3. Agenda
Different types of Boards
Examples: Boards at Various Stages
Step 1: Independent Directors – When & Why
Step 2: Evolving to a Public Board
Takeaways
Q&A
3
4. Boards Come in All Shapes and Sizes
• Many different types and sizes
• Often join due to personal interests
Non-Profit
• Higher risk; Time commitment significant
• Board is primarily investors
Start-Up/Growth
• Can include PE purchased private companies
• Governance is dynamic
Large Private Company
• Standard board composition in place
• Governance is a focus
Public Company
• Strong governance, seasoned board
• Greater focus on ESG
Fortune 500
4
5. Evolution of a Start-UP
Seed
Early
Stage
Series
A/B
Series
C/D
Public
Common/
Founders
Stock
Common,
Preferred or
SAFE/Bridge
Convertible
Preferred
Preferred,
Mezzanine
Debt
Listed
Equity/Debt
Founders
Founder/CEO,
Early
Investor(s)
Founder/CEO,
Investors,
Independent
CEO,
Investors,
Independents
CEO, Primarily
Independents,
Exiting Priv
Investors
Type
Financing
Board
Guidelines, NOT rules
5
7. Examples:
Evolution of Boards
1. Start-up, venture backed
company that seeks to go public
but is acquired - Tile
2. Founder funded start-up that
goes public – GoPro
3. Mature Public Company Board
(8 yrs. public) - Box
8. Venture Backed Private Company
Independent
Ex CFO
Independent
Sitting CEO
Investor
Comcast CTO
Founder Current CEO
Investor
BVP
Investor
GGV Capital
8
9. Founder Backed Private Company
Common/Preferred
Appointee
Preferred Investor
Riverwood
President
Preferred Investor
Sageview
Independent
Former CFO
Independent
Former CEO
Founder/CEO Cofounder/Wife
9
10. Publicly Traded Company
Independent
Ex SVP S&M
Independent
Public Company CEO
Non-Independent
CEO/Founder
Independent Chair
Ex Public CEO
Non-Independent
Ex Box/Sitting CEO
Committees:
Nom/Gov
Compensation
Audit
Operating
N
C
A
O
Independent
Ex CFO
O
N
Independent
Ex CFO
A O
Independent
KKR Tech Head
A C
O
C
N
C
O
N C
8 years Post IPO
Now 7 of 8 Board Members Independent
10
11. Evolving from a Private to
Public Board - Step 1
Adding Independent Board
Members
11
12. When Do You Add
Independent
Board Members
for Private
Companies?
NOT at the
early stage;
Advisors are
preferrable at
this stage
Typically, after
venture
investors are
added
When
operator
expertise can
help the
company scale
When initial
corporate
governance
should be put
in place
12
13. Why Do You Add
Independent
Board Members
for Private
Companies?
Develop initial
corporate
governance
Operator
expertise can
help the
company scale
To develop
Board
Committees
Greater
credibility to
your company
with future
private/public
investors
13
14. Step 1:
Bringing on Independent Board Members
14
Typically, a Board is required
with venture/PE investors
A five-person board,
typically starts with one
independent
Independents can be
sourced in many ways –
recruiter, suggestions from
investors or CEO/founder
most common
Voting agreement usually
dictates the selection of
independents
Director compensation is
typically via stock (not cash)
unless a larger private
company or an executive
director role (more time)
Don’t underestimate the
importance of diversity
16. Good Independent Directors…
• Have values that align with the Board and the company
• Are known & trusted by the Board – reputation matters
• Have a good operating track record and know your industry
– Segment / Transaction / Functional expertise
• Represent all shareholders including the minority
• Willing to make a long-term commitment to the company
• Understand public company governance & can scale
16
17. Establishing Governance – Some Basics
17
Set board meeting cadence of 4-6/year; set up resolutions and minutes
Code of ethics, policies and procedures
Work with mgmt to develop structure for Board presentations
and investor reporting
Set up and “audit committee” to work with CFO and auditors
Executive compensation – full board or set up comp committee?
AND… Get your private company D&O Insurance in Place
18. Evolving from a Private to
Public Board - Step 2
Getting Ready for the Public
Markets
18
19. Step 2:
Getting
Ready to
Go Public
19
Do you have public company quality
management?
Define your committees – Audit, Comp,
Nom/Gov – other?
PCAOB audit vs AICPA – it takes time and is
expensive
Internal controls and SOX readiness
20. Step 2:
Getting
Ready to
Go Public
(contd.)
20
IT systems adequate for a public company?
Compensation consultants and
compensation philosophy
Board – diversity & skill set matrix
Does the Board have the right consultants
(IPO, legal, ESG, etc..)
