a16z Podcast - a16z Podcast: Boards and the Power of Networks

Episode Date: October 29, 2015

It's easy to argue for "choosing possibility" when it comes to addressing diversity and inclusion in tech when certain people have access to networks and others don't. BoardList -- more of a talent marketplace than a "list" per se -- is an effort to address part of that issue, bringing more qualified women onto the boards of tech companies. But isn't it risky for startup CEOs to add unknowns onto their boards (and what's the purpose of those boards, anyway?) Does it take away seats from others including the company's investors? In this segment of the a16z Podcast, serial entrepreneur and BoardList founder Sukhinder Singh Cassidy and Silicon Valley Bank's John China discuss these issues and more -- including how boards (and especially common stock in startup boards) are one way to immediately start changing things.

Hi, everyone. Welcome to the A6 and Z podcast. I'm Sonal, and today I'm here with two special guests, Sikinders-Cacassidy, who is the founder and CEO of the board list, as well as the founder and CEO of Joyus, and she's actually been a serial entrepreneur for many years, and John Chena, who is from the Silicon Valley Bank. Welcome, guys. Thank you for having us. Thank you. So we're here to talk about, you know, we only have a short amount of time, so we can talk about a lot of things. But what I'd love to talk about is a little bit about your experiences, having been an entrepreneur, Sikinder, and then also how you got to the board list, which I think is a really interesting initiative. And also why it's called the board list because it doesn't, I feel like we see a lot of lists out there.

And I kind of want to unpack what that means. Sure. All right. Well, in fact, I think being an entrepreneur and how I got to the board list is fundamentally related. So it's probably natural to talk about one and the other. So I came to Silicon Valley in 1997 after leaving. B-Sky-B in London, and I moved here and literally slept on a friend's parents' couch in Mill Valley for three months until I found my first job, and was lucky enough to have arrived at the

right time, wanted to start a company, didn't know how, and ended up in maybe a year and a half later through a series of events being introduced to four co-founders, engineering co-founders of a company called Yodley, which was in financial services software, who were looking for a business co-founder. And so I started my first company, gosh, in 1999, and was it Yodley for five years, where we became the dominant provider of actually financial data that was personal, right? And aggregated. Yodley subsequently went public just last year and in the midst of getting acquired. And after Yodley, I went to Google for six years where I feel like actually got to be an entrepreneur because I spent a lot of time building different businesses at Google. The first one was local.

So it was the first GM of Local and Maps. And then when, went on to run many different countries internationally. So Asia, Pacific, and Latin America, including our launch into China and Brazil and a number of other countries. But I was telling people, it was like running 18 little fiefdoms because every country, you know, had a different state. And in our case, like China and Korea and Japan and Brazil, were in fact very distinct markets for Google. And around 2009, I had my, I'd after I'd been at Google for six years and felt like, you know, I couldn't go any further. I wasn't going to become the CEO. An entrepreneur wasn't enough.

You needed to be an external entrepreneur again. I really was craving to start or run my own show and passionate about the area of commerce and that ultimately led me to found joyous. And the reason that all relates to the board risk is very simple. As I've seen the narrative on tech of the last 18 to 24 months, on the one hand, I think it's incredibly warranted. You know, it is in fact true that we're not diverse enough. It is in fact true that here we are in the world's leading talent economy and we are not fully harnessing the power of women. Yet, I do not believe that things are nearly as dire as you would read in the press. And about four months ago, I penned an open letter on recode called Choose Possibility

that really surveyed over 300 female founders who founded companies alongside myself over the last 20 years. I think that's what actually drew my attention to your work because, of course, I follow this entire category incredibly closely. It's very personally passionate about it. But you were, I think, one of the first people to actually do a sort of formal survey, which actually played back some data. What were some of the things that you had shared as findings? Well, you know, so the top level thesis was if entrepreneurs were to listen to all the negative signals out there, they would never start companies. But in fact, you know, the lifeblood of Silicon Valley is a bias towards the positive and a bias towards possibility and innovation. So why are we not taking the same approach inside of technology and diversity questions is the real issue?

