2009 Seat at The Table Slides

“A Seat at the Table”
A Study of Venture-Backed Company Boards

October 2009
© Copyright 2009 Dow Jones and Company

More than Half of VCs Sit on Three to Five Boards
2009: Number of Board Seats Per Partner
One
More than Eight
5%
8% Tw o
15%
Seven
8%
Six
9%
Three
16%
Five
18%
Four
21%
© Copyright 2009 Dow Jones and Company Source: Dow Jones VentureSource/NVCA
VCs Prefer More Board Seats
Early-Stage Companies: VCs vs. CEO Board Seat Preferences
8
Avg. Number of Board Seats
6.6
5.8
6
4.6
3.8
4
0
Maximum # of Board Seats Ideal # of Board Seats
Venture Capitalist CEO
CEOs Prefer VCs Sit on Fewer Boards
Later-Stage Companies: VCs vs. CEO Board Seat Preferences
9
7.3
6.3
6 5.4
4.2
0
Maximum # of Board Seats Ideal # of Board Seats
West Coast VCs Sit on More Boards
2009: Average Number of Board Seats Per Partner by Region
6
4.7
4.5
4 3.8
0
West Coast Mid-America East Coast
West Coast VCs Prefer to Sit on More Boards
2009: Ideal Average Number of Board Seats Per Partner by Region
6 5.7
5.3
5.1 5.1
4.4 4.4
0
Early Stage Late Stage
West Coast CEOs Comfortable With VCs
Sitting on More Boards
2009: Ideal Average Number of Board Seats Per Partner by Region
6
4.5
4.2
4.0
4 3.7 3.7
3.5
0
Early Stage Late Stage
Firms with Larger AUM have VCs on More Boards
2009: Average Number of Board Seats Per Partner by Firm AUM
6.0
5.0
4.2 4.4
4.0
2.0
0.0
Under 5M AUM 500M-1B AUM Over 1B AUM
VCs for Pre-Revenue Companies Sit on More Boards
Average Number of Board Seats for VCs by Company Devt. Stage
Data: Dow Jones VentureSource
3 Pre-Revenue Generating
2.8
2.6 Revenue
2.5 2.5 2.4
2.2
2.0
2
0
Start-up Pre-Clinical Clinical Trials Product Beta Product Revenue Profitable
Trials Development
Company Development Stage
Most VCs Require Board Seats
Requiring Board Seat as Prerequisite for Investment
No
18% Yes, for VC firm
or co-investor
30%
Yes, for VC firm

52%
Most Companies Have Four to Seven Seats
CEOs: Average Number of Board Seats that Companies Maintain
12+ seats
0%
8 to 11 seats 1 to 3 seats
8% 13%
6 to 7 seats
32%
4 to 5 seats
47%
Four to Five is Ideal Number of Board Seats for Early- Stage
Companies
CEOs & VCs: Preferred Total Number of Seats (Founders, Investors, Outsiders)
Venture Capitalists CEOs

6 to 7 Seats 8+ Seats
9% 0% 1 to 3 Seats 6 to 7 Seats
8+ Seats
6% 12% 1 to 3 Seats
0%
11%
4 to 5 Seats
85% 4 to 5 Seats
77%
Later-Stage Companies: Six to Seven Total Seats
Ideal
CEOs & VCs: Preferred Total Number of Seats (Founders, Investors, Outsiders)

8+ Seats 1 to 3 Seats 1 to 3 Seats
8% 8+ Seats
0% 0%
8%
4 to 5 Seats
12%
4 to 5 Seats
18%
6 to 7 Seats
80% 6 to 7 Seats
74%
About Half of Board Seats Held by VCs
VCs: Proportion of Seats Held by VC Investors on Company Boards
81-100% Seats 0-20% Seats

1% 2%
61-80% Seats 21-40% Seats

19% 24%
41-60% Seats
54%
VCs Agree but Most CEOs Prefer 21-40%
Board Presence
Early-Stage Companies: Ideal Proportion of Total Seats Held by VCs

81-100% Seats 0-20% Seats 81-100% Seats
1% 1% 1%
0-20% Seats
61-80% Seats 11%
61-80% Seats 14%
17% 21-40% Seats
29%
41-60% Seats
34%
21-40% Seats
40%
41-60% Seats
52%
Later-Stage Companies:
VCs Prefer More Board Control than CEOs
Ideal Proportion of Total Seats Held by VCs

