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C o o l e y I n s I

C o o l e y I n s I

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Published by: Startup Tool Kit on Nov 20, 2009
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12/07/2009

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One o the best ways to demonstrate to investors that your company is operating eectively and building value isto have good governance practices in place. A well-unctioning Board o Directors having regular meetings is agreat way to keep your investors inormed and engaged, and is a critical component o sound corporate governance.Here are some tips on how to accomplish this.
1.
Hold Frequent Meetings.
Following any initial venture fnancing, expect to hold six to twelve Boardmeetings per year depending on investor preerence. Venture capitalists are particularly sensitive to thefrst Board meeting ater they invest – be sure to be adequately prepared, and there should be no importantdisclosures that were not disclosed in due diligence pre-closing. Suggest to your Board alternating betweenin-person and teleconerence meetings with the latter being more operationally ocused and shorter in duration.
2.
set a Meeting scHedule.
You will fnd that it is hard to fnd mutually-agreeable dates or all o your Boardmeetings. At the outset, and then beore the beginning o each ollowing year, work with the assistants o eacho your Board members to set a schedule o Board meetings or the whole year, and then do what you can tostick to it.
3.
select a Meeting location.
Consider having some o your meetings away rom the company’s ofces.For example, consider occasional meetings at the ofces o your investor or company counsel.
4.
use a Board Book
. Send a Board “book” at least a day in advance. The Board book should include, ata minimum: a “dashboard” highlighting key fnancial and operational metrics (talk with your VCs to see whatino they want to see); summary fnancial statements including comparisons against plan/budget; operationalreports (sales, business development, product development/engineering, marketing, fnance); minutesrom prior meetings or approval; listing o proposed stock option grants or approval; and an up-to-datecapitalization table that includes a ull listing o outstanding stock options.
5.
set a Meeting agenda
. Include a summary agenda with the Board book, including estimated discussiontimes or each agenda item (see “Time Management” below). The principal objective o each meeting is toreview critical operational and fnancial issues as well as short term and long term strategy. With respect tooperational reviews, consider picking one unctional area or ocus at each meeting.
ar advrim.
www.cooley.com
for Emerging Company Board Meetings
tips
20
 
 Top
Cooley InsIghts:
emerging companies
 
6.
Manage tiMe.
Venture capitalists and busy executives are very sensitive to their schedules and as a resultare very appreciative when management can run Board meetings efciently. Board discussions can oten takeon a lie o their own, and while it is important to allow the Board to have meaningul discussions on importanttopics, it is also important to manage towards a timeline so that your meetings do not run ar beyond the timeallocated or the meeting. To this end, assigning estimated discussion times next to each agenda item can bea helpul tool to help guide expectations regarding anticipated discussion times and to help ensure that you areable to reach each topic on your agenda. Don’t read every slide contained in the Board book; rather, ocus onhighlights. Detailed inormation can be placed in appendices to the Board book or review by Board membersbeore or ater the meeting. Most Board meetings can be concluded in a two-hour period i people are ocusedon being efcient.
7.
deterMine Meeting attendees.
Determine who gets invited to attend the meeting rom themanagement team. Remember, this may be a political issue. Consider inviting management team members ona rotating basis to drill down on select topics. Empower management team members to make presentations tothe Board on their unctional areas (being mindul o “Time Management”).
8.
Hold executive sessions.
At the beginning or end o each Board meeting, allot time or an “executive”session (i.e., Board members only, no management team members), even i there is no set agenda. This willcondition your management team to expect there to be a closed session which mitigates anxiety about them.
9.
Hold investor-only sessions.
Consider scheduling an investor designee-only session at the end oeach meeting. Some venture capital investors will expect this as a matter o custom. Ask your investors whatthey preer.
10.
take Minutes.
Minutes are intended to be “summaries” o the meetings. Most venture capitalists andcounsel would advise you that “less is more.These shouldn’t be play-by-play summaries, but rather a very highlevel summary o discussions and actions, and attaching any appropriate resolutions adopted. Be careul aboutputting certain inormation in minutes, such as the names o individuals you are trying to recruit, prospectiveinvestors, potential buyers or targets – remember, this will be seen later in due diligence by others and you maynot want to discuss those details later. Have counsel prepare, or at least review, the minutes.
11.
don’t surprise Board witH Bad news.
Although it is fne to spring good news on your Board,consider calling individual Board members in advance o a meeting with bad news so that they are notsurprised. Similarly, i you are going to need to discuss difcult or controversial topics, call each Board memberindividually beore the meeting so you know what to expect and can manage the discussion.
12.
adopt coMpensation guidelines.
Have the Board adopt compensation guidelines or salary, bonusand option grants that will provide parameters to management in between Board meetings.
13.
elect independent directors.
Try to identiy and elect independent directors with relevant experiencein connection with an initial fnancing. Aside rom the “checks and balances” these independent directors canprovide between ounders and investors, having them may be essential or review and approval o interestedparty transactions, and will become important or Audit Committee and Compensation Committee membership.
toP 20 tIPs FoR eMeRgIng CoMPAny BoARD MeetIngs

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