So when I surveyed these women, I said, what were your opinions on being an entrepreneur? Some of the interesting findings that came back, number one, there are families. family of origin, a lot of 55% came from entrepreneurs, entrepreneurial families. Not surprising for entrepreneurs generally. The point is, women fit the same pattern, right? Number two, this was interesting to me. Leading a professional father was most often things like CEO and engineer, leading professional mothers, teacher. Interesting. That was a really interesting pattern. I expected, that's the killer combo, apparently. I expected to see a lot of like, you know, female engineers or female doctors, but, I mean, their mothers were highly educated, but, like, teacher was

right in there. And for father, it was CEO, engineer, entrepreneur, these were the words that showed up. Also, unsurprising, women ourselves have a diversity problem. By far, the vast majority of female entrepreneurs are white and, if not white, Asian. Very little representation from Hispanics and Latinos, and African Americans. So those are some of the findings. But the most important thing was overall, 88% of the women surveyed said they would wholeheartedly recommend entrepreneurship. And the 12 that didn't said it had nothing to do with gender. It was all

about whether or not for their daughters or somebody they advised on entrepreneurship, whether it was quote unquote the right fit because it takes so many things to build a company. And the role that gender plays is quite frankly a very, very, very small signal in a lot of different things it takes to be successful. So, John, you're a supporter of board list, full disclosure here. Would you want to share some of the things that motivated you and where you were coming from? because I feel like we hear a lot about advocates for this work, but very few people actually do anything about it. So I'm kind of curious to hear your perspective to build on what Sikinder is saying.

First of all, when Sikinder calls, you pay attention, and she did call, and we really jumped on board quickly. But from our lens, we've been looking at this problem from a different lens. We sit at that nexus between venture capital and entrepreneurship. And what we see is that from the VC angle, such limited number of women in the practice, and we've been trying to understand how could we improve that? When Sukkinder came along, two things happened.

One is we have great data on women entrepreneurs that's proprietary to SCB, given all the entrepreneurs we had. And we felt we could add to her data list. And quickly we realized once we opened up the data room, we did, we could. And two, it was the first time someone articulated an approach to the problem that could actually be solvable and scalable. Because by creating this marketplace that's curated, highly curated, you could actually start to see that one plus one could equal five.

You could go down the road of solving the problem over time. So actually, I want to focus on this latter aspect because I do like the fact that we're talking about a concrete solution, which I think is what the narrative needs more of. But I do want to say that my initial impression is, is this an exclusive thing? Like, do you have to make it to be like an insider on the list? Because when you talk about having surveyed a certain number of entrepreneurs who are already, by definition, more privileged to be able to pursue a path of entrepreneurship, how can we really be more inclusive? So I guess that's my first question about that.

And just to step back because I don't think we've done a good job of articulating actually what the board list is. Right. Let's actually say what it is. Just be clear. So people understand what the board list is. The board list, and it's in beta currently, I mean, it's less than three months old, to be clear, is a set of tech leaders coming together to curate and nominate women leaders from our own community to serve on private company boards with the thesis that there is huge white space in private company boards. both greater company performance through board independence, and secondly, if you're going to create an independency on your board, why wouldn't you put diverse thought of any kind, including diversity of gender, you know, into that boardroom? So we just believe that of all the solutions that are out there, many focus on tomorrow, which is awesome. And seating girls in STEM is so important. But what about the solutions today that could affect virtually 100%

of Series B and beyond startups? Right. In fact, I've actually heard someone say that the single most influential way to quickly influence a company and do something about us to get on a board of a company? Yeah, I mean, I mean, boards have their hardships too, let me tell you, you know, because at the end of the day, it's still the CEO show. But I do feel like what you have is a group of advisors if a board is used rightly and well, right? And so what the board list is, is, you know, we had 100 tech leaders, including 25 VCs, well, now we're at about 100 tech leaders, probably 30 VC, 70 operators, like CEOs in C-suite, known leaders in the Valley, who basically came together and curated a marketplace. But now, so it's actually a marketplace more than a list.

