VC NED – The Non-Executive Director and Non-Exec Chairman in Venture Capital 11 February, 2008
Posted by Simon Webber in board, Board Member, Chairman, Corporate Finance, Corporate Governance, director, experience, fund raising, governance, growing company, growth, growth company, idsquared, investment, investor, leadership, nec, NED, non-exec, non-executive, non-executive director, non-executive director recruitment, nxd, private, private equity, recruitment, register, Simon Webber, skills, small business, small company, unquoted, VC, vc-backed, Venture Capital, Venture Capitalist.trackback
A good Non-Executive Director, and particularly a Non-Exec Chairman, is rightly valued by venture capital investors because of the vital role that a non-excutive Board member plays in the success of any business. The following information will be of interest to companies that are likely to seek venture capital investment or are currently in discussions. (If you’re looking for details of the services we offer to VCs and corporate finance houses, please click here.)
Venture capital investors tend to value previous experience of working with investors because the demands on a business can be very different once the shareholding expands beyond the founders and their ‘friends and family’. VCs will also usually ask for a reasonable amount of management information from the company and whilst they are very much backing the strategy of the executive team in whom they have invested they will want to know that there is a non-executive Board member around who can help keep everyone’s mind on the long-term growth and, of course, the all important exit.
Many VCs will want, at least at first, to appoint somebody they know and trust as a Non-Executive Director or, particularly if they are significant shareholders, as Chairman. This isn’t something which should unduly worry executive teams. All Directors have a duty to further the interests of the company and each of them represents all of the shareholders. Even if negotiations with your new investor did get a bit confrontational, once they have decided to invest and you have decided to accept their money then everyone is on the same side.
Nonetheless, the corolary is that if you find somebody who is right for the business, as long as they meet the VC’s criteria, there should be no objection to them becoming your new Non-Executive Director or Chairman.
Even if you’re just beginning to think about raising funds, now is the time to find the right person to complement your Board. A non-executive can bring a wealth of experience and skills to your fundraising efforts as well as making sure that those all important initial approaches to investors are well handled. Having the right person around will also give considerable confidence to interested investors and may well improve the valuation they place on your business.
Whether you’re just setting out or negotiating with investors, IDsquared can put together a shortlist for your business as soon as we understand what you’re trying to achieve. All of IDsquared’s Directors work in venture capital so we’re well aware of the subtleties and sensitivities involved; do give us a call or drop us an e-mail.
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