Do Oxfam, Amnesty and World Vision support petrol consumption?

Some unsolicited email spam (not to me) from Littlelot, who replace your Android or PC wallpaper with advertisements:

Aside from the problems of this email being unsolicited, they also have a problem of giving away gasoline. This seems out of line with what I would hope are the ethics of the listed charities below:

 

A glance at the sponsor pictures above may give a hint – there is nature, children, bicycles, animals and festivities – but no cars or roads or other environmentally challenging issues.

Giving away gasoline also seems out of line with the values of many of the early adopters for these sorts of products. The applications themselves take over your PC and mobile devices:

It refreshes your desktop background and mobile lockscreen every day with wallpapers from brands relevant to your profile and interests.

But imagine seeing an advertisement for a fuel company on your homescreen if you were a member of the Green Party (I’m not) or someone who cares about climate change and liveable cities (I am). I’d accept that Z Energy, who are genuine about health, safety and the environment, but am extraordinarily doubtful about any other local fuelco.

The company used to be called Donate your Desktop, and it didn’t really work. Last year they raised $200,000, a surprising feat in the face of no real traction. They also changed their brand, upgraded the website (I believe) and improved their apps. While the new name and website feel like improvements, with just $4,451 raised for charities to date (the company clips 25% of income) it’s very early days.

What to do

It’s hard when you are a start-up, but decisions made early on can have an enduring impact on how your company is perceived. The decisions should be made based on the values of the company, and in the early days these have to come from the founders.

This incarnation of the company seems a lot better than the first, but I would counsel the company to heed their own advice to themselves across everything they do:

“If we wanted people to love our product, we had to give them cool wallpapers from brands they like – even better if we could actually put them in control.”

LittleLot have been very good at generating publicity to date (yes, this is more), but have yet to demonstrate that they can deliver on the promise. Ultimately I’ll always struggle with ceding control of my desktop to another company or to “brands”, and the challenge is to see whether a critical mass of people will.

But I suspect many could be interested, if the apps are good enough, in a one-wallpaper across all your devices product - a decent screensaver app, differentiating by the all-devices approach and perhaps source of the photos. Time will tell.

 

Posted in NZ Business | 1 Comment

Should anyone else adopt the Internet Party policies?

The Internet Party‘s website just launched, but sadly for them this is what happened when I tried to play on the video at the top of the site:

I tried a bit later and had a different sort of error with the same lack of result.

Policy

But enough of presentation – let’s instead look at their 9 policy points. My initial take before reading this and before the party has announced any candidates is that they will need to have great policies for this to work, but that other parties can simply steal those policies to defuse the new party.

1: Deliver cheaper, unlimited, high-speed Internet for everyone. 

Hard to argue with this goal, but other parties have this goal as well. Two details are 50% cheaper connectivity for everyone and an international cable. The devil will very much be in the details which are not available, but the second is a really simple business case to make to those who get it (Labou and the Greens do too), and the first is going to require quite some money and effort, which is already underway.

2: Stop the government from spying on citizens

The details of this will be critical as well – there are clear cases where spying is a good thing, and Kim Dotcom has a clear (and justifiable) bone to pick.  Covered under point 7 is the much more important policy about foreign governments spying on New Zealanders and vice versa. Most people won’t get excited about this, unless there is scaremongering.

3: Reform copyright laws. 

This would be a strength of the Internet Party, and the rhetoric so far is good. I very much like the idea of compelling content creators offshore to make their content available in NZ at essentially the same time as offshore (and, I trust for a similar price) or else we can copy it regardless. That’s a policy that will hasten the day where all content is released globally. The party also advocates for open research, and those efforts are already happening, with Waikato University just launching their new policy on this. Fair Use is another policy and that’s well overdue here, though the lack of the law doesn’t stop bloggers from excerpting liberally. The safe harbour for ISPs will be scrutinised pretty hard given Kim Dotcom’s involvement.

4: Make government work for its citizens, not the other way around. 