It is a marketplace more than a list and you're hitting on it. But what, so there's not a ranking of women. Okay, what there is is 700 plus endorsed women right now in a database who are proven leaders, who other leaders have held up their hand and said, like, I am going to back this person and put my stamp on them as somebody who is ready for a board opportunity. And then you can imagine, as in any marketplace, we just seated it, right? But what do we want to attract board demand, right? And in fact, that's the other side of the marketplace. If you, yes, if you create high quality supply, who doesn't want access to great talent that has been vetted by other people, you know, who are known to be successful in Valley?

People are constantly asking us, by the way, like, you know, can you, do you know, we're looking for this, recommend this. This already happens, right? And there's not like a ready, if people have a list in their head, but it's not documented. And quite frankly, I get asked that question, too. And to your point about whether or not this is exclusive or closed, I understand that. I think our goal at the board list is, it's a couple. Number one, there needs to be a high bar, okay, the reason.

reality is it's a boardroom. You know, a CEO is looking for somebody to give him advice, to challenge and influence him, but also to be there to help him succeed. And knowing how to play a board role is very different from an executive role. So you need to have a very high bar. That's true. Having said that, why did we build a marketplace? We built a marketplace to be scalable and to get out of this notion that, you know, the only people who get opportunities are the 10 people in somebody's head that gets passed on, you know, through a first-degree connection to some other person who happens to be looking because like attracts like, right? So you need to, it's just crowdsourcing.

It's crowdsourcing from a highly curated list. So surfacing the dark talent that maybe people don't know about that can actually make it on those lists through different. And we'll be publishing the criteria to be both an endorsing member of the board list and to be a candidate. So this notion that you need to know me or John to be a member of the board list is not correct. What is in fact true is that great people know great people, meaning are great leaders who've been part of the founding team. They do know great candidates. And in fact, they know other great leaders who should be part of the board list. course, we have a member referral model, but we also have an open application process where

as we publish the criteria, everybody will understand. This is not about a club. This is about a highly curated community that's interested in doing the right thing for company performance. That criteria publication is huge because transparency is so key. I totally agree. So both of you guys mentioned scalability. And John, you've said that's a reason you are a huge supporter of this. We're telling me earlier that you've seen a lot of different things over the years that you feel like work or don't work. Like, I'm really curious to hear that perspective of someone who's observed all these solutions. The one key point you both mentioned was networks. The research shows that networks are really, really powerful. When the criteria come out, will show that, in fact,

it is about open networks. And creating those open networks will actually give more access than most people think to this effort. Certainly far more access than today. Because to be clear, boards today are an incredibly opaque and clubby network. And really, it's often a CEO going to the only the people he knows and asking who they know, and let's be clear. Like, when it comes to networks, you know, a lot of networks look just like who you are. And what I love about these open networks, it's really critical, and that's why I want to make the point, is it's always been believed that there's a set of boy networks and a set of female networks.

This is the first time this effort will combine networks because the effort is to have diverse board sets. And those networks will now be part of, they'll be co-joined. So the nominators are not all females. Yeah. And to be honest, I mean, I think John would concur. I think one of the biggest problems I said this that TechCrunch disrupt a couple weeks ago, people ask me, like, what is the problem with all of these efforts?

I'm like, the problem is it's women for women, okay? I mean, it should be men and women for great talent and great performance. I agree. I would love to see more men be present at all these events. When I go to these women networking things, I kind of am turned off by that whole notion at this point. I totally agree. So anyway, so you're saying that the open networks is a big factor that goes into that scalability. On the concrete steps for us, we're really hoping to push our industry to think about this very obvious but yet understood situation where common shares exist in a startup that are permissible to bring an independent board.

It's rarely used. Rarely used. That is one of the biggest barriers we did. And what we're trying to create is dialogue through a series of salons across the country, starting on the East Coast and the West Coast, where we challenge. where we challenge CEOs, have they thought about it? We're challenging venture capitalists. Have you thought about that pool? It really is you should be indifferent to it,

and you should be open to the possibility, back to the possibility, that you could have a diverse set board members of these highly qualified professionals that could add real value. And so from my perspective, that's where we're playing a role and we're hoping to catalyze others

to jump into the discussion and create their own salons with Sukhinder's group to crystallize a movement, will. Because like one will be get another one. Once you have a series of successful experiences, this thing should start to move in a moment. If there is a challenge with the board list, I mean, obviously there are many. It's a startup. Like we run it just like a startup and it is, right? And it's a product and it's a community. So it has all those aspects of any kind of online social network. But I think John hit it. If there's a fear I worry about, you know, it's not about

supply. There is amazing supply. So it's a demand side. It is demand side. And, and I I think that a lot of the focus on boards is, as you know, public boards. I mean, there are only so many public boards, and quite frankly, you know, you need to have experience most times to be on a public board. There's a reason for that, right? How do you build experience if you don't have experience on private boards? Many of which, by the way, are as amazing as public boards, right? Because they lack some of the regulatory and you can focus entirely on the business.

