Coming out of COVID, investors are losing their taste for boards of directors

Two weeks ago, longtime venture capitalist Chris Olsen, general partner and co-founder of Drive Capital in Columbus, Ohio, took to his seat for the board meeting directors of a holding company. It turned out to be a maddening exercise.

"Two of the board members didn't show up, and the company had a resolution on the agenda to pass the budget," an exasperated Olsen recalled. A "junior person was there for the venture capital firm" - a co-investor in the startup - but this person was "not allowed to vote because they are not a member of the board". And so we had this dynamic where all of a sudden the founder is like, 'Well, wait a minute, so I can't get my budget approved because people aren't showing up for my board meeting. 'admin?'”

Olsen calls it all "super, super frustrating." He also says it's not the first time a board meeting hasn't gone according to plan lately. When asked if he regularly sees co-investors showing up less frequently or canceling board meetings altogether, he replies, “I have definitely seen that. Of course, I've seen other venture capital firms where participation is significantly reduced. »

Why are startup board meetings happening less and less? There are a whole host of reasons, industry players suggest, and they say the trend is alarming for both founders and the institutions whose money is being invested by VCs.

Jason Lemkin, a serial founder and the force behind SaaStr, a community-based venture capital and seed fund that focuses on software bundles as a service, is among those worried. Lemkin tells TechCrunch that he needs to implore founders he knows to schedule board meetings because no one else is asking them to.

Lemkin says the problem has to do with the early days of the pandemic, when after a brief pause in action in April 2020, investment in startups – done virtually for the first time – kicked into gear superior.

“A bit of math that people have missed is that between the second half of 2020 and the first quarter of this year, not only have valuations increased, but VCs . . . would deploy these funds in a year at the instead of three years. So two years go by, and you may have invested in three or four times as many companies as before the pandemic, and that's too much."

Indeed, according to Lemkin, overcommitted VCs began to focus only on portfolio companies with skyrocketing valuations, and they began to ignore - because they thought they could afford it - startups in their portfolio that weren't enjoying as much speed to market. valuation front. "Until the market crashed just over a quarter ago, valuations were crazy and everyone was a little drunk on their 'decacorns,'" says Lemkin. "So if you're a VC, and your best deal is now worth $20 billion instead of $2 billion, and you've got a $1 billion or $2 billion position in that company, you don't care anymore if you lose $5 million or $10 million" on other startups here and there. “People were investing in deals at a breakneck pace, and they [stopped caring] so much about write-offs, and a corollary was people just stopped going to board meetings. They stopped having it."

Not everyone paints such a gloomy picture. Another VC who invests in start-up and Series A companies — and who asked not to be named in this article — says that in his world, Series A and B companies still hold board meetings. every 60 days or so – which has long been the norm so that management can keep investors informed of what is happening and also (hopefully) receive support and guidance from those investors.

This person agrees, however, that the tables have become "broken". On the one hand, he says most of the people he attends have slacked off in Zoom calls that seem even more superficial than before COVID. He also says that in addition to frenetic dealings, two other factors have conspired to make formal meetings less valuable: early-stage investors who write checks to younger companies but don't sit on the board, leaving disproportionate liability to their co-investors, and new VCs who have never been executives at large companies – and sometimes haven't even been mentored – and therefore aren't as useful in boardrooms. /p> Underserved

A question raised by all of these observations is how much does it really matter.

In private, many VCs will concede that they play a much smaller role in a company's success than they would have you believe on Twitter, where reporting involvement in positive results is the norm . One could also argue that, from a yield perspective, it makes perfect sense for VCs to invest the majo...