“The Internet Party will make government more efficient.” This is an old chestnut, and I give a lot of credit to the work that the public service and government are constantly doing to make things better. But that doesn’t mean to say there isn’t a lot more to do. For example, it would be great to allow people working for government be able to embrace modern online tools such as Dropbox & Skype that the rest of us take for granted.

5: Encourage green technologies and protect our environment. 

All standard stuff and as a country that build lots of hydro power stations and has reaped the benefits of cost-free power generation ever since, green tech should be an easy business case to make. The Internet Party throws in the red herring of green data centres, but the greenness comes mainly from the grid electricity generation mix, and that means building more green power stations and shutting down Huntly. Huntly power station is of course the key asset of Genesis Energy, currently on the block.

6: Boost innovation and high-tech jobs in New Zealand. 

Blah blah. This is not easy to do, and I suggest the Internet Party just support and tweak the MBIE Business Growth Agenda.

7: Strengthen New Zealand’s independence. 

Reviewing the TPP and the national security arrangements. That’s code for don’t sign the TPP because of the ridiculous copyright (and other) provisions (it’s basically been captured by US corporate lobbyists). It’s also code for “why be in bed with the USA (or anyone for that matter) when China is far more important to our economy?”

This will be a fascinating policy area, and sure to provoke discussion and outrage. However they also need to be careful to balance naive “do the right thing” against the relative size and power of New Zealand versus other countries. Both Helen Clark and John Key are walking the international corridors of power exceedingly well, and we cannot afford to risk being isolated and at the wrong end of a trade war. That said, there is scope here for major change, akin to the  Nuclear Free moment and it should be exciting to watch.

8: Introduce a government-sponsored digital currency. 

A giant red herring that could be crazy enough to work, but why would you lose your ability to print money? Why not start, instead, with regulation that accepts verified digital currencies as currencies per se, and provides/nudges/forces banks to be able to exchange them. Why not fix the asinine anti-money laundering know your customer requirements for financial institutions at the same time? We are subject to US imposed regulations on this, and it is making of dreadful customer experiences and attacking our “ease of doing business” philosophy.

9: Modernise schools and the education system. 

Nothing that’s not being already done here.

Overall

I would encourage political parties to observe and copy critical elements of these policies.

The copyright, spying and internet access policies should be the most well-formed, and will drive a lot of the party’s support. So borrow extensively from them rather than fight them outright, and the party will lose impact.

The environment, responsive government, modern schools and innovation and jobs policies are all relatively bland, and should already be part of all other party platforms. Obviously there are tweaks that each political party brings, but they are minor, and smart parties will be looking for policy elements that they can adopt.

The digital currency policy can be safely ignored. It might be a god or bad idea, but it’s mainly a distraction.

The spying and independence policies are potential election year nightmares, and not just for the Internet Party. Watch those closely, and if public opinion starts moving then the other parties will have to form strong responses. These could develop into signature issues for the election, or they could fizzle along with the Internet Party itself.

And finally the elephant in the room is Kim Dotcom. He’s great at generating press coverage, but he’s also great at delivering poor coverage. The party, to be credible, needs him to be replaced in the limelight by a whole host of high quality candidates.

It’s going to be an interesting year in politics.

Posted in NZ Business | 4 Comments

Raising money is about to get a little easier

Via the NBR in print, is Andrew Lewis’s excellent primer on the April and December changes introduced by the Financial Market Conduct Act. It’s a timely reminder. One change is that certain small offers, those under $2 million per year with less than 20 investors, are exempt from the complicated disclosure documents. These must be offered as a ‘personal offer’ to anyone who “is likely to be interested” in offers of this kind, and who must have gross income of over $200,000 per year or financial investments over $1 million (etc.).

Lewis also says that the requirement for accountant certification of gross income is now absent, so investors can self-certify and get on with it.

All this is good, and it goes live on April 1. It’s not going to make raising money per se easier – but it will loosen the pain of process a little.

