"How to Manage Up and Have Happy a Board. Even When You Miss a Quarter."
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Aaref Hilaly, Partner at Sequoia Capital, discusses best practices for managing your board of directors and how to be proactive in communicating when things go wrong.
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"How to Manage Up and Have Happy a Board. Even When You Miss a Quarter."
- 1. AAREF HILALY SEQUOIA #saastrannual How to Manage Up and Have a Happy Board, Even When You Miss a Quarter
- 2. Bad things can happen to good people How to Manage Up and Have a Happy Board
- 3. x SAAS COMPANIES How to Manage Up and Have a Happy Board
- 4. At some point, you will miss. How to Manage Up and Have a Happy Board
- 5. How to Manage Up and Have a Happy Board
- 6. Do not manage the board, engage them. Lesson #1 How to Manage Up and Have a Happy Board
- 7. Our casual team The daunting stare of a serious VC How to Manage Up and Have a Happy Board
- 8. Do not manage the board, engage them. Key takeaways Remember the board meeting is for you, not for investors. Use it as a forcing function to look up from the day to day and think big picture re: where you are going. Talk about what’s on your mind — it’s probably the most important thing. → → → Lesson #1 How to Manage Up and Have a Happy Board
- 9. Product over metrics Lesson #2 How to Manage Up and Have a Happy Board
- 10. Email analytics e-discovery How to Manage Up and Have a Happy Board
- 11. Key Takeaways Focus on product New learnings Make sure board members can explain : • What you do • Why it's better than the competition • How you will win an important market → → → Product over metrics Lesson #2 How to Manage Up and Have a Happy Board
- 12. Everybody misses at some point How to Manage Up and Have a Happy Board
- 13. What not to say Common Pitfalls Denial: we missed but everything is great Hope: we missed, but if we keep doing exactly the same things, we will exceed next quarter Doom & Gloom: we missed, we are screwed, it's hopeless → → → Everybody misses at some point (here’s what not to say when you do) How to Manage Up and Have a Happy Board
- 14. Own the miss Lesson #3 How to Manage Up and Have a Happy Board
- 15. Own the miss Lesson #3 Key Takeaways Control the meeting Be honest about what you and the team did wrong Help the board process what happened → → → How to Manage Up and Have a Happy Board
- 16. Put the board to work Lesson #4 How to Manage Up and Have a Happy Board
- 17. Put the board to work Lesson #4 Key takeaways Prepare a list of things the board can do to help in advance of your board meeting Set expectations about when things improve, and schedule board meetings for those times → → How to Manage Up and Have a Happy Board
- 18. Do not manage the board, engage them Product over metrics Own the miss Put the board to work Board Room Edition The WORST-CASE SCENARIO Survival Handbook How to Manage Up and Have a Happy Board
- 19. How to Manage Up and Have a Happy Board
- 20. x Thank you hilaly@sequoiacap.com How to Manage Up and Have a Happy Board
Notes de l'éditeur
- We all know that bad things happen to good people: cars crash, cats die, cancer spreads, elections produce unexpected outcomes. In the context of your business, one of the worst things that can happen is missing a quarter. That’s because when you miss, people question their commitment to the cause — will this business succeed? Does our CEO know what they are doing? Should we run for the exit? These are all questions that creep into the minds of employees and sometimes board members. I spent 10 years as an entrepreneur building two software companies. My first business (CenterRun) I was a clueless founder. In my second (Clearwell) I was a slightly less clueless CEO. In that time, we missed a LOT of quarters.
- I’ve now spent 5 years at Sequoia. We work with a lot of SaaS companies, and they miss a LOT of quarters. That’s not because the founders aren’t great, or the businesses aren’t promising. It’s because life is unpredictable and stuff goes wrong.
- No matter how good you are, at some point you WILL miss.
- In the next 15 minutes, I want to walk through a basic survival guide for what to do when that happens.
- But first, let’s start with two things to do BEFORE it happens. Lesson #1: Do not "manage" the board I know this talk is called “how to manage the board”, but that’s a completely wrong approach. It’s a huge mistake to manage your board, you should engage them.
- I learned this in my first ever board meeting. It was Feb 2001 and I had just raised money from Sequoia for my 6 person startup called CenterRun. The board was me and MM, who’s other boards at the time were Google, Paypal, Yahoo and Flextronics. [MM anecdote — focused on hiring execs].
