How should founders choose venture capitalist partners for their board?

Founders should evaluate potential VC partners not just by the firm's name but by the individual partner's quality and whether there's a soulful connection. It's crucial to remember you might be working with them for many years, so compatibility and shared values are key.

What is the 'Redfin' approach to board meetings, inspired by Amazon?

Redfin uses detailed documents, not just slides, for key issues in board meetings. This forces deeper, explicit thinking and requires everyone to agree on a single version of the truth, fostering candor and better problem-solving.

How can CEOs manage the 'rage' phase when dealing with their board?

During an early 'rage' phase, CEOs often feel a conflict with authority. It helps to remember you are still in charge and the board is an advisor, not the sole driver. Seeing the board as a radio you can't turn off but can still steer around is a useful analogy.

What are the best practices for conducting board interviews?

During board interviews, avoid being overly impressed by credentials or trying too hard to impress. Instead, focus on listening deeply and clearly explaining your company's specific needs and the problems you need help solving.

Why is it important for executives to bring backup to board meetings?

Bringing backup materials allows executives to provide precise, data-driven answers, rather than relying solely on memory. This ensures accuracy, makes them relevant in the discussion, and demonstrates preparedness.

What is the value of diversity on a company's board?

Diversity on a board, particularly gender diversity, can lead to a deeper perspective and make employees feel better about the company. It shows the company values broad input and can attract talent more reflective of the broader population.

How should a CEO handle making decisions after a board meeting?

Instead of making decisions on the spot, it's beneficial to thank the board, acknowledge their input has deepened your perspective, and state you will send a decision within a few days. This allows time for proper consideration and reinforces the CEO's role as the ultimate decision-maker.

Key Moments

Building Your Board | Glenn Kelman

Y Combinator

Science & Technology4 min read31 min video

Jun 15, 2017|8,032 views|110|4

YC Y Combinator

Save to Pod

Key Moments

TL;DR

Glenn Kelman discusses building effective boards, focusing on mission alignment, operator peers, and candid communication.

Key Insights

Choose board members who genuinely believe in your company's mission.

Prioritize bringing on fellow operators who can serve as peers.

Cultivate candid communication, sharing all problems and vulnerabilities.

Document-based discussions are more effective than slide presentations for deep dives.

CEOs should actively manage their boards, directing them on desired outcomes.

Board members providing input after the meeting can be highly valuable.

FOUNDATIONS OF A STRONG BOARD

Glenn Kelman emphasizes that building a strong board begins with a deep connection to the company's mission. Ideal board members should not only love what the company does but also listen more than they speak and commit to attending meetings in person. He stresses the value of recruiting fellow operators who can relate to the CEO's challenges on a peer level, citing an example of a successful board addition who understood the company's scale and challenges intimately.

SELECTING THE RIGHT INVESTORS

When selecting investors for the board, especially those providing crucial funding, the focus should be on the individual partner rather than just the firm's reputation. Kelman advises founders to evaluate potential investors for a 'soulful connection,' recognizing that these relationships will be long-term. While venture firms offer access to a network and experience in fundraising, choosing a partner who aligns with the company's values and approach is paramount for a healthy board dynamic.

THE VALUE OF OPERATOR BOARD MEMBERS

Recruiting experienced operators to the board can bring invaluable practical insights, but caution is advised against simply seeking 'big names' from large corporations. These individuals may not understand the realities of an early-stage company's struggles. Instead, former operators who have faced similar challenges at comparable company stages can act as true peers, offering empathy and practical advice. This peer-level connection facilitates open communication and more relevant problem-solving.

OVERCOMING EARLY BOARD STRUGGLES

Kelman acknowledges a difficult 'Phase One' of his board relationship characterized by personal 'rage' and a siege mentality, common for founders resistant to authority. He learned that the board is rarely the core problem when a company struggles. A key turning point was realizing his own accountability and shifting his perspective to view the board as a resource, not an adversary. This realization allowed for more honest communication and constructive engagement.

FOSTERING CANDOR AND TRANSPARENCY

Effective board engagement thrives on radical candor. Kelman advocates for sharing all problems, including personal failings and mistakes, with the board. He learned to present challenges in their 'ugly bizarre detail,' enabling the board to address real issues rather than manufactured ones. This level of transparency builds trust and allows board members to offer more informed and impactful guidance, turning potentially adversarial relationships into true partnerships.

DOCUMENT-DRIVEN DECISION-MAKING

Kelman champions the use of detailed documents over slides for board meetings to foster deeper thinking and explicit communication. This approach forces the executive team to thoroughly analyze issues, articulate their reasoning, and present a cohesive narrative. Publishing these documents internally also promotes transparency and helps align the entire company around a shared understanding of challenges and strategies, enhancing truth-telling and problem-solving across the organization.

STRATEGIC BOARD MEETING MANAGEMENT

CEOs should actively manage their board meetings, guiding the discussion towards desired outcomes. Instead of making immediate decisions, it's beneficial to take time to process input and communicate decisions later, reinforcing the CEO's role as the 'decider.' Transparency with the management team about board decisions and the rationale behind them is also crucial. By clearly defining meeting objectives and encouraging focused discussion, CEOs can extract maximum value from their board interactions.

CULTIVATING BOARD MEMBER ENGAGEMENT

Encouraging board members to invest time in understanding the business is critical. This includes allowing them ample opportunity to engage with the CEO and, where appropriate, other team members. Board members who are unwilling to dedicate significant time are unlikely to be truly supportive. Valuing their input and reinforcing productive meetings through appreciation helps maintain a positive and effective working relationship, ensuring the board remains a valuable asset to the company.

