Come access all of the extensive templates and workbooks and resources that we’ve gathered together to answer these questions.
Absolutely. But then, of course, aside from us there’s other resources out there that a quick Google will help you find. Definitely recommend you do it. Now, just to think about, advisory boards and governing boards. There, there are two different things. You’re an early stage company. You want to set yourself up for success.
So we’ve touched on, okay, advisors, they’re strategic, they can really help you even early days out of the gate, hit these milestones, get funding either directly or indirectly. Lots of reasons why you want to have advisors. Advisors can also fill particular operational skill gaps.
That you probably don’t have because you’re an early stage company so you don’t have a general counsel, and you don’t have a chief marketing officer, but you can plug some of those holes with advisors in a really effective way. That’s an advisory board. Now, different because you know it’s contractual they’re not, it doesn’t, there’s no limit to the number, it’s you hold the reins because they’re vesting, so you’re, they’re only going to earn this little bit of equity you’re giving them.
If they’re performing, over the length of time that you’ve put them in their place, and you can always terminate that relationship, take the equity back and give it to a different advisor if they’re not bringing you value. So you want to be, so those are like the levers to think about with an advisory board with a governing board.
This is different because it’s dictated by Delaware corporate law. Typically, If you’re incorporated in Delaware, you might be incorporated in a different state. They have corporate law that sets the rules for how you run a governing board. So at, and really what that means, like you still, if you’re the majority shareholder is the founder, you’re still in the driver’s seat, right?
You can decide how you want to structure that governing board. The default is that there is one director and that has to be. So if you are incorporated and you’re a C corp, you do have a governing board. If there’s one director on it, it’s probably you like if you’re really early stage, you don’t really know about it Like as you start to grow Then you have a choice, like you can either do nothing until you take on some venture money, and then that VC will tell you what to do, and that VC may or may not have your best interests at heart, you can start to, come to us, come to WorldViewCamp, look at our stuff, go Google it, look at other resources about strategy and governing boards, and, when is it too early, and then you can really go into it understanding, okay, I like, as the majority shareholder, you can appoint.
Directors, they are going to serve at your pleasure, really, because you’re giving them common stock, and you’re the majority shareholder, and so you can fire them and so the reason why you might want to do that before you go into a funding round is because, especially if you’re a solo founder, say you put two independent directors with you on that governing board, and they serve at your pleasure, if you, if they’re not going to vote the way you want them to vote, Then you can remove them out of their director seat and you can appoint a new director in that seat.
What you’re doing is you’re giving, you’re amplifying your voice. And like you said, like you’re making sure you’re stacking that board in your favor, which can help you have the majority voice once those VCs come in and start taking those seats. And the other thing is that if you go into a negotiation with the VC.
And you’re just one director, then you’re negotiating to add new independent directors, and you’re like just negotiating from a weaker place, and you’re already asking them to fund you, versus if you’re going into that negotiation and you have three directors, like you have you, and then you have these two independent directors you’ve seeded.
Then you’re negotiating from a much stronger position of strength because, then they have to ask for two seats or three seats, they have to ask for two seats plus their own independent director seats. And this is important too because like within that governing boardroom the issues that get voted on, they are the really important issues but also any director, their vote.
Their vote carries weight and will actually have an impact on what the company is then going to, go forth and do.
Sedale Turbovsky: Yeah, I think this is incredibly important. So I want to double down on a couple of things. Just also encourage those of you who are on the on the zoom here, listening in please do feel free to throw in your questions.
And we will start getting to those shortly. But, I think that this, what Breen just described is at the core of, creating a good and useful board. And it’s so important as early stage founders and as founders to understand this. And I come at this from this is my, I’m on my fourth venture back company here.
And have had the opportunity to work with incredible VCs and not so great VCs. And you do, the, something I learned very early on is the board exists to fire the CEO which like that’s, that’s why it’s there. And, on some levels, sometimes you need to fire the CEO and that’s fine.
But also you do want to make sure you’re setting your company up for long term sustainable growth and success and that you have a group there that you can trust to do the right thing to preserve, the value of the company. And so there’s there’s this issue of representation and access to these opportunities.
And I think as founders, we can do a lot to. Promote and open those opportunities to groups that not only are not represented, but that, represent a huge portion of of the populace and can offer some really great perspective. I see there’s some good questions about compensation and other things.
