Building an Early Stage Board with Sam Alexander

Intro: Welcome to the Daily Bolster. Each day we welcome transformational executives to share their real world experiences and practical advice about scaling yourself, your team, and your business.

Matt Blumberg: Welcome to The Daily Bolster. I'm Matt Blumberg. I'm the founder and CEO of Bolster. And with me today is Sam Alexander. This is a great bio, by the way. Sam is the often relentless and always over caffeinated, CEO and co- founder of Bitewell. Well, good to see you, Sam. Welcome to the Daily Bolster.

Sam Alexander: Good to see you too. And I'm glad you like my one line Bio. I thought long and hard about how to make it not boring.

Matt Blumberg: I love it. It's the best one I've had so far, and it's good to have the visual, for those of you who are, some people will be listening to this and some will be watching it, but you're actually in your kitchen and I think I can see a coffee maker behind you, Sam.

Sam Alexander: Oh, absolutely. I am an espresso aficionado. I dial in my espresso machine every morning.

Matt Blumberg: Very nice. Tell everyone what Bitewell is.

Sam Alexander: Absolutely. So at Bitewell, we are pioneering food as a health benefit through the world's first food as medicine marketplace.

Matt Blumberg: Okay. That sounds like a pretty important and transformational business.

Sam Alexander: That it is. It's a big old task, but we're biting away at it one day at a time.

Matt Blumberg: As it were. What's on your mind today?

Sam Alexander: Awesome. So we are a seed stage business just closing out a round of financing and for the first time thinking about board construction. So I'd love to talk to you and hear your thoughts on early stage boards. How should I be thinking about putting this together?

Matt Blumberg: Yeah, it's one of my favorite topics and I give you huge credit for thinking about it because most founders don't end up thinking about it and they just accumulate a board over time that is stocked full of VCs and occasionally some co- founders, and it's not necessarily an ideal board. So my kind of rule of thumb for startup boards is what I call the rule of ones. So the rule of ones is add independent directors from day one, only have one founder on the board, and then for every investor, add one independent. So let me unpack the rule of ones a little bit. Starting with independence from day one I think is great. I've done that with both my last company and my current company at Bolster. You can have a board early on that's you plus two independent directors. And for really early stage companies, you may be past this already, having an independent director that's kind of product focused in your field and one that's go to market focused in your field can be extremely helpful very early on in the company's life. The second part of the rule of ones is only having one founder on the board. And I know that's not popular with a lot of people, especially companies that have multiple founders. I know you have co- founders.

Sam Alexander: I was going to ask you how do you navigate such a thing and also why?

Matt Blumberg: Yeah, I'll start with-

Sam Alexander: Yeah, please.

Matt Blumberg: I'll start with the why. It's a great question. So the reason why is you have a very limited number of board seats in life. You have three people on your board, you have five people on your board. When someone's on your board, when you put someone on your board, it's an opportunity to bring a new brain and a new perspective to your business. And co- founders don't have that. You already have 100% of their mind share on the business. So if you're worried about governance or if your co- founders are worried about some governance issues, fix that in the bylaws, fix that in the charter, make it so that they have a say about something or move something to a shareholder vote instead of a board vote. You can manipulate those things any way you want legally, but the board, and by the way, your co- founder can show up for every minute of every board meeting, but very few board seats and very few opportunities therefore, to pull in some great outside thinking to your board. Now how you do it, I mean, the easiest way to do it is to have a conversation at the beginning of the company's life. If you haven't done that, then you have to have some flavor of this conversation and just say, hey, it doesn't mean you're any less of a leader in the business or less of a shareholder in the business. Let's talk through the governance issues. You'll be attending board meetings. But really I think it's to both of our advantage to bring in someone like X, Y, Z person to the mix. And we can't do that. So that's the second part of things. And then making sure that you're continuing to add independence as you add VCs is really important. Because that balance of investor perspective with independent operator perspective with you as the founder kind of overseeing the whole thing is just a really healthy balance for a board. And I think probably the last thing I would say is when you give independent directors an offer to join your board at the early stage like where you are, you don't want to do more than a two year vest, a two year term because you don't know what you're going to need in two years. You know what you need today, and you want to hire someone a little bit ahead for that board role, but you don't know what four years out looks like. So give them half as much equity but vested over two years and you can always renew. We just had our first independent at Bolster finish her two years, and we absolutely looked each other in the eye and said, " Is it working? It's working." And we did another two. But it's good to have that checkpoint.

Sam Alexander: And talking about kind of board director compensation, what should I be thinking about if I am going with this two year vesting schedule?

Matt Blumberg: So the way to think about, and there's more data I can share with you separately, the way to think about director comp is the rule of thumb is half of what you would give a new senior hire.

Sam Alexander: Okay.

Matt Blumberg: But if you're giving the senior hire that over four years, you do half again for two years.

Sam Alexander: Okay.

Matt Blumberg: So if you are at whatever stage you are, if your market is you're bringing on a CMO and that person's going to get two points of equity, then the director would get one point over four years or half a point over two years, and you can kind of calibrate it up or down from there. And never any cash. No cash at all.

Sam Alexander: Got it. Never any cash ever. Or is there a point in the company's lifecycle where-

Matt Blumberg: Not until you're public.

Sam Alexander: Cool. Great.

Matt Blumberg: Yeah inaudible

Sam Alexander: Eyes on the prize.

Matt Blumberg: If you want to hire a board member as a consultant to do a specific project with a specific deliverable, you can do that, but it shouldn't be part of their compensation for being a director.

Sam Alexander: Got it. That makes total sense.

Matt Blumberg: All right. Thanks, Sam. Great question. Good to have you on the Daily Bolster.

Sam Alexander: Thank you. Glad to be here.