Think your company's too small to draw big-name talent to your board? Think again
By most standards, Reflective Technologies Inc. had already achieved a lot. In 1997, the two-year-old startup was already selling $3 million worth of a patented reflective material that could make cycling and running gear glow brightly in the beam of a car's headlights. But revenue had leveled off, and its young founders couldn't seem to persuade the mass-market apparel makers to adopt their expensive coating.
To do it, CEO Adam Rizika, his brother Robert, and their friend Scott Brazina needed an industry star to join their six-member board of directors. The trio, all graduates of the Massachusetts Institute of Technology's Sloan School of Management, knew that adding seasoned industry players, especially a business celebrity or two, can add a dash of credibility to an unknown startup and help attract investors.
Their target: Bruce D. Troutman, a top marketing and technology strategist at W.L. Gore & Associates Inc. and one of the brains behind the billion-dollar success story of the waterproof textile coating known as Gore-Tex. All right, so you wouldn't stand in line for this 51-year-old exec's autograph. But to Adam Rizika, Troutman was a sage and a hero who knew all about persuading sportswear manufacturers to add an invisible chemical coating that was durable, washable, and compliant with industry standards. "Anything I wanted to talk about, Bruce had lived it," Rizika says.
The courtship started in 1997, when Rizika first cornered the busy executive at an outdoor retailers' trade show in Salt Lake City and started pointing out the similarities in their businesses. Troutman was immediately smitten. "I loved that this product serves as a protective device when you wear it," he says. A few months later, Rizika met with Troutman for a full day at Gore's Newark (Del.) headquarters. Bob Rizika and Brazina followed up with Gore's marketing and technical staff. Over lunch, Brazina brought up a problem they were having--and Troutman finished his sentence for him. It looked like a good match.
Still, Troutman didn't agree to join the board until he saw Reflective present its business plan before an MIT Enterprise Forum session last year, a networking event where entrepreneurs get advice from a panel of business experts. Troutman was one of the panelists critiquing the plan--and it was hardly an accident. Rizika had used his school connections to make sure Troutman got an invite. While in Cambridge, Troutman spent a day at Reflective, and once again, Rizika sweet-talked him. "I was flattered both personally and professionally that they wanted me for a mentor," says Troutman. On top of that, he adds, "I'd grown to admire them as peers." He signed on as a board member last September.
Reflective is not the only one on the prowl for big names to add to their boards. Such panels are already common at many small private companies, even though they aren't legally required to have one. These entrepreneurs value the big-picture perspective they get from experienced directors or a less formal board of advisers and find that big players with contact and clout can bring in new business and open doors nationwide. "I recommend that any emerging company reach high when thinking about board members," says Roger M. Kenny, managing partner of Boardroom Consultants, a New York firm that helps with the selection process. It's not as hard as it sounds, adds Kenny: "Board members love seeing the immediate impact they can have on a small, hot-growth company." For example, since Troutman joined Reflective's board, he has helped the $4.5 million company focus its market more tightly. He has also steered it away from costly mistakes, such as starting its own apparel line, which, he warned, would pit Reflective against its own customers.
Other benefits are easier to quantify. Clay Weger, 31, the founder and chief executive officer of Just 4 Biz.com--an Austin (Tex.) company that sells office products over the Internet--learned in December, 1998, that two venture capitalists had rejected him simply because he didn't have a board. So, early this year, Weger went out and recruited a fellow church member and a noted turnaround specialist--Patsy F. Parker, 51, the former chief operating officer of SouthWestern Bell Mobile Systems Inc.--to serve with him on a three-member board. That did the trick. In April, investors handed Weger and Just 4Biz.com $2 million.
How do these entrepreneurs find big names? For starters, they elevate networking to a fine art, using every connection they have. They clearly articulate their company's needs to their would-be adviser. They seek out people with common philosophies and interests. Perhaps most important, they just keep plugging away.
