The boards of privately-held tech companies are increasingly important agents of change– the right directors at the right time can help the founders create monumental value. But I see signs that this untapped potential is becoming better recognized and developed.
For example, Washington based decacorn Tanium recently added several outstanding independent directors to their board, including Mark Fields, the former CEO of Ford; Matt Thompson, formerly the EVP of Worldwide Field Ops at Adobe; and David Rowland, the executive chairman at Accenture. Other great examples can be found at Instacart, Stripe, Ripple and SpaceX.
It used to be that pre-public tech start-ups rarely put independent directors on their boards. The key venture investors made sure they had board representation, and they joined the founders in providing board oversight and direction. The few exceptions we came across were generally companies in the last stages of preparing for the IPO.
But the venture capital market has changed in the last few years: we’ve seen a massive influx of capital, a slowdown in IPO timelines, the rise of the SPAC, and the entry into the market of the non-traditional venture investor taking the lead on some of the most important venture financings. In addition to the traditional Sequoias and the NEAs, we now see giant firms like Softbank and Fidelity and Tiger Global as the lead investors on many big deals.
In this new landscape, investors are giving the green light to their founders to add market visionaries to their boards, sometimes in lieu of an active board seat for themselves. Founders are taking advantage of the trend to attract sitting public company CEOs and other senior executives from much larger companies to their boards. Investors are also pleased, knowing that their portfolios are benefitting from the insights and the connections that industry leaders contribute.
Here at Lonergan Partners, we’re excited to work with clients to recruit statured executives to serve on their private boards. Many high-profile business leaders with public company experience are anxious to become involved in the private company sector. Interviews with these board member candidates indicate that they enjoy the urgency and impact of board work and the mentoring relationships they build with company founders. They also appreciate the financial upside, as they are able to earn an equity position in these high growth companies.
So if you are a venture investor, maybe it’s time to ask the question: “Could adding an independent director now help me grow my investment?” If the answer is yes, we’d like to help!