The Business of Venture Capital, 3rd Edition

32Challenges in the Boardroom

“The fundamental cause of the trouble is that in the modern world, the stupid are cocksure while the intelligent are full of doubt,” philosopher and mathematician Bertrand Russell once wrote. And this battle of stupid and intelligent plays out in the boardroom at all levels. Between CEOs and VCs — between big-dog Type A VCs and other moderately chilled out VCs.

Arthur Rock resigned from the board of Apple when “Apple took a two-page ad in every newspaper you could think of, announcing that they were ready to ship the PowerPC, which I did not know they were going to manufacture — but that's not important — but that they were going to kill Intel. Literally — that's what it said. At that point, I resigned.”¹ Yet it was the same Arthur Rock who once fired the CEO. He said, “Steve Jobs was a national treasure, he is a visionary — so bright — but I had to fire him from Apple.”²

A board member needs to be prepared to face some rough times — either when companies enter the hyper-growth mode or when they fall apart. When Cisco's venture-backed board brought in a new CEO, his first job was to ensure there was no blood in the hallways. “The quarter that I arrived, we hired a shrink. He eliminated fighting in the open hallways. Physical fighting, I mean. I actually had the vice president of engineering deck the sales vice president in my office!”³

Venture-backed boards undergo considerable stresses when a portfolio company faces:

• CEO transitions
• Performance ...