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Ten common pitfalls of venture boards: many early-stage boards are reluctant to confront their own shortcomings. By identifying and addressing these stumbling blocks, directors and management can get back to being a collaborative team.

Article Excerpt
WITH THE DOWNTURN in financial markets that began in March 2000 and the extraordinary contraction in venture investing, it's never been more important for venture boards and management to embrace fundamental governance processes to maximize the probability of a successful outcome for their portfolio companies.

What's more, few VCs see a clear "Next Big Thing" on the technology landscape. That means they are looking for companies that are attacking important, existing problems with solutions that deliver measurable return on investment (ROI) to customers. Clearly, execution, discipline, and efficiency have replaced sizzle and big budgets as the hallmark of the best start-ups. Just as clearly, those qualities rarely develop without an engaged and attentive board.

When business is booming, there is less of the natural tension that commonly percolates through top-level teams. But when resources are constrained and prospects are less certain, those pressures can disable or break apart a board at just the time the company needs leadership the most. Here are some of the common pitfalls that plague start-up boards. This list serves as a useful self-check for both board members and managements concerned about how well the board is performing.

These pitfalls can be used as a self-test of board performance. Members of a board can confidentially assess the degree to which each of these factors is present in their board and tally the results. Each item has some questions that can open dialogue on these issues.

1. Complacency.

Larger boards may have misaligned investors who take a stance of excessive complacency and self-satisfaction. Complacent boards are comfortable and don't go after, seek out, or act on tough issues. They enjoy the power and perquisites of their role, without challenging the company. This attitude has been deadly to some...