THE ROLE OF DIVERSITY ON THE BOARD

Kelman advocates strongly for board diversity, regretting its delayed implementation at Redfin. He notes that adding diverse perspectives, particularly from women, not only enriches the board's insights but also significantly boosts employee morale and perception of the company. Prioritizing diversity leads to better decision-making and a more inclusive organizational culture, underscoring its importance as a strategic imperative rather than an afterthought.

VALUE OF POST-MEETING FEEDBACK

Kelman highlights that significant value can be derived from board members' insights provided after the formal meeting concludes. This delayed feedback often reflects deeper consideration of the issues discussed. Encouraging these follow-up communications and even soliciting specific expertise on certain topics ensures that the board's collective wisdom is fully leveraged, moving beyond the constraints of in-meeting spontaneity to more considered and impactful strategic input.

Mentioned in This Episode

●Companies

●People Referenced

Building and Managing Your Board

Practical takeaways from this episode

Do This

Choose board members based on a soulful connection and their alignment with your mission, not just the firm's name.

Recruit operators with relevant experience and a similar understanding of your company's scale and challenges.

Write clear job descriptions for the board members you seek, detailing needed expertise.

Prioritize board members who listen more than they talk.

Invest significant time in getting to know potential board members before recruiting them.

Be candid and transparent about the company's real problems during board meetings.

Use documents, not just slides, to force clear and explicit thinking on complex issues.

Prepare executives for board meetings by indicating when they will speak and what question they will answer.

Be direct and crisp with answers: 'Yes', 'No', 'I don't know', or a number.

Admit when you don't know something to be credible and model good behavior.

Have executives bring backup materials to provide precise answers.

Follow up with board members to acknowledge productive meetings and reinforce the relationship.

Communicate your desired outcomes for each board meeting beforehand.

Encourage management teams to attend board meetings to understand the process.

Publish board meeting documents internally to foster truth-telling and problem-solving across the company.

Avoid This

Don't always choose the firm with the biggest name when seeking investment; focus on the quality of the partner.

Don't recruit executives from massive companies who don't understand early-stage challenges.

Don't present fake problems to the board; be honest about real issues.

Don't aim to be the 'King Without a Kingdom' – a board member who only speaks from past authority without listening.

Don't let employees think the board is just an entity that yells at you; foster transparency.

Don't accept a board candidate who talks incessantly and doesn't listen.

Don't make impulsive decisions in board meetings; take time to consider new perspectives.

Don't avoid discussing diversity on your board; it leads to a better overall perspective and employee morale.

Don't rely on impressive-sounding credentials alone; assess if the candidate truly fits your needs.

Don't let board members reject candidates for you; handle rejections personally.

Don't treat board meetings as a 'tap-dancing show' to look good; focus on the actual business issues.

Don't blame the board for unpopular decisions; take responsibility.

Don't expect board members to find the right answer off-the-cuff; allow for follow-up discussions.

Don't think of the board as just an advisor; remember you are managing them too.

Don't use slides alone for critical issues; detailed documents force deeper thinking.

Common Questions

VC board members offer access to capital and a broad network due to their experience with many deals. Operator board members, however, bring direct, hands-on experience from companies at a similar stage or facing similar challenges, providing more practical, peer-level insights.

Topics

Business & Entrepreneurship Leadership & Management Board Governance Company Culture Venture Capital Founder Advice Career & Skills Recruiting Strategies Startup Boards Executive Leadership

Mentioned in this video

People

Richard Gere

An actor whose character in 'Pretty Woman' was an early, albeit cinematic, reference point for what Glenn Kelman thought a board meeting might look like.

Bob Milod

A board member from Priceline who brought a different perspective as a former CFO and PE firm member, focusing less on growth at any cost and more on governance.

Austin Lian

The founding CEO of Carmax, who expressed enthusiasm upon being contacted by Redfin, indicating he had been anticipating such a call.

Colonel Jessup

A character from 'A Few Good Men' quoted by Glenn Kelman during his 'rage' phase, symbolizing an aggressive and unreasonable stance towards his board.

Emily Melton

A board member who responded supportively when Glenn Kelman admitted the company needed more time and money, offering help instead of ending the venture.

Julie Bornstein

A board member recruited from Stitch Fix, whose successful recruitment involved auditing a board meeting, highlighting the importance of candidates investing significant time.

Media

Pretty Woman

A movie that served as Glenn Kelman's initial, though inaccurate, visual reference for board meetings.

A Few Good Men

A movie from which Glenn Kelman quoted Colonel Jessup's line, representing an early, aggressive approach to dealing with his board.

Spider-Man

A movie referenced for its character (played by William Dafoe) who was fired despite inventing a crucial 'suit', used as an analogy for ineffective board members.

Companies

CarMax

A used car retailer that served as an example of a company whose CEO (Austin Lian) was a desirable board member candidate for Redfin due to relevant experience.

Priceline

A company where Bob Milod served as CFO before joining Redfin's board, contributing a valuable perspective on governance.

Greylock

A venture capital firm that provided a board seat to Redfin and is noted for its access and ability to make introductions, including potentially to high-profile figures.

Redfin

A technology-powered real estate brokerage founded by Glenn Kelman, which is the central subject of the discussion on building its board.

E-Trade

A company mentioned as an example of a major success that might impress a CEO during a board candidate interview, highlighting the risk of being overly impressed rather than assessing needs.

Amazon

A company whose practice of using documents instead of slides for meetings influenced Redfin's approach to board communication.

Stitch Fix

A company from which Julie Bornstein was recruited to serve on Redfin's board. Her recruitment process involved auditing a board meeting.

Locations

Mount Rainier

A location where Glenn Kelman found a space to candidly discuss his issues with his board, marking a turning point in their relationship.