Please do feel free to drop more questions in there. Obviously, Breen, you have a ton of experience, not only as as like general counsel and legal counsel, but also in building and like tackling this opportunity. I’d love to get your take on just overall what kinds of we lightly touched on it, but like what are the, like the real benefits for a company and having a diverse board?
Are there stats out there about how the company performs over time? If you could touch briefly on those and then I’d love to get into some questions here because I think there’s a lot of like Specific mechanics that people will want to ask about in terms of getting good advisors and getting good board members in place.
Breen Sullivan: Okay, yeah, and I know, okay, so as far as why is diversity so important at the board level? There have been many studies and a lot of them have come recently from McKinsey that have found very strong correlations between Gender diversity, specifically at the board level, and then profitability and value creation of those companies.
So this is really beyond debate at this point. There is also a great book called XX Edge. It’s written by Ruth Shaber patients Mary May Ball, their investors that has really done a great job aggregating many of these very well researched and established studies that have been done in recent days that really make that point over and absolutely racial diversity, all diversity, LGBTQ age diversity, all of it is very important and correlative with it.
Gender because 50 percent of the population are women. It’s just the largest, it’s one of the most obvious imbalances and one of the easiest to studies and track. So the evidence is very clear that having gender diversity and then, having diversity at the board level and the executive level makes companies more profitable.
That’s one reason to do it. Another reason, and this gets a little more in the weeds on why is that. And and I think that this probably resonates it. It’s not that all women are the same or all men are the same. But when you have that gender balance, you tend to have risk adjusted decision making, especially in times of crisis and indecision.
And the world, this is what a comp, building a company and scaling a company, it’s core to that experience is, it’s always a problem, right? There’s always problems. So having the people at the top that have this superpower of the, just being able to make that decision in a way that is more likely to help the company endure and be profitable through the rocky times.
As you are growing and scaling your company, why would you not want that benefit? So I want to make those points and then Let’s see, did I answer that or?
Sedale Turbovsky: Yeah, that was great. I think yeah, that was fantastic. I want to pop into some of these questions because I think they’re really good and following along here.
Let’s start with this 1. Because there’s a couple questions about this. Can you just talk about the compensation structure for advisory and governing board members in early stage startups? Do they get a salary? Are they getting, equity? Can you speak to that?
Breen Sullivan: Happy to speak to that. Okay. So for startups and really early stage early stage companies, advisory boards. There are a couple of frameworks that have been around for a while that are pretty established. And I would say market, when you’re thinking of building out your advisory board is founder or you’re negotiating for compensation in an advisor role.
The fast framework is a good one to go look at. There’s also a more updated framework that came out that Carta is behind. And it’s. Towards slightly later stage startups. So if you are, maybe you’ve raised a pre seed round, maybe you’re pretty sure that your, your future is venture backing.
I would maybe look at that CARTA scale versus the FAST framework. But the way it roughly breaks down is that it’s 0. 1% Up to 1 percent equity for an advisor and the services expectations. Also a sliding scale where it’s, less time and and value that they’re giving you if you’re towards the bottom and it’s more if you get towards the top.
I would say a rule of thumb would be if you are a larger. Startup. You’ve raised that precede. Maybe you’re raising a seed. I would think 0. 1%. You want to stay as close to that as you can. And I would expect 4 to 5 hours of services from that advisor per month. And I would use, there’s a lot of great advisor agreement templates that you can find the fast or fast.
org you can find one that they have that’s good. The Carta, this new framework they came out with they also have a template agreement. I like I like Wilson’s template, I, Cooley has a good one, they’re really publicly accessible. And so you want to make sure you sit down with that advisor and you really figure out what they’re giving you in those five hours per month.
And also another piece that’s super important. You don’t want to start vesting. That equity that you’re giving them until you’re actually getting value from them. And so this is a mistake. A lot of times founders will do this. You’re like, so excited. You build out this great big advisory board, but then you can’t actually make use of them.
And so they’re vesting the equity, but you haven’t gotten the services. So you want to be thoughtful and strategic about that. Now, can there be cash to an early stage startup? Sure. There’s no rules. There’s no one right way to do it. I don’t typically see that unless one thing that can happen.
Especially if you’re, when I was mentioning before you’re filling those skill gaps. So say you really need like a fractional CFO or CTO. And so you’re combining, okay, I’m putting this person on my advisory board. I’m going to give them this equity grant that will vest over two years, but I’m also going to have a 1099 kind of services component to this advisor agreement.
And you’re paying them cash or you’re paying them additional equity to actually provide outsourced. Like fractional work. I’ve seen that. That’s a negotiation. Now, governing boards, this unfortunately the headline is that it’s a black box. So this is really true. And I’ve spent a lot of time Googling this.
