Startup Boards Preparing y our board package

1. Startup BoardsPreparing your board package Why we created this frame-work To help founders / CEOs • Understand what information should be covered in a board-meeting • Think objectively on how investor board-members assesses your startup’s progress • Balance the flow of information and stimulate a honest discussion • Understand how decisions are made By: MahendraRamsinghani Mahendra is the author of “The Business of Venture Capital: Insights from Leading Practitioners on the Art of Raising a Fund, Deal Structuring, Value Creation, and Exit Strategies (Wiley Finance).

2. Startup Boards Book Overview An essential guide to understanding the dynamics of a startup's board of directors Authors: • Brad Feld, Foundry Group • Mahendra R., First Step Fund Released in Q4 2013. Addresses: • The importance of having the right board members on your team and • How to communicate and engage with the board. • How the board can support you, and hold you accountable.

3. Startup Boards Essence of a good board meeting • Information: CEO provides update on business progress • Two-way discussion: CEO and board members are able to address challenges in an open, honest manner • Decisions: Board members make decisions effectively, in the best interests of the company • Time: Meetings are on-time and succinct. No “death by meeting” • Tone: Congenial, yet intellectually honest.

4. Startup Boards Before your first board meeting • Agenda: Develop the agenda with assistance of your lead board member. The meeting could be a general update, or requires decisions / approvals • Attendance: Are all the board members in attendance? Do you have a quorum? • Board Package: Does your board package offer enough level of detail? Is this sent ahead of time so that board-members are prepared? • Takeaways: What is one thing you want to get out of this meeting? Did you ask for help?

5. Sample Board Package First Board Meeting Date Venue Conference Call Line: Time: 10:00 am to 12:00 noon

6. Attendees • Board Members • Name (Title, VC Fund) In Person • Name (Title, Organization) In Person • Observers • Name (Title) Via Conf. Call • Management • Name (Title) In Person • General Counsel • Name (Law Firm) In Person

7. Agenda • Welcome 10:00 am • Business Goals 10:10 am • Discussion: Performance Metrics • Board Discussion 11:10 am • Alignment of goals • Checks and Balances • Other business 11:40 am • Closed Session 11:45 am • Feedback to CEO

8. Welcome • Board introductions • Lead Director welcomes / opens the discussion • Each member introduces themselves and touch upon: • Class of shareholders represented {Preferred / Common/ Observer} • Describe their reasons for investing in the company • Potential value they can bring to the company

9. Business • Start with a brief refresher / overview of the business. • You should describe the stage of development of product, identify key team members, market trends and competitive trends • State facts with minimal usage of flamboyant adjectives. You are no longer selling – treat this as a working session of your key team members. • Pause often – ask “Any questions ? If not, let me move into the next part of our discussion.” • Lead the discussion towards the top 3 goals for the next 12 months

10. Business: Your goals and metrics • Your goals should be measurable, simply stated and achievable • Have no more than 3 / 5 goals • Establish clear metrics for each goal. • Baseline and Stretch metrics should be established • Break these down by quarter or month. In a startup, a lot can change in a matter of days. • You should • have the resources (cash and people) • and be able to impact each goal and its metric • Know that the CEO’s performance will be measured against these metrics

11. Business: Your goals and metrics • The Lead Director and the CEO should lead any discussion to a satisfactory conclusion • All members have been heard / had their inputs • If necessary, align everyone via “Just to make sure we have everyone’s inputs and agreement on the metrics….” • Stay on schedule – if discussions stretch out, politely remind everyone, “In interest of time, we should lead to a conclusion, or have a separate meeting to address some of these items.”

12. Business: Resources • You need sufficient resources to meet your goals. • Resources are of three kinds: Cash, People and Time • Cash and People are inversely proportional to Time. Faster to market is only possible when you have adequate cash and people. • Factor in all three resources conservatively – it always takes 2X long and 2X the amount of cash • When new product features are being added, consider costs for product development as well as launch timing. • If your launch dates are pulled ahead, you will need additional people for development, QA, testing and design pivots • If your adoption targets are raised, you will need more cash for customer acquisition • Your board should factor in resources required to meet your goals • Entrepreneurs on your board have more experience and will be realistic. Watch for opportunistic behavior.

13. Sales and Marketing • Present your sales pipeline (See format in Appendix) • Be Realistic / Conservative • Factor in delays and unforeseen challenges. Stuff happens! • Missteps / delays in revenues can lead to cash challenges • Cash challenges can lead to CEO challenges • Marketing • A measurable marketing plan that demonstrates outcomes • supports sales / lead generation • Brand building / awareness creation • Budget includes expenses for AdWords, PR Firm, Conferences / Trade Shows, Blogs etc. • Outcomes and variances

14. Your Budget and Financials • Ensure your budget planning factors in your key goals / milestones • In first meeting, present your 12 month budget • Provide details by month (See Sample Annual Budget in Appendix) • Seek inputs / discussion • Board should approve annual budget • In subsequent meetings, provide highlights • Cash at hand will last for XX months • Calculate how long the cash will last before you need to raise additional round of financing • For example, if your burn rate is $50,000 per month and you have $500,000 at hand, you will run out of cash in month #10. Thus, you need to start planning for the next raise at least 4/6 months ahead of time • Describe any unexpected expenditures / variations from budget • Include detailed financials in Appendix • Income Statement, Balance Sheet,Cash Flow Statements

15. Top Challenges • Be prepared to discuss your startups top 2/3 challenges • If you don’t have any challenges, you are not thinking hard enough • Your board may not necessarily know all your challenges – make no assumptions • State these challenges without being defensive – every business has challenges. Your board knows that ! • Come prepared with some possible solutions to these challenges. The board cannot do ALL the work but can guide • Stimulate a healthy debate, welcome opposing views • Ask for help – your board members WANT to help • Finding experts to help explore solutions • Accessing some potential customers • Attracting key team members

16. Board Action Items • Formal Portion • Chairman moves a motion • All in favor say “Aye” – any discussion? • Motion “seconded by” and “approved” • Board approval may be needed for: • Your 12 month budget and operating plan / metrics • Option Pool / 409A Procedures • Appointment of Independent Director • Minutes are recorded by Counsel / Secretary & approved in next meeting

17. Board Alignment Make sure all your board members are aligned on • Business • Agreement on 12 month goals • Agreement on Key metrics • Mitigating top 3 challenges • Board Related Matters • D & O Coverage • Decision making process: Options grant / 409A Valuations • Board Meetings / Communication • Lead Director role • Frequency of meetings • Format of communication • Annual CEO performance review • Annual board performance review

18. Close the meeting • Thank everyone • Remind them of next meeting date / time / venue • List your follow up action items • De-compress, chillax and take some time to reflect of key discussions and your board dynamics • Productive discussions and clear outcomes • Board members willing to roll up their sleeves • Healthy participation / 2 way communication • Team spirit/ collegial environment

19. Post-meeting actions • Talk to the lead director and ask for feedback • Quality of meeting • Quality of information / board package • Areas of improvement • After each meeting, ask yourself if: • Board members believe in the CEO’s leadership • Are energized about the future potential of the company • Are convinced they made a good investment decision

20. Conduct a post-mortem • A good board meeting • Covered relevant information / progress updates • Stimulated healthy discussion on key challenges • Board members were prepared, engaged and willing to help • Non-defensive, open discussions • Honest – No pandering or “false emergencies” • Team spirit/ collegial environment • Adhered to time

21. Appendix: Sales Pipeline

22. Appendix: 12 month budget