Mastering Early-Stage Board Meetings | Startup Finance Basics w/ Kruze's Scott Orn | E1865 | Summary and Q&A

TL;DR

Learn how to effectively run an early stage board meeting and present metrics to gain the trust and confidence of your investors.

Key Insights

• 🏂 VCs value proper governance and accountability in board meetings as they have a fiduciary duty to their limited partners.
• 💗 Board meetings are not only about financial metrics but also provide an opportunity for VCs to contribute their expertise and network to help grow the company.
• 🏂 Timely preparation and distribution of financials and board packs are important to ensure productive and efficient board meetings.
• 🇨🇷 It is essential to accurately allocate costs and expenses to the appropriate categories (e.g., cost of goods sold, operating expenses) to present an accurate margin profile.
• 🏛️ Founders should proactively address any potential issues and seek feedback from VCs to build trust and credibility.
• 🖐️ Financial metrics such as gross margin, revenue, and budget versus actuals play a crucial role in evaluating the health and performance of a company.
• ✋ Startups in high-margin businesses are generally more attractive to VCs due to their increased profitability and potential for higher valuations.

Transcript

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Questions & Answers

Q: What are the goals of VCs when it comes to governance and board meetings?

VCs want to ensure that their investments are being managed correctly and that the company is on the right track. They also want to contribute their expertise and network to help increase the value of the company.

Q: Why is it important to finalize financials a week before the board meeting?

Finalizing financials a week before allows for sufficient time to review and address any questions or issues. It also shows preparedness and thoughtfulness, which helps build credibility with investors.

Q: What should be included in the financial package for a board meeting?

The financial package should include a financial snapshot, which shows cash, burn rate, length of runway, and revenue metrics. It should also include the three financial statements (balance sheet, income statement, cash flow statement) and a budget versus actuals analysis.

Q: Why is gross margin an important metric for VCs?

Gross margin represents the profitability of a company and its ability to cover other expenses. Higher gross margin businesses are more attractive to VCs as they have more room for growth and investment.

Summary & Key Takeaways

• Board meetings are important for venture capitalists (VCs) to ensure proper governance and accountability for their investments.

• VCs not only act as fiduciaries but also bring their expertise and network to help increase the value of the company.

• Best practices for running a board meeting include finalizing financials a week before the meeting, preparing a standardized deck, and sending out the board pack at least three days in advance.