I think by our measure, at most, 22 to 25% of boards in the venture capitalists who are partners with us on the board list, about 25%. gave us their data, and we also got data from one of our other sponsors, Wilson Sincini. Only about 25% of boards have a female in the seat, have a female board member, and often that number is biased because of female investors. So, quite frankly, the number's a lot lower. But I'm sure if we were to look at how many boards even have an independent seat in a series B, I bet you we'd find a similar number, which is we only served for how many

were in women, but the reality is it's an equally big challenge, is just understanding as a founder, the value of having an independent voice on your board, not just the VCs. Exactly. So one of the themes that you guys are touching upon is this missed opportunity in A, truly independent board members that are helping startup founders, but B, this notion of this underutilized common versus preferred stock in the company and why that's such a huge opportunity. Could you guys actually talk more about that and why for those who are not on boards, those actually create better boards? Our first engagement was with our advisory board of some of the best venture capitalists here

in Silicon Valley. And when we approached the subject, what it was interesting, they understood it, but no one had been paying attention. In fact, what I think happens, most startup entrepreneurs don't focus on that seat. So it goes unfilled. Right. It's not even filled. So we see it as an opportunity to create a net new position, not a takeaway from anyone

else and not at the exclusion of anyone else. It's actually additive. That's the way we're looking at creating the demand from. And we were validated in that room. And so now we have a series of future salons with CEOs of those venture capital firms willing to participate to have the open discussion. Right. And why is it important? I think that was the question. The other question you wanted us to tackle. I think it's important for several reasons. So at Joyus, which is company I run, obviously, I put two independents in two of my board seats. One, was my second common. I put an independent in my seat, and I had one independent seat. And so I put them in in the series B. And I have four venture capitalists on my board. So first of all,

as a founder, if you think the only perspective that's relevant to you is your VC, right, when you are building your company and going through, you know, honestly, some of your most hellish days is your VCs. Well, they're not operators. Okay. So number one, do you want to perspective? Yeah, some are X operators, but generally speaking, do you just want one? point of view in the room. I mean, I as a CEO have never wanted to feel like, first of all, my financial investors control my board. And number two, that there's not somebody who understands what I'm going through, right? Those are like the, those are the nice to haves when all's going well. Let's talk about when things are not going well. Right, which I think we need to talk more

about in general, because that's really what matters, right? When things are not going well, what do you need as a CEO? You truly need independent thought in that boardroom, because the one challenge of boards, and this is true, and this is one of the challenges performance-wise, is boards are often too late to understand what's going on in a company, right? So imagine the combination of sort of, you know, you catching up with something once a quarter, you have two bad quarters in a row, now you have, you know, people who aren't that familiar with your business and who buy their, you know, buy their time, don't spend time operating, and now they're in a knee-jerk reaction situation to something that's going

on. And if all the times a board is likely to make a knee-jerk reaction or an uninformed decision or like a radical decision, it's when things aren't going well, right? Once again, who do you want in the room? I mean, for me, I want an operator. I want an operator who's been through high and low. I want an operator who has even a perspective for me as a CEO, which may well be like, hey, hold steady. I've seen this before. Things are going to be good. Or, you know what? Like, I've seen this pattern before. Actually, you know, I agree with your venture capitalist or what have you. This may be a time to think about alternatives. But the point is I want an independent thinker. and I want somebody who when things are not going well, has the courage to say, hey, here's what I've seen and here's what I think.