So a lot of people, no one knows, like there is, there are no standards. And the best that I can give you as someone who’s been in this world and really thought about this for a long time and done all my homework, private equity is going to pay. Typically, if you’re sitting on a governing board and it’s a private equity port co, you’re probably getting paid like 70 to 80, 000 cash component, and then you’re getting equity in that private equity company.
And, the percentage of equity, that, that’s more nuanced and that’s more of a black box, but it’s probably something that’s legit. And, but then, but if you’re not there and you’re in like any other private company growth stage world. It’s really between you and that CEO. It is a negotiation.
I typically, when it’s a governing board seat, there’s an equity component and there’s a cash component, but that’s like as much as I can tell you, it, depending on the industry you’re in, the revenue, the annual revenue of the company, you might be able to find some Something published where someone’s mentioned what they’re compensated.
And if you can find that, then that’s good. And then you can use that to help you when you’re negotiating.
Sedale Turbovsky: Awesome. That was a great answer. There’s a couple of questions here that I do want to address. That just apply to the nonprofit space. And I’d love to get your take cause I don’t know the best way to answer this, but I think you might given your background first of all, like Does a lot of this stuff translate over to non profit boards in terms of thinking about the board and board structure?
And maybe just start with that. Like, how does this translate to the non profit world if at all?
Breen Sullivan: Yeah. Okay. So great question. So it really is apples to bears and and there’s a few different reasons why. So we at the fourth fact do not have any not for profit opportunities in our board marketplace.
And the 800 companies that are part of our ecosystem and that are using our platform, none of them are not for profits. This is not because we do not value not for profits or we don’t think they’re amazing. It’s because our mission is to close the gender power wealth gap and get more money on boards and cap tables.
The not for profit boards, unfortunately, are not helping. So if we get more women onto not for profit boards, it won’t actually close that wealth gap of women on, the for profit capitalization tables and just, having more money and power. So that’s why it’s outside our focus. Now, there’s a nuance to that, too, in that you can serve on not for profit boards, and that doesn’t deem you qualified.
Like when you’re trying to get a corporate board seat on a large private board or a public company board, it’s often a requirement that you have previous for profit board experience or previous board experience. And even if you’ve sat on 10 not for profits, they don’t consider you as having board experience.
So that isn’t fair, and I’m not saying that necessarily is, makes sense, but that is how it works, which is another reason why we don’t focus on it in the fourth effect. Now, that being said there are some very fundamental differences, like a not for profit board, a lot of times it’s pay to play.
You are, when you are getting that seat on the not for profit board, the expectation is that you are fundraising for that not for profit, or you are even paying money into that not for profit. Also a not for profit, it’s mission driven. It’s not it’s a different model.
It’s there’s different goals when it comes to scaling and growing. So I think those are the other reasons why it’s not deemed. Qualifying board experience because it’s not in that for profit world. So what I can tell you we’ve heard this from a lot of recruiters and a lot of people that are placing candidates in these very sought after powerful board seats.
And if you have advisory experience with startups. That’s considered more board. It’s like you’re closer to getting the checkmark of having previous board experience than if you have served on not for profit boards. So I don’t know if that’s helpful.
Sedale Turbovsky: That’s perfect. Thank you so much for that.
And that was a great answer. I didn’t fully know how to answer that. So it’s perfect. There’s a couple of really good questions here that I’d love to get your thoughts on that are just more about the mindset of going into those conversations or meeting and. The individual who posted this, maybe you can do a follow up and say, if this is for someone looking for a board seat or looking for a board member there’s a question here about what’s the mindset going into those 1st director meetings or conversations?
And another question. I think that it goes well. It’s what should I look for? What should I look for in a board member? Thoughts on red flags, green flags. How you should think about starting those conversations.
Breen Sullivan: Okay. So as a founder is that the perspective, like how you’re like, so as a founder going into, okay.
So very different advisory and governing. But I think one big commonality is that these boards, especially when you are early stage and you have the majority of the shares, these boards are there to serve you. Like they are there to benefit. You in the company. Now the advisory board is 100 percent there to make you the CEO and your management team look good, thrive and be successful hitting your business goals.
And that’s what the advisory board cares about. So you don’t owe them. Anything right? Like you don’t have to impress them. You don’t have to like have quarterly advisory board meetings where you know it’s you feel like it’s a dog and pony show and you have to prepare this whole thing. You can do that.