For a look at how bad it could all get, take a browse through Box Inc’s SEC Form S-1 Registration Statement for their IPO. It’s 220 pages, and while interesting for some (and to me at least) will be hard going for many investors.

Buddle Findlay published their latestupdate on the FMCA today (it’s worth reading), and I noticed one new provision that might be piquing the interest of a few listed companies:

“From 1 April listed issuers will be able to make rights issues and other similar offers of securities of a class that is already quoted, using a “term sheet” type document”

That may be an angle that Mega is thinking about, but who knows.

And of course Crowd Funding becomes a thing from April 1, though the actual sites are some time away as the FMA has yet to even publish the requirements to be a licensed crowd funding provider, let alone take prospective crowd funders through that process.

But from April 1 any company will be able to raise up to $2 million a year from a combination of personal offers and crowd funding. Offshore experience and the smart word on the street is that successful crowd funding is expected to deliver average investment amounts that are around $100,000-$150,000. There seems to be  feeling that crowd funding will be used as a top-up mechanism or a catalyst for personal offers, rather than the sole source of funds. Time will tell.

More reading

Financial Markets Conduct Act MBIE official site.

Buddle Findlay’s latest update

An older Buddle Findlay update with lots of other links.

Posted in NZ Business | 2 Comments

$91 million for “new visa processing technology”

Buried in an otherwise excellent report on NZ Tourism (found through this NZHerald article) is the statement:

Immigration NZ is investing $91 million in new visa processing technology that will enable visitors to apply for their visas online”

That feels ridiculously expensive, but overall this is very important to NZ and we need to make sure it works.

1: It’s expensive

The mind boggles. $91 million is an extraordinary amount of money to spend on any computer system. How unreasonable is $91 million?

  • $91 million is 758,333 hours or 431 person-years of work at an average all-in cost $120 per hour.
  • While $120 per hour is relatively cheap for contracting, at 8 hours a day and 220 days a year this equates to an income of $211,200 per year per person.
  • Perhaps there is a lot of hardware in this budget, but $91 million will deliver up to 30,333 pieces of hardware at $3000 each.
  • Maybe there are new operating costs involved (although the business case pointed to savings.) In this case taking $21 million from the budget would bestow $2.1 million a year for 10 years, which is 10 of those expensive $211,200 people per year, or, more reasonably, over 40 people averaging $50,000 per year.

2: It’s well underway

Implementation of Immigration ONLINE (also known as the Immigration Global Management System, or IGMS) started in February 2012 following Cabinet’s approval of the business case in November 2011. The project is on track to complete the majority of functionality by the end of 2015, including online visa applications and processing, the use of electronic documents, automation of simple tasks, access to the system by approved third parties and significant improvements in identity management. Remaining functionality that is not central to a quicker and easier user experience, relating to, for example, retiring legacy systems, will be completed by the end of 2016.

It’s all being being done by Datacom – which as they are a local company means that the money is cycled back into the economy, and diminishes the net cost to New Zealand considerably. One could even argue that there is a multiplier effect which creates a net gain for NZ, as not only are Datacom staff spending money in NZ, but the tax (GST, PAYE and income tax) goes back to the government, while the owners of Datacom are the government-owned Super Fund and a local family who plough (very smartly) money back into New Zealand through investments.

3: However it’s worth it.

The project, even at the ridiculous price, is easy to justify if it increases migration and tourism. One presentation I found from Immigration NZ, for example, states that migrants add $1.9 billion to GDP each year. I don’t doubt that, and they also point out that education alone brings $2 billion of export earnings. So getting this right is really important, and the sooner the better.

How is it going? Another presentation, from April 2013, stated that end to end student processing was targeted for first half of 2014. Today it’s still ‘please complete the form“, and prospective students have a very long PDF to print out, and must supply a vast amount of physical evidence like photos, medical and police certificates, their passport and evidence of their ability to pay tuition fees and that they have a place at an educational institution. It’s a nightmare, so simplifying it is well overdue.

