The Business of Venture Capital: Insights from Leading Practitioners on the Art of Raising a Fund, Deal Structuring, Value Creation, and Exit Strategies, 2nd Edition

CHAPTER 22 Board Value Creation and Evaluation

“A lot of VCs have a playbook of how they are going to add value. They end up in a Socratic mode—always asking for information—constantly probing and pushing, but never turning around and saying—let me help you solve that problem. It becomes a very time-consuming affair for the CEO, and it's a very selfish act on the part of the venture capitalists.”

—Brad Feld, The Foundry Group¹

To ensure that, as a practitioner, you are on the “assets” side of the board's balance sheet, you must understand the company's short-term value drivers. For early-stage companies, the immediate drivers may be product development, which calls for technical acumen. As the product gets ready for launch, access to beta sites or first customers takes priority. Risk mitigation is interwoven at all stages, with ongoing threats from competitors or substitutes. As the company grows, access to financial resources and growth management techniques comes to bear. Finally, the exit negotiation requires the ability to align all stakeholders and ensure positive outcomes. Several variables affect this complex interplay, including the stage of the company, the present and future constitution of the board, skill sets, and investor alignment and preferences.

Generally speaking, a practitioner can support the CEO of an early-stage company by following value creation steps:

• Product development
• Sales and growth of revenues
• Improved profit margins

“The only reason top-tier ...