You don’t have to do that. It’s up to you. And if you just wanted to have individual one off meetings with those advisors, because each advisor is there for a very particular reason, and there’s something specific you need from that advisor. Then you do you, right? Like that advisory board it’s supposed to be very valuable for you because you’re paying for it.
It’s the same as if you went out and you hired people and then your governing board now there, it’s more structured because you have to adhere to the corporate law. That is what’s, ultimately dictating how that board is run. And it will have some requirements. So there’s, there’s probably an annual there’s some annual something, or maybe if you know depending on how small the meeting or how small the board is maybe it’s not an in person thing, but there’s some structure to that gets involved with like how you have to operate.
And then as far as say you have multiple members, you have structured, quarterly meetings or biannual meetings or whatever it is. And then you’re nervous as a founder, like walking into that governing board meeting. What do you do? Like, how do you get prepared? How do you impress them? I think before you walk into that room, it’s really understanding the dynamics of ownership.
And what your leverage is in that room. So if you are the majority shareholder, and you have appointed these independent directors that have common stock that are, you know that you could fire. If they don’t do it, if they’re not good, then, then that’s one dynamic when you’re walking into that room and obviously, what’s the point of having them if you’re not getting value from them, but you don’t need to be terrified of them and, they’re not, they’re there to help you do a better job governing the company.
Then I think like another important piece to keep in mind is that they, unlike the advisors. Who a lot of times are very operational. These directors are not intended to be in the weeds. They’re not supposed to micromanage you. They’re not, their fingers, it’s nose and fingers out like they’re supposed to be, they need to know what’s happening.
They need to ask the right questions. They need to help you think through your blind spots and make these great strategic decisions. But if you have governing board members that are, trying to like. To really stick their fingers in the pie, like that’s not helpful and you have to, be empowered to be able to voice that with how you want to run it.
Now, I think part of this power dynamic, depending on how big your board is and how much equity the, other outsiders might have in the company and what is the equity, what are the shares that those board members have, like all of this could affect. That power dynamic when you’re walking into the room, and then that can affect what you can expect to get out of the meeting and how you can operate it.
Again, this is where your advisory board can be really helpful too, because if you have someone like Sedale, who has done this with four companies. You have him on your advisory board, then you can call him and you can be like, I’m logging into this board meeting and I have, two seats that are, that these VCs have, this is their agenda.
I don’t want to get fired. I’ve got, you can give him the lay of the land and you can get advice from an insider with how best to navigate that meeting.
Sedale Turbovsky: Yeah, no, that’s great. I love that. And I do think, I myself personally, I have a lot of close mentors and advisors.
And certainly before we’ve ever built, a governing board I learned very early on just the value of having that nice advisory board in place. And Yeah, there’s some great some great questions, follow ups to that. Does a governing board replace an advisory board?
Can they co exist?
Breen Sullivan: Okay, yes, they co exist. No, they don’t replace they’re totally, they’re different things. The advisory board, Is it’s a contractual relationship. You’re not obligated to have one. It can be a hundred advisors. It could be two advisors. You could, you can have those advisors constantly, like filter out each year.
You probably give away too much equity, but you, you can set the term and advisor advisory board could be infinite. like you could have it be like you build out your advisory board and they stay your advisory board the entire length that your company is operating or it could be very much like a two year term and you have no expectation of keeping that advisory board static.
They can coexist. The governing board is what is statutorily required, to exist. Like you have to have a governing board in most instances.
Sedale Turbovsky: I love it. There’s a couple of questions here that are related. 1 is you mentioned 4 to 5 hours of services per month for equity. Is that the low end or the high end of those hours of service?
I assume. And then the other 1 is, you mentioned 1. 1 to 1 percent of equity, 45 hours of work per month. In addition to. The 70 K, what’s the proposed what’s the oh, I see. The 1 question is 4 to 5 hours of services per month for equity. Is that low or high? And then also what’s the proposed equity for governing board members?
Is that the same as advisory board? And I, I know you touched on like that. It’s a black box. And it really just depends. But I didn’t know if you have any other additional insights on that front. I tell people all the time once you get into this space, it really is just the best answer I’ve seen is just like a drawing of spaghetti.
It’s just, whatever works, because it’s very, it’s much more strategic in, in my experience. And so there’s more negotiation and, Like customization, right?
Breen Sullivan: I think that’s a great answer. And yeah, so I think that’s right. I do think the other thing to keep in mind is that a really early stage company can give such a big equity grant because actually 0.
