We caught up with Marina and Adrian to discuss how founders can deal with difficult relationships in the board room with investors.
Marina Traversari is a Board Advisor, Link Stone Advisory who has founded, scaled and exited business as senior executive, Chair and Board Advisor and draws from experience at Spherics, Gapsquare, Sage, Oracle and Telecom Infa Project.
Adrian Palmer is a Senior Advisor, Link Stone Advisory with Link Stone Advisory and has scaled, raised funds and exited business as both CFO and professional advisor. He draws from experience at Pliant, Oxwood, Symec, Cognisess, Grant Thornton and Ernest & Young.
Marina: Difficult investors is not an uncommon position that I have encountered when advising founders, where founders feel increasingly uncomfortable with the position of their investors in the board room and in some cases, this has boiled over into being confrontational or investors seeking to take control. While the investor may have specific reasons for their concern, my experience is that the additional pressure that investors direct at founders can be due to their own pressures, especially if the investor is facing liquidity challenges and that issue is on the rise as investors struggle to have exit events in their portfolios.
Adrian: Most investors will bring a lot of experience with them (either from their own background or other portfolio companies) and will seek a position in the Board to oversee and contribute to the success of the business. While it is reasonable for investors to be represented on the Board, care needs to be taken to ensure the Board considers the interests of all shareholders rather than focussing on their own interests. An experienced Chair should be conscious of the need to ensure the Board has the right dynamics and discourse is constructive.
Marina: When relationships do become strained with investors, founders can be reluctant to address the issue. This might be because the founder takes the implied criticism personally. My advice is not to avoid the issue but to seek to engage in a respectful and objective discussion. The founder should also engage their team, particularly their Chair or CFO.
Adrian: I agree, especially with involving the CFO. An investor is likely to frame their position in terms of value creation and the CFO should be able to frame the response in similar terms.
Marina: In one situation I was involved in, both the Chair and the CFO failed to support the founder. The role of the Chair is critical and founders should take care to appoint the right person: someone with relevant experience, a great network and ability to create a strong Board, shares the vision for the business and an ability to provide a collegiate challenge to the founder. These are capabilities the business needs to develop as a business matures towards a business exit, one I have experienced myself and supported founders to make the transition from CEO to Chair to support their succession planning.
Adrian: The role of the CFO can be incredibly diverse and in reality one person may not be able to do it all. The best CFOs create great teams but the ability to build a team of diverse skills in a venture business can be limited. Much of the work I perform is supporting CFOs, either coaching them to develop the finance capabilities or supporting them, for example in a corporate transaction, where they lack experience. In your situation, it could have been that the CFO lacked problem-solving experience or the terms of reference to frame an objective discussion.
Don’t take Board dynamics for granted and make sure you build an effective Chair and CFO to help you manage investor relations. We advise founders on how to create effective Boards.
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