When to bring in an independent chair

When Quantifi Photonics announced Caroline Williams as its new board chair in August 2022 the significance was two-fold: the Auckland-based company had not only secured Williams’ governance experience but also its first independent chair.

So when do founders know the time is right for such a move?

Williams’ appointment came a month after the company raised $25 million in a Series C funding round led by Intel Capital, the venture capital arm of Intel Corporation – one of the world’s largest semiconductor chip manufacturers. Post-raise the company was valued at $90 million.

The Auckland University spinout develops and manufactures high-density photonics test and measurement instruments for the rapidly growing high-speed optical communications market.

Its revenue, which comes 100 percent from exports, is not disclosed. Quantifi has grown to around 90 staff and four offices globally. 

Stevens says the board decided the time was right to shift from an investor chair to an independent one following its Series C raise as a way to inject a fresh perspective and new way of doing things at board level. It has done exactly what they wanted it to, he says. 

“Caro has got a lot of that structured governance background and while all of the board, with the exception of me and the other co-founder [Dr Iannick Monfils], have got governance experience, having someone who is really focused just on being a chair rather than being a chair and something else, has helped a lot.”

His one regret is not making the move sooner. 

His advice to other startup founders is to get an independent chair to help balance things on the board as soon as you start seriously expanding offshore and have venture capital investors on board. 

“It changes the dynamic.”

‍

Making the choice

Quantifi’s board brought in a recruitment firm to help them choose an independent chair, and considered several candidates. Williams was recommended by one of its investors, Nuance Connected Capital.

She’s an experienced director of high-growth companies, including chair of Easy Crypto. And importantly for Quantifi she had telecommunications industry experience as a former Spark employee. 

“It was very obvious at that point, compared to any of the other candidates who we had been talking to, that she was immediately a very good fit. It was decided very quickly,” says Stevens.

Williams says she was interested in leading the seven-person board after being impressed by what the company was doing on a global scale. “I love to be around people that are doing genuinely big things,” she says. “And Andy and I had a good rapport from the beginning.”

The board’s brief to the incoming chair was to keep things going with a tight focus, bring in some structured governance, get the board working really well, and provide support to the CEO and board.

“It’s very attractive as a chair when you’re dealing with people that know what they have and they’ve thought about what they need and want,” she says.

‍

Getting bigger

Stevens says the company couldn’t have handled Williams five years ago – and she may not have been able to handle the company. There’s an evolution in any startup’s life as it grows its team and, in Quantifi’s case, shifts from a self-funded tech startup to one that's VC-backed with offices in New Zealand, the US, Thailand and Germany.

At some point the company will outgrow Williams as chair and likely himself as CEO, says Stevens.

“That is success – getting to the point that the company is ready to move past you. It’s important that all directors and the chair recognise that there’s going to be a time when their job is done and it’s better for the next person to step in.”

‍

Williams says it is about providing the right-sized governance for the age and stage of a startup, and recognising what that looks like at any particular time. 

“As an organisation grows you have to gently drive constant improvement in governance practices and strategic thinking and management culture, and just move along with the business. There will come a time when we might need a global chair,” she says.

How you map that governance path comes down to the amount of engagement the chair needs to have with the CEO. 

“Andy is a mature CEO with a clear vision for his company, he knows his industry very well, and he knows how to run his business. That’s really different to the board of a really new startup,” she says.

In both situations, the chair is there to support the CEO and the management team. But in a startup, the board has to help fill gaps in areas that a young management team might not have, Williams says.

“That does mean being a bit more hands-on and a bit more available.”

‍

Middle ground

What happens when the board chair has a different view to the founders and CEO?

Williams says she and Stevens both have quite strong personalities and views, but they work things out because these are also complementary. 

“It wouldn’t be unusual for us to come at issues from different perspectives and we are both plain talkers and neither of us are very fancy; we don’t take offence very easily,” she says. “I can think of instances where we have got to a better place between us than either of us would have got on our own on particular issues, and that’s really helpful.”

Stevens agrees a good chair has complementary skill sets and can offer insights and advice while also seeking a middle ground.

“A better relationship is being able to get to that middle ground without too much bloodshed.”

“And at the end of the day, Andy is running this company,” says Williams.

The whole point of an independent chair is to stand between the investors and the founders, she says. Given her angel investor background, Williams says she leans more towards ensuring founders are supported, while also helping the board work together. 

“Everyone is actually wanting to achieve the same business goals but there can be varying views on how to get there.”

Stevens says having a serious investor like Intel on his board is not something he could handle alone and he doesn’t think there are many tech CEOs that could handle that sort of boardroom environment without an independent chair.

“They are serious, heavy-duty investors. It would have been very difficult to have a successful board without an independent chair now we’ve got to the point where we’ve got these large investors.”

The board is running at a high level of sophistication now with that type of investor, Williams says.

“They expect to get a board pack that’s got all the information they need to make the decisions that they are going to be asked to make. Also to give the value and insights and the perspective that Andy might be wanting from the board, there’s quite a lot of work involved in having those meetings prepped so that everyone can operate at that level,” she says.

‍

The right time for international input

There’s no one answer to when a startup going global might need international directors on its board – it depends on the company. 

As Quantifi expanded in foreign markets it looked for a couple of international directors but never appointed one. Now at its current size, it’s almost too late, says Stevens, as the company can get those insights from its investors or overseas consultants.

When a startup is small and starting out it also needs someone who really understands how to grow businesses from New Zealand, he says.

“That is really different to international growth, so having that internal understanding is very important to begin with.”

Williams’ advice to startup founders is that New Zealand’s pool of startup directors is getting bigger and she would love to see people from more diverse operational backgrounds appointed, who could be hugely helpful. “I would love to see us move away from having an accountant, having a lawyer, involved in your business.”

To hit its target of becoming a $200–$300 million company, Stevens says Quantifi’s board anticipates it will need a significant cash injection in the next two to three years, and there are a number of ways it could do that. But it could even happen earlier, he says; “We’ve got some really exciting stuff going on and that could move the agenda up. Who knows?”

The independent chair’s role is to help Stevens ready the company for those options.

They include an IPO (the company is already doing audited accounts to ensure it would be compliant for a stock exchange listing), private equity, and a trade deal.

“My goal personally is to get the company to the point, as we see the need and the opportunity, for that capital investment to take us up to that next level; I would like to be able to walk into a board meeting and basically put all three options on the table in front of the board and shareholders and let them take it from there,” says Stevens.