Editor’s note: Many startups struggle with selecting highly effective board members. Adam Ghetti, founder, CTO and chairman of startup Ionic Security, attributes much of the success of his company to its board members and advisors. He shares tips on how to find great advisors.
SandHill.com: Other than not getting advice on avoiding pitfalls, what can happen to a startup without great board members?
Adam Ghetti: If you get the wrong board structure early on with the wrong kind of make-up, you’re going to spend more time having to justify yourself to the board versus getting their time to advise on the next step the company should take.
SandHill.com: Where did you learn how to select effective board members?
Adam Ghetti: From a gentleman named Sig Moseley. Sig has done 140-some early-stage deals across a broad set of industries including Internet security, and he had tremendous experience in the general operating pitfalls that a lot of early-stage companies tend to make. He helped us avoid mistakes by focusing us on:
- How to configure the board structure and for what reasons
- Would we really want to have a certain type of person on the board vs. another — and why?
- What would we be willing to give up for the right person that could add the right governance value? (We didn’t think about governance to begin with.)
Sig played a key role in advising us on how we structured our board. Looking back on it now, I find that was a very valuable set of insights that wasn’t so apparent early on.
SandHill.com: You recently closed a Series A funding. But who were the advisors and board members during your $2 million seed round of funding closed in May 2012?
Adam Ghetti: We had a lot of security investors and advisors and a lot of industry investors and advisors for the first year of the company’s life and for the first 18 months that led up to our being able to do the Series A.
From the security arena we had folks like:
- Christopher Klaus, who built one of the first most successful enterprise-focused security companies in the world and sold a lot of technology to regulated enterprises
- Phil Dunkelberger, who is the founder and CEO of PGP, which is the largest data security company ever created
- Ken Levine, who was the founder and CEO of Nitro Security, which was acquired by McAfee and who has focused on data analytics in security
From outside the security sector we folks like:
- Brad Hammond, who created one of the larger financial services data room technologies in the world
SandHill.com: Even though you had great advisors, did a challenge occur that you did not anticipate?
Adam Ghetti: I would say it happened every day from a technical challenges perspective. We understood that they would be part of the package to get where we were going. But from a business perspective, we have been very blessed to have not run into any unforeseen circumstances that we would consider in any way material.
We’re realists, so we know that we don’t know everything, and we have more respect for the things that we don’t even know we don’t know. So we plan with that in mind. Instead of saying we’re going to go from A to C, and B must be in between A and C or there is no way it will work, we’re flexible. We could have part of B or more of B or B plus something else. So when challenges present themselves, we don’t necessarily look at it as a diversion from plan as long as it’s within the same direction we originally started on. We treat our entire business that way.
We’re very fortunate to have investors and supporters around us that believe in that same philosophy, like Ted Schlein at Kleiner Perkins. He is probably one of the most intelligent professional investors that I’ve met. He also gives hands-on experience and mentions people to connect to (but it’s not a directive). We didn’t expect how involved folks like Ted Schlein would get in our business for the positive.
SandHill.com: I assume your top advice for other entrepreneurs or startup CEOs is to find great advisors.
Adam Ghetti: Yes, and I will add to that for clarity. You’re never done learning. At any stage in your life, no matter what you’re doing and who you have become as an individual, you always have room to grow. What you need to focus hard on is where are the areas where you can grow in a meaningful way in the shortest amount of time that will make the other areas of your life better, both personally and professionally.
SandHill.com: So how can one find the best advisors? What was your strategy?
Adam Ghetti: What I did early on personally was try to find the folks that I had a lot of respect for their history of actions and interactions (from engineers to investors to peer advisors to life coaches).
I found ways to integrate them into my daily process. I didn’t want to just get somebody’s name on a slide deck that I get to call once a month and some email exchanges here and there or to make introductions here and there — that’s a transactional advisor. And, I’m not a big fan of transactional interactions. I’m a huge fan of spending more time with a fewer number of people to build relationships.
You should treat your advisors as such, folks that you can lean on in a material way, both in the professional and personal worlds. I say personal because a lot of decisions have to be made inside of a startup that are not in any way about the business per se but are about the culture of the company, personnel decisions and things you normally wouldn’t think to call an advisor on. You need to understand that they wouldn’t be advisors if they hadn’t done some great things and solved a lot of hard challenges.
My one big piece of advice to anybody who wants to find great advisors is to find the ones you can build real relationships with because you’ll get real value out of that. Don’t choose people you think will be good transactional introducers.
SandHill.com: That sounds difficult.
Adam Ghetti: It is harder and takes more time, and you’ll hear a lot of “no” responses from a lot of people early on because they don’t have the time. But if you position it properly and you gain the trust of those individuals, you’ll end up getting more value than you ever could personally find from just an advisor. Build real relationships. Don’t go find transactional advisors.
SandHill.com: How do you build a relationship like that once you find the advisor?
Adam Ghetti: You don’t go to an advisor asking for anything. You go to the advisor and explain the current state of your company and ask where they think they can add the most value. And you have to be brutally honest.
SandHill.com: Honest about what?
Adam Ghetti: Be brutally honest with everybody about everything. Be honest with your investors, even the people that aren’t yet investors but could be. It gives them the feeling that you’re going to work hard to do the right thing all the time, and if something comes up that you didn’t know about, you’re going to explain that to them and let them know sooner rather than later. What they don’t want to see is you constantly trying to hide the unsavory parts of the opportunity.
To drive that home, in our general partner meeting for our recent funding round, we listed the three biggest risks of our opportunity. We framed that right up front. And for the rest of the two hours it was our job to convince them that we could overcome those risks.
It’s also important to be honest with employees. Once a month we have a company meeting where we show the money in the bank account, show all the prospects that we have, show them our hiring plans, talk about the next 30-60-90-day strategy. That way, at least once a month, there is nobody in the company that doesn’t know exactly where we are. That lets everybody know we’re making the right decisions for the right reasons.
Being brutally honest gets you far in life. I think a lot of entrepreneurs try to do the hard sell for employees and potential investors and customers. And they negate to do the hard reality. People think that the hard reality will always stop a hard sell. But I’ve learned in my situation that doing the hard reality first and then the hard sell gets you twice as far.
Adam Ghetti is founder, CTO and chairman of Ionic Security. He founded Ionic Security (previously Social Fortress) to address cloud data control and protection. Building technology-centric companies since age 12, Adam is one of Atlanta’s youngest and most promising tech entrepreneurs. An expert in complex systems and complex tasks automation, Adam has a deep, applied knowledge of application, network and data security and has spent the last 14 years building large-scale systems in Internet-related verticals.
Kathleen Goolsby is managing editor of SandHill.com.