This article is ostensibly about a bad board member, but in reality it is about a bad board. A bad board member is only one director out of many, and cannot, on his own, do much more than disrupt meetings. A good board will shut up a bad board member and not allow him to lead them astray. A bad board allows the bad board member to run amok and follows him there. A founder must manage the board and assume there will always be a rotten egg in the bunch. Herding cats isn't easy, but it must be done.
But my experience is that groups tend to follow the person who is loudest, not the person who is best qualified to lead them. It is very much possible for one rotten egg to ruin the whole batch.
I know nothing about managing a board, but how does one deal with this aside from being the loudest blowhard on the board?
While I love Steve's blog, he doesn't share what advice he gave his former student. Mine would be this:
I don't know what the power structure and equity structure is in the organization, so I don't know how vulnerable your job and your ownership in your company is. But in general boards can't simply fire people without cause. I would strongly suggest that you start by documenting absolutely everything. Make sure all meetings are minuted and keep your own copies of those minutes. If the bad board member says something to you outside a meeting that has some bearing on your relationship or the company, find an excuse to get him to email it to you. You can even record phone calls in many states with only one party privy to the fact the call is being recorded. (IIRC California is not one of these states).
Secondly, get chatting to a great corporate attorney. Email me if you need a Seattle reference. You need to get a deep understanding of how vulnerable you are and what levers you have to protect yourself and your business. Then (and I say this again) keep records of everything in the context of knowing what will help your situation.
This quote suggests that you are kicking ass at your business:
"We went through the status of the company, and at least from the outside it sounded good. In fact it sounded great: three major versions of the product shipped, multiple iterations and a few pivots under their belt, revenue was growing even faster than plan."
The key here is "...even faster than plan.". You and the board agreed to a plan and you over-delivered. It's important that you document your own performance - get hard evidence of the success story above.
Other than that, keep doing the great job that you clearly are doing and save the war chest you're accumulating for the crunch if it ever comes.
"while a VC can remove a founder who misbehaves, there is no corresponding recourse when a VC is the source of the problem."
Yes, there is. A board is decided upon by shareholders. There may be shareholder agreements (linked to term sheets etc) that grant Board membership or nomination powers to a minor shareholder, like a VC, but the power is retained at the Shareholder level.
The Shareholders nominate the Board. The Board instructs the CEO. If the CEO is strong and/or a Shareholder, this often makes alignment between those three roles easier, but of course it doesn't prevent the possibility of a situation like the OP describes. Still, claiming there's no recourse for a bad board member or VC is not accurate.
And founders don't forget - funding is always an option, with risks and rewards.
Not a very useful article by Steve Blank standards... It's missing the critical parts about "What I did when this happened to me" and "What you should do if this is happening to you", as well as "What you should do to try to avoid this".
Moral of this story: get a commitment from the VC team member you want to be on your board - don't get it shuffled off to someone else on their team who is just looking to prove what a hardass they are.
Or don't give up that board seat, but that's pretty much not viable once you take VC.
Once you have board they're your boss. Remember those? Their most distinguishing feature is they can fire you much, much easier than you can fire them. Bob Dylan wrote a song about this. Upvotes for the correct title...
As for the other board members, they're not looking for these kinds of precedents to get set.