Indeed, this is no time to be shy. Take Daniel Lubetzky, 30, president and founder of PeaceWorks Holdings LLC in New York, which sells food products made cooperatively by groups like Israelis and Palestinians that are normally embroiled in conflict. For his 11-member advisory board, he approached the biggest names he could think of--even former Secretary of State Henry S. Kissinger, who was the only person to turn him down. "I believe it's only because I was never able to speak with him personally," he says, without a touch of modesty. Lubetzky cold-called Ben Cohen, co-founder of Ben & Jerry's Homemade Inc., because of Cohen's well-publicized commitment to social causes and his experience in food distribution. Although Cohen gets dozens of requests a week to advise small companies and only considers one or two a month, he was intrigued enough to meet Lubetzky in New York. Impressed, he signed on. "I was interested in the mission: using the power of business to build bonds of friendship between enemies," he says. His main complaint? Lubetzky gets distracted by all the opportunities that come his way. "My role as a board member is to get him to focus," says Cohen.
If appeals to altruism don't work, you might waken an older executive's entrepreneurial spirit. Judith E. Starkey, president of Atlanta-based Chamberlin Edmonds & Associates Inc., a 128-employee, $12 million consulting firm that helps hospitals obtain Medicaid and Medicare dollars for uninsured patients, makes a point of cornering recent retirees from high-powered jobs. She has managed to recruit both Thomas J. Roeck Jr., retired chief financial officer of Delta Air Lines Inc., and, most recently, Gordon M. Sherman, who retired in January as the Regional Commissioner for Social Security in Atlanta.
Roeck, who usually confines his board activities to nonprofits, did his due diligence before signing on in February, 1998. He sat in on three months' worth of board meetings and toured the offices, where he approvingly noted that there were no "potted palms or marble, and people were stacked in cubicles." Ultimately, Roeck was won over by the 12-year-old company's impressive growth record--68% a year and on track for $20 million in sales this year.
What about compensation? Some board members aren't concerned about that, though it sometimes helps to offer a small stipend or, in Lubetzky's case, travel reimbursement. At other companies, equity or profit sharing are thrown in to sweeten the pot. When Elizabeth A. Murphy, now 37, decided to start a Washington consulting firm, CFM Partners Inc., in 1996, to help banks comply with regulations on selling securities and mutual funds, she couldn't afford to pay her directors anything. Instead, she gave them 5% of her stock. Entrepreneurs who take that route typically fork over 1% to 8% per person.
Veterans of such star searches say you should figure out the kinds of skills and people you need. For starters, you'll want someone with experience or contacts in your industry. Ideally, they will be well-known. Be sensitive to their time constraints and assure them that they won't be bogged down with day-to-day decisions; you're supposed to tap them only for big-picture advice.
Can you aim too high? Perhaps. "Sure, I'd love to have Michael Dell on my board," says Weger, the Web entrepreneur, of the founder of Dell Computer Corp. "But realistically, he's not going to have the time for me."
Then again, you never know. William Lohse is now founder and president of SmartAge Corp., a San Francisco-based Web marketing firm with 56 employees. But as founding publisher of PC Computing and former president of Ziff-Davis Publishing Co., he was able to use his blue-chip business connections to attract a powerhouse advisory board and raise some $10 million in startup capital. His advisers include Vinton G. Cerf, senior vice-president for Internet Architecture & Technology at MCI-WorldCom; Theodore J. Leonsis, group president of AOL Interactive Properties; and Jim Seymour, editor and lead columnist for PC Magazine and TheStreet.com. Lohse still hasn't gotten around to putting together a compensation package for them. To save time, members will convene either in a dedicated Internet chat room or by teleconferencing.
And speaking of Michael Dell, Lohse did ask him to join. No, he didn't accept. He also got to Benjamin M. Rosen, the founding investor of Compaq Computer Corp. and Lotus Development Corp. and currently Compaq's chairman of the board and interim CEO. "I got as far as having dinner at Mr. Rosen's apartment in New York, but he ultimately decided he didn't have time," says Lohse. "Neither one came on the board," says Lohse, "but they both invested in the company. I'll take that for now." Just goes to show, it never hurts to ask.
This article was originally published in the May 24, 1999 print edition of Business Week's Frontier. To subscribe, please see our subscription policy.