Greene Street Observer No.15

Founders, Partners, and Friends,

In the go, go dot-com days of 1998 to early 2000, there wasn’t a lot of thought put into board construction. Startups were more focused on optimizing the amount of capital and the valuation. Generally, the highest bidder that conducted the least amount of diligence won the right to invest, and that investment firm added a board member. But as the market turned in itself, so did many boards as each investor had their own set of objectives. What were the competing objectives?

• Fund dynamics: Some investors wanted to create liquidity to raise a new fund, or the opposite, they already returned a fund and wanted to go for broke - meaning they would run the company as an option to hit it big or go to zero.

• Time: Many board members sit on 10 to 20 or more boards. Therefore, board members would triage their time in the interests of their own fund. 

• Most importantly, vision and alignment: Founders quickly found out that their vision didn’t align with that of their investor/board member, and massive fissures at the board level would reveal themselves.

Doesn’t this sound familiar? We saw the same behavior in companies from 2018 through early 2022. Founders and investors were jumping into long-term relationships where neither party spent the time to invest in each other and ensure there was a shared vision. Now that times are tough, board conversations can be even more difficult.

It is impossible to categorize people, but having served on more boards than I can count and seeing all types of good and bad behavior from both board members and founders, we can boil board members into two basic categories.

• Magnifiers. Magnifiers ruminate on the difficult issues. They can’t move past the past, they keep lists and hold grudges. If an issue is like a cup of water, rather than splitting it up and drinking the problem together, they fill it up and let the cup run over. They magnify the problem and in a group setting, that can calcify a board’s ability to act. Guess what happens then? The management team and especially the CEO spends 50% or more of their time dealing with the board. The magnifier creates a board like a bullwhip and pulls the whole organization with it. The secret I want to share is simply having one magnifier on your board can cause this problem. Just one.

• Buffers. When things get difficult, buffers, most importantly, stay calm. They show leadership, strength, and support for the management team. This is step one, it is an attitude - and this attitude we hold dear at Activant. Buffers help the board and the CEO or management team break problems into two parts, what we can control and what we can’t. Then they help keep the board focused on what we can control and break that down into clear questions. The board, along with the management team, builds a plan with clear dates and deliverables and it is the board’s job to hold them accountable and adjust as needed.  

Unlike the Magnifier, the Buffer doesn’t keep score, but pushes the team to focus on the present and future. Like a bullwhip or a sine wave, we view the buffer as reducing the harmonic motion of the organization - in other words the peaks and the valleys.

A good board member or investor starts with 1) deep alignment around the company’s mission (what they set out to accomplish) and culture (how they want to act). They have 2) a more concentrated approach to investing and are willing to selectively take board seats so they have the time and space when needed and 3) alignment with the rest of the board. 

A board meeting should be a comfortable collaborative place that adds strategic value and doesn’t burn excess time. Founders, keep your cap tables clean and focus on building a deeply aligned board filled with Buffers. 

Let’s go! 🚀

Steve Sarracino

Founder & Partner

There’s nothing like kicking off Summer with fresh research! In our latest publications, we cover:

• Fuel Cards — We explore how fuel cards transform fleet management and expense tracking, providing seamless solutions for businesses to manage their fuel expenses efficiently.

• Real-Time Payments — We delve into the evolution of real-time payments, examining how this technology is reshaping the financial landscape by offering immediate transaction processing and enhancing the customer experience.

Activant’s Inaugural Genesis Summit is approaching fast, with tickets selling even faster. Speakers include:

• Scott Galloway (Professor and NYT Best-Selling Author, NYU, )

• Bastian Nominacher (Co-CEO and Co-Founder, Celonis)

• Dan Westgarth (COO, Deel)

• Wesley Chan (Co-Founder and Managing Partner, FPV Ventures)

• Gesa Miczaika (Co-Founder and General Partner, Auxxo)

• Peter Smith (Co-Founder and CEO, Blockchain.com)

If you’re a Founder, Investor, or Limited Partner, you won’t want to miss it! Learn more and apply to register here.

• The team hosted our first-ever Poker Night in our office, gathering founders, investors, and others. We’ll be hosting many more, so contact John and Marc if you want to join the next one.

• To kick off the start of summer, our Partner Andrew hosted a dinner for GPs in SoHo. Thanks to everyone who attended!

• Andrew hosted a dinner for Irish Founders in Belfast in collaboration with Ormeu Labs.

• Celonis, a leader in process mining, was named a Leader in Gartner’s 2024 Magic Quadrant for Process mining Platforms [LinkedIn]

• Cardless, which helps companies launch mobile credit cards, has partnered with Qatar Airlines [USA Today]

Activant is a research-focused global investment firm that partners with high-growth companies, transforming the way the world makes, moves, and sells.

Founded in 2015, Activant has invested in category-defining companies like Deliverr (acq. by Shopify), Hybris (acq. by SAP), Celonis, Sardine, and many more.

The firm has $1.5B assets under management and is headquartered in Greenwich, Connecticut, with offices in New York City, Berlin, and Cape Town.

The Greene Street Observer is published monthly from Activant’s office on Greene Street in New York City.