I'm often asked why there is so much conflict in the meetings of boards of directors of startups.
Watching board meetings erupt over the past decades has led me to a primary cause for most of the troubles at the top.
The main reason is not among often cited "obvious" reasons for board conflict (e.g. investors have different objectives than entrepreneurs, founder CEO is in over her head, competition is winning, running out of cash, etc.).
I think the central reason is due to how the different brains on the board think: the founder CEO and core team are driven by right brain decision-making while the investors are intensely left brain driven. The result is too often less than the best startup, and can even lead to its failure.
Big Corporations Suffer Similarly
This mix and related conflict are not confined to startups. The guru of consumer marketing, Al Riese, has found the same in large public corporations. His findings and related implications are discussed in detail in the book "War in the Boardroom". It is a quick read, packed with powerful marketing tips for company leaders wanting to become world-class and win big.
The board of directors of the typical early stage, venture-backed startup is made up of five members: two from management (founder CEO and a Vice President), two from investors (venture capitalists) and one independent. Small and quick, this mix is combined with monthly meetings and works well for new enterprises who must be fleet-footed and fast to change. Conceptually it is effective and powerful.
Conflict: Intuition Collides with Numbers
Founder entrepreneurs use a lot of intuition to make their decisions. Starting with an original idea, they move as fast as possible to push it forward, shaping it daily even hourly into something that grows and attracts more and more business. This speed, combined with entering a market that does not exist, leads to decisions that are based not mainly on statistics, rather they are made primarily at the gut-feel level. Bold and gutsy, inspiring and terriflying, those decisions result in the success or failure of the new enterprise.
The current wave of consumer-centric new enterprises (from Facebook to Instagram and Tweeter to apps and games for pad and phones) is lead by individuals trained to operate with a ton of intuition. Yet I've also witnessed similar intense intuitive decision-making in semiconductor and IT startups. Gut feel wins, often. Doubt that? Try asking people who worked with Steve Jobs and the Google co-founders.
In contrast, startup investors are mainly thinking left brained. The venture capitalist is most likely to come from an established company, often a public one whose stock is traded on Wall Street. Stockholders hold such boards responsible for getting the CEO to set expectations and meet financial goals (lots of numbers), quarter after quarter after quarter. That numbers-centric business culture is where the VC became famous, a hero, and eventually lead to his leaving to become a Partner in a venture capital firm. There he invested in a half dozen startups and joined their boards of directors, bringing with him the numbers-centric thinking that he used to become successful and famous.
The inherent conflict is obvious: When the founder CEO declares her right brained intention to boldly go "where no man has gone before," the left-brain set of board members goes ballistic. The ensuing fight is about the lacking numbers to support the gutsy move.
Exceptions are Great
People who learn how to find "the golden middle" (old German saying) win big. It took a lot of pain for Steve Jobs to finally figure that out, but when he did, the company that emerged became "awesome." There are other examples out there, and they make fine independent board members.
Investors who can do think intuitively have become icons. Examples include Don Valentine, venture capital pioneer and founder of Sequoia Capital. He hand picked the second wave of Sequoia investors, each of which I've seen demonstrate deep understanding of right brain thinking: Michael Moritz and Doug Leone.
Similar intitive thinkers can be found among the early employee numbered people who have left large startups such as Facebook before they went public to become active angel investors. Intuitive thinking investors are well worth hunting for.
If you assemble your board of directors with special attention to how each person makes decisions, your chances of success will get a big boost (and your long board meetings will be more pleasant, less filled with wasteful conflict). Right brain thinkers are especially valuable to founder CEOs, but are not common. Do your homework on investors, they all have money, but not all have the appreciation and ability to operate with fast moving, intuitive decision makers like you. When you have such people working for you (on the board), you will have added one of the most powerful elements of what it takes to build an unfair competitive advantage for a startup.
I wish you The Best on your Adventure!