In January this year FutureGov reported that the project was on track. Let’s hope so,

Overall: Let’s make sure of this one

The concern with large projects like this is not just the cost, $90.5 million in this case, but that the complexity makes them much harder to deliver a usable system that actually makes things easier. Nobody wants another Novopay, and I am sure that the conversations in the corridors of Immigration NZ, government and Datacom are held with that in mind.

This is arguably more important to New Zealand than Novopay (though I would be wise not to argue that 1-1 with an unpaid teacher.) Even during the worst Novopay periods teachers were still coming to work each day, and good for them. This Immigration system will, amongst other things, help or hinder students from paying  (generally tertiary) teachers at all. It’s also a critical piece of the tourism and immigration puzzle, both important drivers of our economy and society.

So I hope the government, Datacom and immigration stakeholders are well on top of this, and the project continues, on track and without fuss largely underneath the radar.

Posted in NZ Business | 5 Comments

Do you have your business licenses?

New Zealand rightly gets credit of being an easy place to do business, but sometimes we forget. As a reminder here’s an excerpt from an article on the tax implications of Kickstarter projects:

In the United States, if you accept money for goods or services above a certain threshold, or at all for certain kinds of work, you probably require all of the following:

  • A business license in every city in which you work in person. If you make something and deliver it, it’s possible you need a license in the destination city.
  • A state business license, which is connected with state sales or other taxation. The license may have specific extras you need, such as an assumed business name (the dba, “doing business as”) or registration for certain kinds of business. (Many business types, varying by state, require registration, certification, licensing, a degree, bonding, and insurance!)
  • A reseller certificate or exemption permit if you buy services or goods at wholesale intended for resale. For instance, in my case, as a new book publisher, I need to give a copy of this permit to the printer that is making my hardcover books. It needs it for its files so that it, in turn, can show its taxing authority that it properly did not need to charge me sales tax on its sale of finished items.
  • A federal Employer Identification Number (EIN), which is used by businesses in lieu of a Social Security Number (SSN). 

In New Zealand you need a GST number.

Tax is much much more complex in the USA as well, with city, county, state and federal income taxes for businesses and individuals, taxes along with sales taxes and even a use tax, on items that you buy from outside the state and use within the state. 

Our own taxation system is structurally far better. It’s still far more complicated than it needs to be, but there seems to be a recognition that it needs to improve, with some recent moves to reduce the pain. However there is still a long road ahead, and the IRD’s very scary IT project to complete.

While the USA market is unfathomably vast, it is expensive and painful to start or grow a business in the USA, and these regulatory barriers to entry are to the advantage of incumbent or well-financed businesses.

It’s obvious that having a presence in the USA and other large markets is important for NZ exporters, even web-based ones, but addressing the world from New Zealand does have significant advantages. And we get to live here too.

Posted in NZ Business | 3 Comments

No more little children being dropped off by their mummies

When I went to school over 30 years ago the norm was to walk, cycle or take public transport. Similarly a colleague I spoke to yesterday said that when he went to school in Tauranga 20 years that there were hundreds of bike racks at his school and it was hard to find a place to park his bike. And I talked last night to someone from Hawkes Bay, and when she went to primary school a little over 10 years ago cycling was the norm as well.

But there has been a dramatic shift to little children being dropped off by their mummies (that’s how we would have cruelly described it at school) over the last 20 years. And the result of the critical mass shifting is that it’s now deemed too dangerous for kids to cycle or walk to school. But a lot of that perceived or real danger is the very traffic caused by those car driving mummies.

It’s a vicious circle, exemplified by another conversation yesterday with someone who firstly talked about how she used to cycle in Auckland, then about how cycling in Auckland became too dangerous because of the cars and poor infrastructure, and then about how cyclists in Auckland are painful and dangerous when she drives her car. I struggled to get her to understand the causes and effects.

