Joining a startup board? 4 key questions CIOs should ask
As a prominent Bay Area California CIO, Ralph Loura has lost track of the number of tech startups that have asked him to join their fledgling boards of directors.
“You have to be very selective, and also careful about your brand,” says Loura, who sticks largely to advisory board roles with several Silicon Valley startups. Currently the CIO of optical networks provider Lumentum, Loura sits on two national nonprofit boards, the Technology Business Management Council and Genesys Works.
“You should only join companies you feel strongly about,” he advises. “There has to be good chemistry there with the leadership team.”
That “good chemistry” with the founder of Boston-based backup software startup GRAX is what led CIO Ken Grady of Idexx Laboratories to sign on as GRAX’s only independent board director in early 2019. The five-member board includes the CEO, CTO, two venture capitalists and Grady.
Since CIOs and their teams are the primary targets for GRAX products, “I am the voice of the customer, so they look to me for the value proposition,” says Grady, who was originally a strategic advisor and influential early customer. He was asked to join the GRAX board after a candid conversation with the CEO, where Grady spoke up about how customers were actually using the software. “Let your customers tell you your business model,” he advised.
As Grady’s experience shows, enterprise CIOs can certainly provide valuable customer perspectives to a tech startup struggling to break into the $1.6 trillion U.S. tech market. But what’s in it for you? What makes a seat on a startup board worth untold hours of your unpaid time and effort? Below are some expert answers to a few key questions CIOs should consider when a startup CEO invites you to take a seat.
Who are the founders and how will your skillset help?
“Pedigree matters,” says Sanjay Mirchandani, CEO of Commvault and a former board member at data management startup Datameer. “Fall in love with at least three startups before you choose one.”
Consider how much help you can provide in accelerating their success. Then do some serious homework. “Who are the VCs behind them? What track records do they have?” Mirchandani adds. “Engage with the VCs, talk about their portfolios. See where they have holes in their strategy.”
Idexx CIO Grady recommends asking practical, probing questions like: “What’s your sales motion? How do you find your customers? How long does it take to turn on your product and get value?”
His final question is about the endgame. “I would ask, ‘OK, founder, what’s your exit plan? Are you riding this all the way or looking to sell off to AWS or Google?”
If that question makes you cringe, you’ve already got your answer. Lending your expertise to the sales side of product positioning is a role reversal for many CIOs, who are most accustomed to fielding vendor pitches, not producing them.
Joining a startup board “is a mixed bag in many respects,” cautions Phil Fasano, CEO of Bay Advisors and a veteran CIO and board-level advisor. “First, you aren’t working for money but for equity. So, pick a company you’d like to own for a long time—and one you feel passionate about their value.”
Your job as a CIO on a startup board is “doing business development, helping to govern and providing advice to the CEO,” he adds. “You’ll be expected to open your Rolodex.”
“How do you elegantly explain where you draw the line?” when pitching to your CIO network, asks Julie Cullivan, an experienced board director and former chief technology & people officer for Forescout Technologies in Silicon Valley. “I didn’t find it to be a huge problem,” she says, recalling how she would reach out to vouch for a particular product with CIO friends, but would not pressure them further.
“I recommend having that conversation (with the startup board) up front,” she says. Find out how much of their interest in you is about leveraging your network versus helping grow the company or manage its enterprise risk.
Fulltime CIOs Loura and Grady both stressed the importance of drawing a clear line between their day jobs and their board advisory roles. “I sat down with my Idexx CEO and we drew up conflict-of-interest guidelines,” says Grady, who only speaks in support of GRAX products as a board member, not on behalf of Idexx.
Before Loura took his enterprise CIO role with HP in 2014, he made a full-disclosure list of all his advisory board roles. “I know of cases where people are asked to resign” after failing to keep their employers fully informed, he adds.
Will this experience enhance your business leadership brand?
Almost certainly, it will. Serving on a startup board introduces CIOs to entirely new angles on real-world business challenges—from merger & acquisition debates to working directly with venture capitalists to rethinking product strategy.
“It’s absolutely an education,” says Idexx CIO Grady. “It’s given me a very different perspective on M&A from an insider’s point of view.” In his interactions with his own company directors now, he brings those fresh perspectives on strategic, sustainable growth to ongoing board discussions.
Your engagement with the startup’s leadership team is also likely to be deeper and more varied. “It’s a very different commitment level in how you support a startup board,” Cullivan notes. For example, while the executive team ultimately has to make the decisions, “if they’ve never done an executive compensation exercise, they may ask for your help.”
Perhaps the greatest asset to your brand as a business leader is the “ton of connections” you’ll make with a new crowd of early investors, venture capitalists, and portfolio company managers, Cullivan points out. “Don’t underestimate the power of that network.”
Would an advisory board or observer role be a better fit for now?
For fulltime CIOs, the potential time sink and additional responsibilities may simply be too daunting a commitment to make. Therein lies the enduring appeal of advisory and board observer roles.
“I really think the advisor and board observer roles are an excellent route to take, whether you end up in a board member position or not,” says Cullivan, who currently serves on five boards in a mix of director, advisor, and observer roles. “From engaging in ad hoc advisory meetings to sitting in on board meetings, I may not be a voting member but I’m going through the investment rounds and learning so much about the startup processes.”
Longtime CIO Kevin Barnes served as a board observer for several Silicon Valley startups from 2018 to 2020 while he was managing director for the venture capital division of Ferguson Enterprises. He particularly enjoyed the greater levels of collaboration and cooperation during the startup board conversations. “Everyone is in the room is vested in that success.”
While there were some technology elements in those board deliberations, most of the focus stayed on business fundamentals, staffing, recruiting, go-to-market plans, customer service and pricing models, Barnes recalls.
What enterprise CIOs can bring to those boardroom exchanges is that famous ‘helicopter view’ of how an entire large company operates end-to-end, says Barnes, currently CIO of Rex Signature Services and an executive partner with Fortium Partners.
“That perspective can be a big advantage for startups, to have CIOs sharing how they successfully helped their organizations evaluate and adopt new technologies,” he points out. “The change management aspects. Fostering the required alignment across the executive group and with the user base. Everyone who’s been in the CIO chair has the battle scars when these steps are not done well!”
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