What To Look For

One of the questions I’m frequently asked by entrepreneurs is “what is the most important skill set to look for in recruiting and adding board members for my company?” I’ve watched this debated by my colleagues as well – operational, sales or finance expertise, product knowledge, a vast network and CEO coaching skills are among a host of attributes consistently discussed.

All of these are important characteristics to look for when adding people to your board and you should recruit based upon gaps in skill sets in the makeup of the board. I believe though that none of them are as important as finding someone who has exhibited a history of using good judgment. Good judgment is comprised of many things – honesty, character, integrity and thoughtfulness all come to mind. But good judgment is all of those things in action. Consistent good judgment is acquired over time. Will Rogers once said “good judgment comes from experience, and a lot of that comes from bad judgment.” Truer words have never been spoken.

Not too long ago, a board member who I’ve worked side-by-side with for years exhibited particularly poor judgment that has had significant negative ramifications for the company. He acted in a self-serving manner and placed his own interests ahead of the company. It’s very important to note that he didn’t do this maliciously. He cares deeply about the company and genuinely wants it to be a great success. Nevertheless he didn’t think through the consequences of his actions and subsequently hurt the company and wound up being forced to tender his resignation from the board.

I’m sad to say that I saw this coming. It wasn’t the first time this director had exhibited poor judgment. A handful of times over the last couple of years he acted without really thinking, only the consequences weren’t as serious. Nonetheless, I saw a pattern emerging and predicted an ending like this to other board members. The hard part is that this director was well-liked by everyone, myself included. I always enjoyed his company and he’s one of the brightest people I know. He helped the company on numerous occasions and went out of his way to do so. Nevertheless his poor judgment resulted in a lousy outcome and caused a great deal of heartache and pain for everyone involved and it could have been avoided if the board collectively acknowledged his pattern of judgment and acted earlier than later.

This isn’t the first time I’ve seen directors have a significant negative impact on a company, not by a long shot. Directors have far more influence on the success (or failure) of a company than most people think. They comprise a small group of people who ultimately control the destiny of a company.  They are responsible for keeping, hiring or firing the CEO and other C-level executives, approving the budget, raising any material capital (equity and/or debt) or issuing more shares, approving employee options, and many other important decisions. Having people who consistently use poor judgment on your board can have dire consequences. On the other hand having high-character, thoughtful directors can result in massive upside for you.

In my experience, most entrepreneurs give far too little thought as to whom they invite to serve on their boards. They see a big name and they light up thinking about the instant credibility that board member brings and all the connections he or she will make for them. Ask anyone who has served on many boards and they’ll tell you that often the bigger the name, the less work you get and the bigger the headaches. I’ve seen many board members added with very little diligence done and I assure you that’s a recipe for disaster. Most founders I’ve worked with do a great job of diligence before hiring C-level executives, few do the same amount of work before adding a board member.

So what is good judgment and how do you spot it? It’s a little bit like Justice Potter’s famous quote, “I can’t explain it but I know it when I see it.” How do you find out if a potential board member has good judgment? You invest time in getting to know people who have worked closely with them before. Talk to as many people as you can. Ask them about that person’s decision making. How does he make decisions? Is he thoughtful? It’s easier than ever (LinkedIn) to reach people who have worked with someone. I urge founders to put the same time into diligence on prospective board members as they do other key hires.

It’s The People

Since I joined TechStars a few months ago, the question I’ve been asked the most by my colleagues in the venture community is probably “who’s the next Managing Director of TechStars New York?” Despite the fact that we have equally fantastic programs in Seattle, Boulder, Boston, Chicago, San Antonio (Cloud) and also power accelerators for both Microsoft (Windows Azure & Kinect) and Nike, the spotlight always seems to shine the brightest on New York. Having grown up in New York, I get that. It’s the city that never sleeps and if you can make it there, you’ll make it – anywhere.

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Yesterday, we were really excited to announce Eugene Chung as the new Managing Director of TechStars New York. I got to spend some time with Eugene during our interview process and was immediately struck by his thoughfulness. We interviewed over 30 candidates for the position, many with more “brand name” than Eugene. However, no one left their mark on me more than Eugene did. Unlike so many folks that function in a “ready, fire, aim” mentality, Eugene never rushed to answer a question and didn’t throw something against the wall if he didn’t have a good answer.

Personally, I was more impressed with Eugene’s work as a filmmaker than his work at NEA. There’s hundreds of super bright young men and women who graduate from top business schools and go work at big venture capital funds, there’s few people like Eugene who hone their artistic sides as well and take a stab at creating a film dedicated to something as personally important to him as Divided Families.

When we look at startups that apply to our programs, we put a heavy emphasis on team. In fact, we like to say that we look for five things in an application:

  1. Team
  2. Team
  3. Team
  4. Market
  5. Idea

I joined TechStars because like me, David Cohen believes that more than anything, it’s about the people – and he’s built an organization that is founded upon that deeply held belief.   Yesterday, we proved that again. Welcome to TechStars Eugene, you’re a perfect fit.