Oct 232014
 

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Dr. Earl R. Smith II
DrSmith@Dr-Smith.com
Dr-Smith.com

Emerging companies face a challenge when it comes to attracting top-quality senior talent – particularly for the board of directors. Here is one way to meet that challenge.

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When asked what I do I sometimes reply that I am a Virtual Chairman. That answer almost always generates a somewhat confused look. As it is one of the more important contributions that I make to start-ups, I have developed a series of clarifying statements that illustrate what I mean by that rather obtuse term – Virtual Chairman.

For most start-ups the Board of Directors is an afterthought – a legal necessity that is populated by the three Fs – founders, friends and family. The position of Chairman of the Board (virtual or otherwise) is either unoccupied or claimed by the senior founder. As a result the start-up suffers from a lack of the kind of senior talent, seasoned judgment and access to a wide and rich source of resources and contacts that a well-constructed board can bring.

Because the role of Chairman – let alone Virtual Chairman – almost never figures into the organizational charts of founders of start-ups and because a discussion of the role often brings a new clarity of vision, I have developed a page-long set of talking points to guide the discussion.

I want to review them in this column in the hope that they will be useful to founders that are trying to get their start-ups off the ground and into that rarefied realm of established, profitable and successful companies. So here are my talking points (with a bit of additional commentary):

 

I help founders build their ideas into a successful business. Neither an investor nor a consultant, I support entrepreneurs as a full member of their team; as an owner and a decision maker. My contribution is judgment based upon extended experience and extensive contacts.

 

It is a real challenge to get seasoned and successful people to sit on the board of a start-up – but it can be done. The benefits to the company can be quite significant. Most substantial people are sensitive to any risks to their reputation and very alert to liabilities that can accrue from any board membership. They tend to be very focused on the vision, capability and ethics of the founders. Founders that understand the gains that can be realized from a board need to approach the challenge seriously and with a willingness to reward commitment with the only thing available in the early phase – equity. The keystone to any board is the Chairman. This is the person who will set the tone and ground rules for the board and will be instrumental in filling the rest of the board seats.


I help to incubate startups. In that role, I provide leadership and experience. I invest my time, and, in return, I receive an equity stake in the business. As a member of the team, I think like an owner and win or lose with the founders.

One of my early contributions as a Virtual Chairman is to provide experienced guidance and free or low-cost access to resources that would be prohibitively expensive if the company had to pay market rates for them. My own experience and contacts can be useful over a wide range of areas such as refining a vision for the company, arranging funding, forming strategic alliances and structuring an exit strategy.


Start-ups require high-speed execution and unrelenting perseverance if they are going to succeed. Things can easily become chaotic. My role is to keep my head above water and provide insight, direction and stability.

There is nothing like having one or two battle hardened veterans on your team when things shift in to overdrive and your carefully crafted business plan gets shredded by the unanticipated. Start-ups by their nature exist at the very edge of chaos. The founders are most often trying to do something that has been rarely if ever done successfully before. Passions and anxiety run high and the tendency to panic can be very hard to manage. Veterans can maintain level heads in the midst of this chaos and help a company navigate the shoals and reefs.


I bring to each team the experience I’ve gained in raising money, setting strategy, building and leading teams, establishing strategic partnerships, developing products and services and bringing them to market, arranging mergers and acquisitions and doing deals. And I make all my contacts available.

One of the most important contributions that I make is possible because of the experience I have gained over several decades of starting companies and helping founders grow theirs. I can keep a team from squandering resources inappropriately or neglecting opportunities that are crucial to the company’s growth. I can provide a road map which keeps the horse before the cart, all of the axles well greased and the entire rig firmly on the right path.


In a fundamental way I act as a company’s virtual chairman. I am active in the business but don’t play any day-to-day operating role. I am involved in all planning and major decision making.

It is a rare group of founders who willingly subject themselves, their business plan and their vision to aggressive oversight. Sooner or later it does occur. For some teams their first experience with critical review is during the heat of a presentation to a funding source. Others get their first experience with aggressive feedback from clients – clients who do not reflexively accept the founders’ rosy evaluation of their value proposition.

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