Boards of a different breed.

• Author: McKenna, Regis
• Position: ROAD TO XL - Excerpt

Ed. Note: While Directors & Boards has skewed to a readership of Fortune 1000 executives and board members, we have always edited the journal so that anyone at any size company with an interest in corporate governance would find plenty in it of value. In 1995 we had Regis McKenna, a highly regarded advisor to Silicon Valley companies (he worked with Intel Corp. in launching the first microprocessor and with Apple Computer in launching the first personal computer), examine the issues facing early-stage companies. Following is an excerpt from his article, "Boards of a Different Breed" [Fall 1995].

In the 1960s and 70s, virtually no attention was given to companies listed on the 0TC market. Since the early '80s, high-growth startups such as Intel, Apple, Genentech, Compaq, Sun Microsystems, Microsoft, Adobe, Dell, Cisco Systems, Netscape, and a host of others entered the public market, capturing the imagination of investment bankers and investors.

Early-stage businesses are a different breed than the established Fortune 500 company with 15 or more years of operating and public-life experience. The new high-tech public company faces a daily onslaught of technology, market, and competitive risks that could have rapid and dramatic effects on their successes and market value. These new companies face unique issues and challenges, not only for their management but for their boards as well.

I truly believe that the character and makeup of a board are different in these early-stage companies. And it often requires a different board to help a company move from the fast-paced entrepreneurial world to a more mature company. I have identified a few of the major issues facing the entrepreneurial company because these issues illustrate the kind of insight and experience needed to be a good director in such a firm.

Choosing board members is critical to young companies. Too often, entrepreneurs are saddled by boards composed only of investors or friends. Entrepreneurs should choose board members to fill the gaps in their own expertise or to enhance an existing strength of the company. A founding engineer may select a board member with financial or marketing expertise to provide insight and experience he or...