What’s a NED, anyway?
NED stands for non-executive director (also abbreviated as NXD) and it refers to a member of company’s board of directors who is not on the executive management team. While NED is the more common term in Europe, in Silicon Valley we typically say “independent director,” which I have always taken to mean a director independent of both the company’s executive management team and the company’s venture capital (VC) investors.
Startup boards typically have three types of directors:
- Founders, who represent the common stock [1]
- VCs, who represent the various classes of preferred stock [2]
- Independents, who represent (what they believe) is the good of the company [3]
By virtue of my joining the board of European work management leader Scoro, I came to meet Martin Fincham of The Gorilla Factory (presumably a reference to Geoffrey Moore’s metaphor), a fellow NED, and the board chair of Scoro. So I naturally was eager to read Martin’s new book, Diary of a Novice NED, and put it on the top of my reading list once it came out.
While I won’t dare to review a book written by a new colleague (and our board chair!), I will say a few things about the book:
- It’s a quick read, enjoyable, and at times quite funny.
- It truly is a diary: mostly written in the first person and with lots of interesting stories.
- It bottles a lot of wisdom: Martin seems to be a fellow reductionist, so the book features many pithy pieces of wisdom, derived from his years of experience.
- It has a European tilt to it: while it’s certainly relevant to startups everywhere, some things are different in Silicon Valley [4]
- More than anything: it provides a rare inside look at how Martin prepared for and made the jump to “going plural” [5], making a new and satisfying living as an advisor and director.
Diary of a Novice NED is available on Amazon here. Congrats Martin and looking forward to the foreshadowed second book!
For my thoughts on how to be a good independent director, or NED, see here.
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Notes
[1] While founders typically have common stock, they sometimes have their own series, often called Series F (founder), that has the same liquidation preference as the common stock, but additional rights such as multiple (e.g., 10x) voting rights or protective provisions.
[2] Read this paper from Wilson Sonsini for a look at the challenges faced by VCs in wearing two hats on company boards.
[3] For more on the role of an independent director, you can read this UK article, The Role of a NED, or this Utah Law Review paper, The Role of Independent Directors in Startup Firms.
[4] And it discusses tax “schemes” (I love the connotation difference between the UK and USA on this word) that are UK specific but, I believe, have rough spiritual equivalents in the USA (e.g., QSBS)
[5] Seemingly, a UK idiom for working with multiple companies as an advisor/consultant, as opposed to just working at one “real” job.