Lots of Governance decisions w/ the lawyers
21. Governance Decisions Leading up to your IPO
• ESPP plan and terms (look
back, discount, etc…)
• New stock option plan for a
public company
• Evergreen feature for stock
option plan
• Single or dual class stock; If
dual class, when does it
sunset?
• Single or multiple classes of directors
• Independent Lead Director
• Set a forum for shareholder litigation
• Plan for phasing out of venture
investors over time
• Board Committees – Audit, Comp,
Nom/Gov and others?
• Public Company D&O Coverage
THESE AND MANY OTHER DECISIONS TO BE MADE
21
22. Transitioning to Public
Audit Committee Chair
22
Formal Audit
Committee set up
at least 24 mos
before an IPO
Define
responsibilities w/
Nom/Gov– risk,
ESG, cyber, etc…
Need at least one
“financial expert”
All AC members
must be
independent when
you go public
AC chair integral
part of the banker
selection and S-1
process
Familiarity with
the buyside and
sellside investors a
real plus
Sitting or retired
CFOs are ideal for
this role
23. Transitioning to
Public
Compensation
Committee
Chair
• Set up at least 12 months in advance
• Define responsibilities w/ Nom/Gov– does it include social
responsibility, succession planning and/or other areas?
• Comp Committee should be structured to be Advisory,
Strategic and Administrative
• Engage a compensation consultant and transition towards
public company compensation plans for execs before IPO
• Agree on measurable KPIs and tools to prove
management is or is not performing to targets
• Develop a documented and discussed compensation plan
and philosophy; will be used in the CD&A when public
• Former CEOs, CFOs or HR execs are ideal for this role
• Don’t underestimate how much work is involved with a
compensation committee during the IPO process
23
24. Transitioning to Public
Nominating/Governance
Committee Chair
Provides guidance and
aligns the board on
governance priorities
Runs the process to
find new independent
Board members
Guidelines for
committee
responsibility (ESG,
risk, cyber, etc...)
Runs Board
assessment and
evaluation process
Gets charters in place
for all committees
Usually, the last
committee to be set
up, non independent
directors can be part of
this committee
31. Transitioning from Private to Public - Takeaways
• Primarily Insiders/Investors
• Focused on helping management
and scaling the company
• Operate as a full board
• Very “inward” thinking
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• Majority = independent Board Members
• Experience operating in a public
company environment
• Operate in committees & at full board
• More “outward” focus
• Greater focus on ESG including cyber,
human capital, environmental
• Familiarity with ISS/GL, NASDAQ/NYSE
& other public co requirements
• Understanding the IPO process and
ongoing external investor relations
PUBLIC COMPANY
PRIVATE COMPANY
32. Transitioning from Private to Public - Takeaways
• Get governance in place early as a private company
• Invest early (when private) in a highly qualified independent director
• Expand the number of independent directors within 1-2 years of going
public
• Understand which investor directors are willing to stay post IPO, for how
long and develop your board skills matrix to match the needs of the board
• Develop an IPO readiness plan 24 months before going public so you are
prepared (if the window opens)
• Public board experience matters – at least with several of your directors
32
Venture backed companies are what I consider less formal corporate boards
This is an example – The Tile board. Describe the people
Generally made up the CEO and investors and they don’t add independent board members until they are later stage. In 2022 we sold Tile to Life360 but this was the board composition at that time.
Often times the independent board member is recommended by a venture firm or the CEO. They realize as they start to grow the board composition needs to change and an independent can help prepare for high growth, a sale or an IPO
The board room is less formal and much more focused on operational issues than corporate governance. Lots of time is spent on how to raise enough capital for the company to growth
Advice on this type of board – find it through investors and CEO friends, not recruiters. Find companies that match well with your skill set or industry background. Tile was logical for me b/c they wanted an AC chair and someone who knew consumer electronics. The attraction for me was to work with the investors at GGV and BVP and later the CEO who I helped bring in.
If you are interested in companies like this, you should meet the head of people at the big venture firms and let them know you would love doing an independent board role at one of their portfolio companies. They all have “people” partners who are often looking for people just like you. You just need to reach out and meet them.
One last note – don’t expect any cash comp. You will get an option an it can be worth a lot….or not
Venture backed companies are what I consider less formal corporate boards
This is an example – The Tile board. Describe the people
Generally made up the CEO and investors and they don’t add independent board members until they are later stage. In 2022 we sold Tile to Life360 but this was the board composition at that time.
Often times the independent board member is recommended by a venture firm or the CEO. They realize as they start to grow the board composition needs to change and an independent can help prepare for high growth, a sale or an IPO
The board room is less formal and much more focused on operational issues than corporate governance. Lots of time is spent on how to raise enough capital for the company to growth
Advice on this type of board – find it through investors and CEO friends, not recruiters. Find companies that match well with your skill set or industry background. Tile was logical for me b/c they wanted an AC chair and someone who knew consumer electronics. The attraction for me was to work with the investors at GGV and BVP and later the CEO who I helped bring in.