1 percent is such a big equity grant. Like when you think about it, if you back up like it, because once a company grows and scales and gets big, it’s not giving 0. 1%. To, to, to very many people, even though that seems really tiny, that’s actually like pretty significant. So you’re getting that because it is a really early stage company.
And I think the 1 percent is really high. Like I think I even like the Carta scale changed it. So it was 0. 1 to 0. 5, like it didn’t even go up to 1%. So I kinda I feel, I know that fast framework has said that, and we’ve talked about that, but personally. I think it can be a red flag when startups are just giving away too much equity to investor or to advisors.
So if you’re in that 1% Like if it’s point one, you’ve got 10 advisors and you’ve given away 1 percent of your company. If you’re giving away 1 percent to an advisor, like that’s worth 10 advisors. So is that one advisor going to be like, they better be getting you like a 5 million investment. That’s all I got to say.
I think it’s like a, I don’t think it’s good. And we wouldn’t make, like when we thought about structuring the fourth floor, now the fourth effect, like how do we do this? We didn’t want to take equity from startups, even if they were fundraising in our back room, because it’s, it can be a black mark.
It can keep you from getting funding from VCs if you’re doing that. So I’d be really careful. Important thing you have
Sedale Turbovsky: It really is. I’ll just echo that and say that we even have had to go back and recap a cap to, the one thing to say is that if you do mess it up, you can fix it, but it’s really annoying and it’s going to take some time and some cajoling of people.
But, you can always recap and fix your mistakes, but you might be fine enough battle to do that. So be very stingy and make sure you have those vesting agreements in place as well with early advisors. There’s a couple other questions here. One is do you, LLC?
I think that’s an interesting question. I’d love to hear your take on that.
Breen Sullivan: I, it, absolutely. It depends on your LLC. Are you, if you are, say you’re a sole proprietor, you are a lawyer and you have your own shingle and you’re just a tiny little LLC sole proprietorship does it make sense for you to have an advisory board?
It still might, right? Now, can you, what advisors usually are interested in when they’re signing up is, They want that equity. They want there to be some chance that equity will be worth something someday. So if you have no plans to scale, you’re just a, a sole provider and you’re a lifestyle business, then it might be harder to attract those advisors to serve in your advisory board because that equity is probably just never going to become liquid.
It’s never going to be worth anything. It’s not going to grow in scale. That being said there, there absolutely still might be appetite for people that want to get board experience, even if it is for and non traditional smaller consultancy. I’ve seen it happen. And and then I think as the LLC, depending on what you are, like, so say you’re more of a consultancy then it can absolutely be super valuable to build out that advisory board, because even if you’re not planning on rapidly scaling in the next three years, you still might be planning on scaling your business, and and then it’s valuable.
It’s it, so yes. That would be the answer.
Sedale Turbovsky: Love it. Another great question here. Do investors expect startups to already have board members lined up prior to investing, or is this an understood part of growth and development with access to funds to afford board members?
Breen Sullivan: Okay. I think it depends on the piece.
It depends on the VCs you’re talking to. And I think there are VCs out there that would be like, Oh, don’t worry about your board. Don’t think about it until we give you money. Cause then they have more power. What do VCs think? I don’t know. I think generally speaking, they want, they look at your advisory board and that’s important.
And if you have no advisory board, or you have three dudes on your advisory board and it’s not really clear why they’re there, those things matter when you’re being assessed as and are you worth it? Because, they know that if you’ve been strategic and you have, maybe you have an advisor that shows you’re already thinking about your exit strategy, maybe you have an advisor that, you’re manufacturing something in China and you have an advisor that can get you into the right factory.
That shows that you’re a good investment. I think like governing board, did they expect you to have thought about it and have it all in place before they show up? No. But if you. If you are a an experienced entrepreneur, then you will have. And so I think like they don’t care about that. That’s more about you.
Sedale Turbovsky: No, that’s a great answer. And I just want to add I think having a great strategic advisory board who can get you those kinds of contracts, super valuable. And then also coming to a VC we’ve turned down capital from investors before because they wanted too much in terms of board seats things like that.
And so just having a being fluent in this language, at least even if you don’t have a board. Like prepared or stacked or anything is really important, just so you know what you’re getting into as you have these conversations. So really important to like, think about this stuff. Great. Another great question here.
And I do want to mention, we are drawing close here to the end in terms of time. So if you do have additional questions, please do feel free to throw them into the Q& A. We may not get to them all. But I want to close with a couple of things. I would love, I have one more question that I think would be great for you to tackle, Breen.