We need to break this circle of despair, and get people back onto the streets, walking and cycling. We are seeing this start in some cities, Wellington especially, and successes in Auckland with multi-use areas like Fort Lane and Elliot Street. The end game is that New Zealand has vibrant walkable, liveable cities, with incredible people-filled street life and places to live that attract and retain the best talent.

So it’s great to see the Greens today launched a cycling to school policy. It’s a clever start.

Firstly, it exists. I would like to see policies from the other parties about how they will create better people-centric cities, and how they will also remove a huge number of cars from the roads at rush hour.

Secondly it focuses on schools first. That’s cheaper, as the infrastructure will be in relatively simple residential areas, but it also allows for dramatic uptake rats as a school’s students switch en masse from cars to bikes and walking. I think the Greens policy needs to provide for more support to each school as they embark on the switch to walking and cycling, helping them, for example, work with council on the infrastructure plans and with  rider instruction, education and campaigns to get parents and kids to switch to the new modes of transport.

Thirdly it is safer and smarter. Getting people out of cars and moving creates healthier lifestyles, lowering obesity rates and, rather interestingly, that little exercise in the morning increases capacity to learn. But this policy is also taking responsibility for delivering kids safely to school, and that means physically separating cyclists from cars on busy roads, cunning moves to create safe shared environments on suburban streets and the shift in driver attitudes that will come when over 1,000 kids cycle to one school.

The policy grants $50 million a year over four years for the schools and councils that grab it first. I’d like to see the early schools competing for the first round of funding, and a great deal of care, learning and experimentation taken with the initial roll out. If the programs in the first few schools work well, then the demand will naturally spread to other schools, and the funding needs to be available as it does.

Above all — I can’t wait for a future where the kids can take back the streets and hoon to school on bikes. It’s so much fun, and once it becomes cool again then who knows, maybe us adults will want to start walking and riding as well. At some stage, and please make it soon, we will have critical mass, and people around the world will start talking about our cities in revered tones.

So good for the Greens, and I look forward to the other parties responses.

Posted in NZ Business | 7 Comments

Finding great advice and advisors for founders

There are a few different sources of advice for founders, with the most important ones being end users and paying customers. Below I have put a list of sources of advice in  order of importance, just to push the point that the best form of advice comes from actually doing stuff and observing the results.

The focus of this post is to answer a question that comes up a lot – articulated by one person earlier today as:

 I would dearly love a mentor/investor with that sort of experience, do you have any advice for who to approach?

I really dislike that word mentor, which to me has connotations of a somewhat contrived, unbalanced and paternal relationship. That could be just me, but I prefer the word “advisor”, or “someone you had a coffee with once”, so if you ever ask me for help please keep that in mind.

1. End Users

These are the people you are building your products and services for, and it’s critical that your entire business is built around them. So go ahead and immerse yourselves in their world. Observe them and ask open questions to determine their unmet needs as the first step in the design process. Later on watch them use your prototypes and successive versions of products. Go hang out with them at their conferences and hire people from their community as you grow.

2. Customers

These are the folks who pay for your products, and so it makes a lot of sense to observe where they want to spend money, and what is and how it is easiest to sell. But be careful to balance short term revenue with that long term unmet end-user need. The real value is in the latter, though you may need to former to keep your business afloat.

3. Company 

You have access to a vast amount of knowledge internally. The customer service and sales teams are close to the customers, but so are the people who collect money. At the beginning these are often the same person, but as you expand make sure the communication continues. Make sure that everyone in the entire team contributes to building up the knowledge about your business, and to your short and long term strategies. There are lots of ways to do this, and it’s also important not to distract from the core goals of getting work done. Ultimately leadership is about helping people, rather than telling people, so if you find that an isolated group is doing all the thinking then try to change things up. At the same time make sure that you have alignment  between the key team members, not just in what you are doing but also why and how.

These days we are also overwhelmed with data, so make sure you are both collecting it and also looking at it in formal and informal ways. I like seeing daily, weekly and monthly reports, but also to be able to play with the data and make ad hoc queries. Your data should also contain internal metrics on how you get things done – such as average number of sales calls made per day and close rates.