If you are interested in companies like this, you should meet the head of people at the big venture firms and let them know you would love doing an independent board role at one of their portfolio companies. They all have “people” partners who are often looking for people just like you. You just need to reach out and meet them.
One last note – don’t expect any cash comp. You will get an option an it can be worth a lot….or not
Public company boards are more formal and more focused on traditional corporate governance
This is an example – The Box Board. Box is a local software company doing about $1b in revenue and went public back in 2015
Box’s board composition is a bit different than your typical public company Board. The CEO is always a board member (and often the chair but not so in the case of Box). However, until I joined the board, the CFO was also a Board member and the former COO of the company is still on the board. The CEO and the ex COO are not considered independent by corporate governance. That means they often can’t sit on committees. So while we have a nine person board, we only have 7 to fill the four committees. This creates more work for us independents. Note from the slide who is on what committee. The letters with a circle around it denote the chairperson for each committee. For example, I am the AC chair but also on the operating committee as a member.
Also note that the chairperson of the board is Bethany Mayer. Aaron was the chair until last year when we made a change due to the activist battle we were in. I could give you a whole separate discussion on activists but will spare you of the today. Also, note that 4 of the 9 board members are women! In fact, I am on one committee where I am the only male! Progress is slowly but surely being made in companies like Box. This creates opportunities for all of you.
I was actually added to this board in the middle of the activist battle as someone who was acceptable to both the activist (who I knew) and the Box board (many of whom I also knew). So this opportunity came to me via my network.
The board room is more formal and much more focused corporate governance, capital allocation, M&A and operational efficiencies. Also public companies spend a lot more time on cyber security and ESG issues since they are higher profile.
Advice on this type of board – find it through potentially a recruiter but more likely via your network. Find companies that match well with your skill set or industry background. Note for Box, I did not have a lot of enterprise software background, but they needed an AC chair, someone who understand operating efficiencies and growth issues. I had to spend a fair amount of time getting to understand this industry before I joined Box.
Another way to look at what boards are looking for is to review what boards say the do well and maybe not so well
This is an NACD survey from 2020. Note the two axis are Satfisfaction with the time spent in a governance area (Y axis) and importance of each governance area (x axis). So the bottom right is likely what boards are looking for
Note the topics on the right bottom quadrant
Oversight of culture and oversight of human capital (HR execs). This is due to an upswing in board room focus on ESG. Also note succession planning is this quadrant. So if you are an HR exec, especially from a large company, this is good for you. On the downside, not enough time is spent in these areas because we don’t have enough people related execs in the board room. I think people execs have some real board room opps in the upcoming years. Tell the Coretha story about the internal investigation we just completed
Cybersecurity is also important so CISOs are going to become more valuable. Or if you are relatively strong in the IT/cyber area and you do some classes like the NACD cyber program, you may increase your attractiveness to the potential board you are seeking.
Digital transformation is gaining steam. THis can be IT people but it can also be a GTM person who transformed their business. Maybe someone who lead an on prem -> cloud business model change
Click
Finally, there are two areas on the bottom left that are likely moving to the right quickly – ESG and director education. Again a good situation for HR professionals and execs with any type of experience in ESG.
The point of all this is to understand what the buyer (aka the Board) is looking for and turn yourself into the right product they want to bring on board!
This is from the most recent NACD Board room report. It shows the skills sets that Boards say they are most often looking for in new directors and it gives you an idea of the trends that are happening. The numbers in red are the %s for the OUTGOING board members so you can see what skills are being more often sought now vs the folks that are leaving boards.
Some thoughts on this
Leadership skills are now and always have been one of the most important skills sought. CEOs, CFOs, etc.. Especially from public companies are always needed. But if you have run a large P/L in a large company that is real leadership too. CTOs, CISOs and CHROs are also good leadership skills. We tend to like people who have had more of an overall corporate view (as opposed to P/Ls) but we make exceptions if you come from a large company
Notice that finance has been and is still in high demand. Good for me! That is because everyone needs AC members and chairs
The big drop off is in the management/strategic vision category. Less consultant types… Companies are looking for operating execs with real world experience.
Notice that technology and investor skills are becoming a hot add. Tech because things are changing so quickly, and everyone is a tech company these days. IR because topics like ESG are becoming more important to boards and Boards are having to spend more time with investors.
Also notice that operations, S&M and regulatory experience is more wanted now vs the exiting directors.
If you are strong in one of these important categories, you want to showcase that in your Board bio and LinkedIn Profile.
When boards do searches, we are typically looking for someone we can see sitting on a specific committee. We are also looking for someone with relevant skill sets that might be missing from the Board. Your job is to find a way to profile yourself in a way that enables them to see your skills fit their needs.