So let's say you get an independent, for example, not necessarily from, but among many options, the board list. And you don't really know them because they aren't coming from your personal network, which is exactly the point of the diversity. However, that's a wild card. Exactly. So how do you advise people kind of come around that, especially because founding a company, you've done this now three or four times is a hard, scary thing. So what advice do you give to people? Well, you know, there's this fine balance, right? On the one hand, keep in mind, it's one voice among five or six in a board room. Number two, what people forget is I actually think that in private companies, board seats are relatively low-risk, high-a-opportunity.

If you are not sure about someone, you set a board term. Like, in a startup, for somebody to give you a year of their time, by the way, that's plenty. You don't need to put somebody on your board for five years. Like, arguably, it might even matter for what stage of a company you're at. You might want to shake it up at every stage as your company shifts. That's exactly it. So it's like, you know, so you can put somebody in the boardroom. They're not. going to control your board, right? Chances are it's one out of five or six seats, right? Number two, you are after all the CEO. It is a private company. If that board dynamic is not working out, guess what? You could have a conversation and decide that it's not working out. Right. So I feel like there's far more upside than downside to boards. And it's an easy entry point to get to know somebody. I mean, you're going to see somebody, you know, once every other month or every month. And so it's a very

low risk interaction is what I would call it. Okay. Compared to somebody trying to force a gender ratio on your executive team. Okay, good luck with that. You know, at the end of the day, you know, you are in like constant contact. You're in like, you know, high contact with that person and you are betting on each other, right? Yes, I want to see gender equality in the executive room, but I think that's a much higher risk equation where it's like, you know, I mean, and by the way, let's think about all the times people hire people they don't know in their executive team most of the time. That's right. You're fighting them through recruiters. Right. So, exactly. So, I mean, we talk about this network. So really is the board higher risk than

your executive team, though. Actually, I'm convinced. I'm sold on that. To answer the question from another lens, there is this endorser. Everyone in this marketplace will be highly referenceable. Yes, that's true. Even if they're not well known. That's exactly right. What we do ask all the endorsers is, you know, you're putting in a reference. It's not anonymous. We expect that you would be able to take a board call and would take a board call in this person. So please don't put somebody in if you don't feel like you can stand behind them. Right. Because yes, Referenceability is exactly the right thing, right? And we all know how powerful that back channel reference is. So the board list is in some ways a positive system for back channel referencing, right? Right. In fact, it kind of makes it more overt in a way that's beneficial to everybody. Yeah, absolutely. So, you know, we've been talking a lot about the space we're in, the boards, and the solutions that are out there. How can people who want to get involved do something about this? What you can do is look at the candid criteria, look at the endorsing criteria if you want to be part of our community. Either way, right.

feel free to apply. Today, we don't have the notion of what I call candid self-nomination, but we do have a forum where women who are interested in telling us about their interest in boards can submit it. So if we do, in the future,

which I think we will think about, open up a lane where women can bring their own endorsements, right? We believe in this notion of endorsements pretty strongly. So I don't think you can just nominate yourself, but you can, in fact, maybe put up your hand

and bring an application and an endorsement alongside you. So I think there are ways if you're interested in either joining us as an endorser and helping nominate great women, or, in fact, think you would make a great board member. You can always go to theboardlist.com and just fill out a simple form and let us know. Of course, the most important thing, the thing we fail to talk about, if you have an open board search and you want help with it, go to theboardless.com right now, and we have

amazing, amazing women leaders that you should consider. Obviously, that's our goal to help people get great board members. And is there a long-term roadmap or plan for other underrepresented minorities? You know, people have asked me this question about underrepresented minorities. Of course, I think about diversity more broadly. You know, I think at this point, our hands are full, quite frankly, with just this swath. But certainly, I think, having built a marketplace, it has a lot of utility for other minorities, quite frankly, for nonprofit boards, for public boards. There's nothing about a product. You can do a lot of different things in the future, right? There's nothing about a product that says it has to be tech boards. Right. It's still early days yet,

though. It's early days. Look, our interest is in, you know, solving the problem in our backyard and serving the community that's been so good to us, I think. So I don't think we can talk about what others should be doing if we don't solve it in our own industry, quite frankly. Well, thank you guys for joining the A6 and Z podcast, and I'm excited about what you guys are doing. Thank you for having us.