Generally the task of collecting and presenting data belongs to the development team, but they are busy building the product and this can be neglected.  can neglect to provide this as they focus on delivering product, but please don’t, as understanding what is going on is how you learn. So make sure that it’s a priority to capture and report data as you go so that you can all understand what is going on and continually improve.

4. Fellow Founders

Now on to the interesting stuff.

It’s lonely being a founder or a CEO of a larger company. You can feel like you are inventing things as you go, and have nobody to turn to for trusted advice. My take is that the best people to share and learn from are others who are or who have just been through a similar situation.

So reach out to other founders and CEOs, and get into the mode of having occasional coffees or drinks with each other. Even better you may want to join a small founder or CEO group. There are founder and CEO groups that exist, but starting your own is the best way to make sure you can get into one.  So go ahead and progressively gather a mixed group of people from your town who are in the same position as you are. Start meeting regularly in a quiet and private place, not necessarily with any particular agenda, but with a view to have an informal conversation. You could add beer, food or guests, but the important features are that each person gets to talk and listen about their own issues, and that the group is by and for the founders or CEOs.

Larger groups can work too, but it’s much harder to get a productive session where founders are learning from each other rather than listening to a speaker or speaking to the same people in a beer or cocktail setting. To do this right you will need a facilitator who has a mandate to place primary emphasis on the founders or CEOs speaking and learn from each other. I’ve been doing this recently when facilitating TINShed events for a group of around 20 CEOs from the fastest growing TIN100 and TIN100+ companies, but I would hope that the people who meet in the room also continue conversations 1-1 or in small groups.

Larger events, such as awards nights and meet-ups can be very useful as well for sporadic catch-ups with peers, and for meeting new peers. Check out meetup.com for meetings in your area, and make sure to actually meet one or two new people each meeting. Don’t get drunk. 

Beyond this you can also reach out directly (Twitter works well for founders) to peers for advice over coffee, email or direct messages. While most very successful and well known people are usually incredibly generous with their time, they are also bombarded with requests. So start with people who are not yet in the limelight, and who are perhaps a bit closer to your stage of development

5. Reading

I do recommend reading a critical mass of books about business, but also to stop after a while, as they tend to get repetitive. These days you can often get the essence from a book within the first 3 chapters or so, with the remainder of the book is full of repetitive padding. Read accordingly.

My take is that business per se is actually very easy and the hardest parts are the things that distract and derail you. Find stories about people who started or ran great companies, and try to understand how they kept the focus on the right things, and how and why they made the decisions they made.

Industry websites, magazines and websites about early stage companies are also great sources of advice, but they can be massively distracting given the amount of “must read” news each day. You do need to keep up with your sector, so while I recommend occasional wider scans, you should visit a handful of sites regularly. It may also be handy to have an active and helpful presence under your own or your company’s name in websites, and certainly being on Twitter gives you a great firehose of information along with a community of smart and awesome people.

6. Paid Professionals

It’s really important to find great legal and accounting advisors. These are not your family accountant or lawyer, as you want to work with people who have worked with other early stage companies that you admire. So ask around, talk to them and get good references.

Once you have retained someone then please be a good client (especially if I have referred you).

  • Make sure that you are aligned as a team before asking a lawyer for help in drafting documents like shareholders agreements. Do your internal negotiations without your lawyer in the room, and trust the lawyer to write it up professionally. If your lawyer gives you a list of questions to answer, make sure you all agree on the answers before responding, and respond quickly.
  • Use your accountant as an advisor rather than a bookkeeper,  and make sure they have all of your data by keeping your Xero accounts up to date.
  • Trust your advisors – if you have briefed them well then make sure you thoroughly read what they have done but don’t second-guess them. Always read contracts and look at your accounts in detail – it’s your signature and responsibility not theirs.
  • Pay your bills on time.