And then would love to just hear your thoughts and kind of takeaways. What should folks do after this webinar to continue moving forward or continue, future proofing their company and thinking about how to, put a great board in place to ensure their sustainable growth.
The first thing, the question, this person says, I’ve been in the tech industry for 25 years. How would I get into a board? Will fourth effect help with placements or advising advisory board members?
Breen Sullivan: So love that question. And also that kind of tees up with what, my call to action, right?
So absolutely. So it’s a two sided board marketplace. It’s Bumble for boards. So if you are looking to sit on a board, Then for you, you’re interacting with this board marketplace, you’re looking at all of these individual opportunities and you’re clicking in, you’re touching and feeling them, you’re deciding, you’re reading about the company, you’re reading about the founding team, you are putting yourself out there as a candidate, as an applicant.
You also, come to, we have a lot of programming and events, so it’s organic, so you can meet the CEOs that are building out their boards, it doesn’t have to be just reaching out over the platform. These are all ways that you can start to tap into the, board and board adjacent. So advisory board, governing board, opportunities with smaller companies and get in yourself.
The other thing you can do is you can opt into our investment club if you are an accredited investor, and by being an accredited investor, you unlock additional angel advisor opportunities. So if you’re looking to write an angel check anyway, why not also get a board seat out of it? So you can do that.
You don’t have to do that, but you can do that. You can also, if you become an investor, you can meet the GPs. That are we have a number of affiliate venture funds. And those GPS are frequently looking for people to add to their stable of advisors and that becomes their shortlist for independent directors.
So these are the ways through our board marketplace as a candidate that you come in and you get those seats as a founder, anyone and you can be both, by the way. So say you’re a founder, you’re building out your boards, but you also want to sit on boards or you want to invest or you want to get investment, you can do all those things.
You can wear different hats, but founders, we want you to come in and sign up your company. Your company can list unlimited board and board adjacent opportunities into that marketplace. So when you click on it, it looks the same for you as it does for a candidate, except for you can click on a button where you can just create.
As many advisory board, Angel Advisor, Independent Director, and Observer opportunities that then go live in our platform. You can also just opt in, no additional charge, if you’re fundraising. And you can post all about your fundraise in our back room. And you, and those investors, the venture funds and our members who are accredited investors will see it.
And strongly recommend that you create Angel Advisor listings if you’re fundraising. Because it gets more eyes onto your fundraise. So those are ways that we can like very directly, help you build out your boards to get you funding that way, but then also help you just get funding by posting about, needing funding in our backroom.
Sedale Turbovsky: Awesome. Thank you so much, Breen. It has been a pleasure. I learned some new things and I really appreciate the awesome work you’re doing. And I do just want to say for all those founders out there, You really think about this board, your board and your advisory board are incredible strategic assets and they really should be something that you’re thinking about and leveraging for your sustainable and continued success and growth.
We will make this available as a recording. As I mentioned, we’ll send out an email. And so forth. And yeah, I really appreciate y’all for listening in and huge. Thank you to you, green for being here and sharing your experience. And for building this awesome thing that is the fourth effect.
Any other like last calls to action before we close out and let folks get on the place.
Breen Sullivan: I guess the last thing I should say, because it might be confusing. I see some questions about gender, like who is invited to participate. So I want to be very clear that all companies no matter what you all companies are welcome, and we want you to join and sign up your company and become a member yourself, whether you were women, men, any, however you identify.
And same thing with our investment club. Everyone is welcome. If you are an accredited investor, come invest, get involved. There is a so the one area of the fourth effect where gender really is a factor. We are intent is to help companies find diverse candidates for their boards. That does not mean that you are not able to become a board candidate and the fourth floor if you are a white man, you can but it’s that it’s not intended for you that’s the only you know that is the message so women.
An underrepresented board candidate. That is the intent, to make it easier and to give you that access and to put you in the spotlight. But everybody is welcome in the community. And there are ways for everyone to be a member. Yes.
Sedale Turbovsky: Awesome. Thank you so much. Really appreciate it.
And thank you all for joining us for the webinar today. We’ll let you all get on with your days. You can tune back in next month. We’ll be doing something awesome again and definitely keep an eye out for the email. We’ll have followups. We’ll have all kinds of good links and info so that you can move forward on this.
So thank you so much, Breen.
Breen Sullivan: Thank you all. You are welcome. Thank you.