81-100% Seats 81-100% Seats
1% 0-20% Seats 61-80% Seats 0%
61-80% Seats 5% 5%
0-20% Seats
8%
17%
41-60% Seats
30%
21-40% Seats
41-60% Seats 41%
45%
21-40% Seats
48%
Mid-sized Companies have Largest VC Board Presence
Board Representation for VCs by Company Employee Count
60% 57%
55% 56%
52%
49%
45%
40%
20%
0%
1 to 10 11 to 25 26 to 50 51 to 100 101 to 200 200+
Company Employee Count
VC Board Presence Drops After Company
Generates Revenue
Average VC Firm Board Representation for Companies
80%
Pre-Revenue Generating
62% 63% Revenue
60% 56% 55%
53% 51%
48%
40%
20%
0%
Start-up Pre-Clinical Clinical Trials Product Beta Product Revenue Profitable
Trials Development
Company Development Stage
VCs & CEOs Have Spent More Time on Board-
related Activities
Time Allocated to Meetings, Calls, etc. over the Past Three Years

Spent same
amount of time Spent same
28% amount of time
32%
Spent less time

5%
Spent less time Spent more time

Spent more time 8% 60%
67%

VCs Plan to Increase Their Board Participation
VCs: Board Participation Changing Over Next Two Years
Expect decrease
12%
Expect no change
36% Expect increase
52%
VCs Leave Boards Quickly Post M&A
VCs: Time On Board After Acquisition
1 yr to 18 18 months +
months 7%
3%
7 months to 1 yr
6%
4 to 6 months
7%
0 to 3 months
77%
70% of VCs Off Board Within Year of IPO
VCs: Time On Board After IPO
18 months +
13%
1 yr to 18 0 to 3 months
months 42%
17%
7 months to 1 yr
17%
4 to 6 months
11%
Top Concerns: Financing, Exit Strategies, &
Sales/Marketing
Three Biggest Issues Facing Company Boards
80%
60%
60% 57%
40% 35%
30%
26% 25%
20%
0%
Financing Strategies Exit Strategies Related to Sales & Marketing
Acquisitions
Biggest Value: Network of Contacts
CEOs & VCs: Top Four Value-adds as a Board Member
80%
63% 64% 64%

60% 54%
48%
40% 34%
27%
22%
20%
0%
Mentor to CEO Network of Raising Follow- Exit Market
Contacts on Financing Knowledge
Open Communication Most Important Factor
CEOs & VCs: Top Three Characteristics for a Productive Board
80%
66%
60%
60%
51%
47%
43%
38%
40%
20%
0%
Active Participation Open Communication Useful Feedback
by All Members
No Specific Measurements Required
Metrics for Board Effectiveness

Specific Metrics
Specific Metrics 9%
16%
Some Metrics
12%
No Metrics
44%
Some Metrics
40% No Metrics
79%
Valuation & Exit Strategy Highest Conflict Factor
CEOs: Factors Creating Most Challenges with VC Firm Board Members
60%
51%
47%
42%
40%
34%
30%
20%
0%
Personality Sales & Term Sheet Valuation Exit Strategy
Conflicts Marketing
Strategy
Main Conflict Factor for VCs: Executive Mgmt.
Searches or Changes
VCs: Factors Creating Most Challenges with Different VC Board Members
80%
60% 56%
51%
42%
38%
40%
30%
20%
0%
Personality Executive Sales & Valuation Exit Strategy
Conflicts Mgt. Search & Marketing
Change Strategy
Over 80% of CEOs Satisfied with VC’s Time
CEOs: Satisfaction with VC Board Member’s Time Spent with Company
Not at all
Not very satisfied Completely
satisfied 4% satisfied
14% 20%
Somewhat
satisfied
28%
Very satisfied
34%
Most CEOs Satisfied with VC’s Feedback
CEOs: Satisfaction with VC Board Member’s Level of Feedback & Quality of
Feedback
Level of Feedback Quality of Feedback
Not at all satisfied Not at all satisfied

5% Completely satisfied 10% Completely satisfied
Not very satisfied 18% 17%
14%
Not very satisfied

17%
Somewhat satisfied Very satisfied Very satisfied

31% 32% 33%
Somewhat satisfied
23%
More Information
Emily Mendell
National Venture Capital Association
(610) 565-3904
emendell@nvca.org
Kim Gagliardi
Dow Jones & Co.
(603) 864-8873
Kimberly.gagliardi@dowjones.com

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“A Seat at the Table”

A Study of Venture-Backed Company Boards

© Copyright 2009 Dow Jones and Company

Early Stage Late Stage

Early Stage Late Stage

Company Development Stage

Yes, for VC firm

Venture Capitalists CEOs

Venture Capitalists CEOs

81-100% Seats 0-20% Seats

61-80% Seats 21-40% Seats

Venture Capitalists CEOs

Venture Capitalists CEOs

Company Employee Count

Company Development Stage

Venture Capitalists CEOs

Spent less time

Spent less time Spent more time

© Copyright 2009 Dow Jones and Company

63% 64% 64%

Venture Capitalists CEOs

Level of Feedback Quality of Feedback

Not at all satisfied Not at all satisfied

Not very satisfied

Somewhat satisfied Very satisfied Very satisfied

© Copyright 2009 Dow Jones and Company

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