- Key Takeaways Do not manage the board, engaged them Remember the board meeting is for you, not for investors. Use it as a forcing function to look up from the day to day and think big picture re where you are going Talk about what’s on your mind — it’s probably the most important thing.
- Product over metrics
- How you engage the board is important. At my second company, Clearwell, I had Jim Goetz from Sequoia on the board. The early board meetings all focused on product: what were we building? what was the feedback from customers? how does it address an unmet need? That relentless focus is how we started with email analytics, and ended up in e-discovery, a market we had never heard of, and built a profitable $100m revenue run-rate business that we sold to Symantec. This is super important because SaaS companies are easily understood and comparable with key metrics (LTV, CAC, quick ratio, whatever). So it's easy for boards to lose sight of what you are building, why it matters, and how you will win. Don't do that, because when you miss, everyone freaks out much more if they are not clear on the big picture.
- Focus on product in your board meetings At least once a quarter, explain new learnings from customers / the market Make sure all your board members can explain in 3 sentences what you do why it's better than the competition and how you will win an important market That gives them a compass to navigate the numbers and keeps them grounded.
- OK, so now let’s assume you are following these two lessons. You are engaging your board, not managing them, and keeping them focused on product, not just the metrics. Great, but you will still miss. You will still miss. You will still have that terrible meeting, where you walk in with your stomach in knots. You will feel like you have screwed up, let everyone down, promised results that you did not deliver. You’ll be questioning everything, but at the same time know that people expect you to have the answers. What do you do?
- Common Pitfalls Here’s what you don’t do. Don’t say: - "we missed but everything is great" -- denial - "we missed, but if we keep doing exactly the same things, we will exceed next quarter" -- hope - "we missed, we are screwed, it's hopeless" -- doom & gloom - most common: "we missed, but if we just fix this one thing (usually, change one executive), we'll be fine" -- silver bullet None of these are credible. They are just knee-jerk responses that make you look like you don’t know what you are doing. The reason I know this is that I fell into these traps. In Q2 2002, we missed horribly at CenterRun. I naively believed my optimistic VP Sales and promised the board that a bunch of deals would come in at the end of the quarter. Zero came in. I had to go see MM at my lowest ebb, and was full of doom and gloom. I wasn’t sure if he’d shout at me, or want to fire me, or what. Instead, he listened, then sat in silence, and then asked me, “Have you seen the movie Apocalypse Now?” [MM anecdote]
- Lesson #3: Own the miss What I realized afterwards is that a good board member has seen lots of companies miss lots of quarters. What matters more than the miss is your reaction. And you need to own it! You should be upset, to show that you get the importance. You should be hard on yourself, because the harder you are, the more the board will want to lift you. But you should also help the board process what happened. Is it a tactical issue or a structural one? Tactical would be you hired a bad sales rep. Structural would be product issues causing churn, or increased competition that will take longer to fix. At Clearwell, we had a huge miss, right after raising Series C. We started giving the standard reports, until our new investor interrupted, looked at me and said: “what the hell happened here?” I spent the entire board meeting at the white board walking them through the fact that our addressable market (people doing ediscovery in house) was too small, and how we were changing packaging, pricing, and adding features to broaden out. To give us the runway, we had to lay off some people.
- Key Takeaways Control the meeting: send out materials in advance and tackle the miss head-on as the first agenda item Be honest about what you and the team did wrong Help the board process what happened — get to root causes, no matter how unpleasant
- Put the board to work The reason you have a board is so that they can help you in tough times. Bring them into the process, and put them to work — not on demeaning tasks or busy-work, but on meaningful things that will help. “It would be great to speak with 5 customers in the finance vertical to see if that’s a market we should pursue”, or “Can I get your help recruiting a VP Marketing?”, or “Walk through the product with me and let’s discuss how we could simplify the workflow”. People feel better when they are doing something to help.
- Key Takeaways Prepare a list of things the board can do to help in advance of your board meeting Set expectations about when things improve, and schedule board meetings for those times
- So to summarize, the 4 key lessons are: … Do not manage the board, engage them Product over metrics Own the miss Put the board to work
- Today, I’m on the other side of the table. Instead of being the entrepreneur, I am the board member showing up at board meetings hearing about the miss. But often I am actually more bullish about a company after a miss than before. When founders do it right, the miss actually strengthens our relationship. Because founders who show the grit and skill to lead their companies through the tough times are much, much more likely to succeed.
- Thank you…