One rather cynical way to think about paid professionals is that they cost $1 a word – spoken or written. This might encourage you to be very efficient with your own and their time.

It’s the same, in my experience, with designers and developers – give really good inputs and then stand well aside while they work their magic.

7. External Business and Technical Advisors

These are last in my list – but many people put them first. I believe that’s a mistake, and it’s better to work through the above first, but at some stage you will need help from people who can help you work on the business, not in the business. I’ve written before on the right mix for directors, and it’s the same sort of mix for advisors.

Free Advice. Great advisors can be expensive, but on the other hand people love being asked for help and advice is often free. There is definitely an element of getting what you pay for though, and waiting (or asking) for someone to blog or write about your business or homepage is not the most effective strategy.

To find advisors start with people you have met who you respect, and have coffees with them to update them on your business and get their informal advice. Ask them who else you should talk to, and keep having coffees. Over time you’ll call back the ones who are most useful.

It’s really fun giving advice – most people enjoy it. But it takes time and energy to give quality considered advice, and there is really only so much anyone can expect to give overall. So at some stage you should pick one or more people to have a more formal relationship that involves economic benefit. The mechanisms for this relationship are occasional or periodic consulting, retained advisors, advisory boards, directorships, shareholders and director-shareholders.

Retaining someone as a Consultant can be a nice way to test out a relationship, but also for longer term work. Either way I bring the person in for a few hours or days to see whether you can work together and obtain decent results with them. Try to get a tangible outcome from the work – not a report for a shelf, but some changes, agreements or decisions. You can leave it at this if you like, or choose to retain them formally or on an ad-hoc basis from then. Technical or business consultants may be particularly useful for a certain stage of growth only, say, so an ad hoc relationship is a good way to stop paying them when they are no longer useful. While a month to month advisory contract can work, be clear that it can end anytime at your discretion, and be clear on the expectations for the amount of work (minimum and maximum).

And speaking of which, all advisory work should be for short bursts of time. Advisors can help in small doses, but are an expensive way to get stuff done. So if you find yourself using them a lot consider hiring in the skill (from them or someone cheaper) instead. If they are good they should help you find their replacement.

Advisory boards can work for some sectors, like medical companies where the boards are stuffed full of scientists and doctors. The upside is that the members have no governance power, so you legally don’t have to listen to them. But if they start telling rather than advising (as they will) then they will in effect become a de-facto board of directors, and they may be in conflict with a real board. I don’t like them in general, and would prefer 1-1 relationships with advisors, which is often how these work in practice.

Boards of directors are the right place, for my mind, for your most trusted advisors. You need to have people who are comfortable with the governance role, who understand they are there at the shareholders’ discretion and who (collectively) have the appropriate mix of skills. Don’t be afraid to let them go when you are no longer learning, or need a different set of skills, and don’t be afraid to pay them well and demand work and results every month in return.

Shareholders and Shareholder-Directors are aligned with the success of the company, and it’s fantastic when they have invested a material amount for them in your company. Because they gave you money you can generally pay them less, or nothing, which is great. But while they will act a lot more like owners, there is the danger that they will act like the owner, or that they will act in their own short term interests rather than the company’s or founder’s. So you may need to deal with a strong difference in opinion, especially around raising capital. So, especially if they hold a small percentage, you need to retain the ability to let them go from their formal director role. You should also hold them to work and results commitments each month and make sure they are on the board for their advice rather than their money.

Shareholders who are not advisors are fine – just make sure everyone knows where they stand. They do have your interests at heart, so you can (and should) get in touch with them if you feel they can help, which they should be willing to. This can be especially useful around fund-raising time, but should generally sit in the background as quiet or loud supporters.

Overall

While you may end up with a handful (at most) of trusted advisors, ultimately you need to make the decisions yourself, do don’t cede authority. Many founders have managed very well without ongoing external help, so don’t feel you have to have any, though I do recommend it.

Posted in NZ Business | 2 Comments