ExpertCEO

I have a friend in a "major business publication" that is researching a story about venture capitalists being on too many boards. This problem may be exacerbated as the time to liquidity grows and as the venture capital firms downsize. This means that VCs will not have as much time to spend with their portfolio companies or may not be able to take board seats when making new investments. Does anyone have any comments or experience with this issue that they'd like to post and share with our readers? Also, if you're willing to talk to this individual, you can send me a private note, and I'll pass your contact information on to him.

The last VC I spoke to had exactly this complaint -- too many boards. I'm sure it takes a psychological toll and may distract him from finding new deals. Another way it affects companies like mine is that VC's simply can't do small deals. This fellow has a minimum $5M deal size and strongly prefers investments in the $20M+ range.

We were looking for $1M. Most VC's in our space liked our story but not the deal size. Angels will do small deals, but few could wrap their heads around the technology. We raised a little angel money, got an SBA loan, and are bootstrapping from there. May seek VC when we mature to the point of having a much larger market opportunity.

Ken, I see this happening more frequently now--but it is not just because they are on too many boards. I work with VC's and PE groups who also need board support on a variety of internal and external growth issues. Some of them are overextended--but smart VC's are looking to augment their boards and advisory boards with skill sets that their CEO's and teams need to grow. If they can't always find that perfect match with their internal partners, they expand their keiretsu to include people like me and Reboot Partners.

Dean DeBiase

I am also seeing this here in Silicon Valley with name VCs as well as others. But I will also add that many of the newer VCs offer little today in operational support since they lack relevant experience. Maybe it's better for them to be on too many boards...keeps them from getting too involved in things they should not be involved in.

Presently, I am deeply involved in four companies with junior general managers/CEOs and have found that four is plenty. One VC with a good operational background from a blue ribbon firm recently told me he sits on 20 boards. I doubt there is much value added there other than the firm's money and reputation.

Ken,

I would be happy to talk to your friend... Here's how we're approaching this problem at OpenView...

1. Focus: we are highly focused on a specific sector (Software) and stage of company evolution (expansion stage). This way we can maximize our expertise, which would maximize the insights we bring our portfolio companies. It also makes our portfolio companies highly relevant to each other in the exchange of best practices and learnings from previous mistakes.

2. Fund size: we made sure that the size of our fund is tuned for the sector/stage of our investments. Since we tend to invest $5-10M in first rounds... and limit ourselves to 3-5 investments per year (limited by our capacity commitments to each portfolio company)... we had to make sure that the size of each fund (each sub-$150M) is such that we would not be tempted to do more deals than we can handle... and resist the temptation of having to invest more in each company than the company should receive.

3. Operational DNA: the partners at OpenView all come from operating backgrounds. This makes our experience base much more relevant to our CEOs.

4. Leverage (internal): We didn't want the partners at OpenView to be the only source of expertise for our companies. So we built our own full-time consulting team (OpenView Labs) to be an extension of our board responsibilities. The role of Labs is to deliver operational value-add to the portfolio in the form of project work. It is a cost center for us, but a shared cost with the portfolio.

5. Leverage (external): We are highly focused on leveraging independent board members to augment what we bring to our company boards. We help our CEOs define the key skills/roles needed on the boards (that we don't deliver), and we work to recruit them. That includes giving up one of our seats (when we have more than one) for an independent.

Hope this helps... More on our model here bit.ly/aIWlOQ

Firas Raouf
OpenView Venture Partners