Alignment of values

Tony Featherstone talks to Motize.com founders David Smith and Geoff Webber about the significance of advisory boards when establishing a disruptive start-up venture.

Disruptive start-up ventures that thrive on uncertainty can follow a predictable path with governance. An advisory board is formed after the venture grows, often in response to new investors wanting a say or because the founder needs different perspectives.

Forming a board early in the venture’s lifecycle is viewed as too costly, a brake on the entrepreneur, and a potential speed bump for a fast-moving, nimble culture. So the founders form an advisory board only when the venture builds scale.

Not all start-ups follow this script. But it’s fair to say many early-stage ventures see boards as a cost rather than an investment and more about compliance than strategy. In doing so, they underestimate the value a board that understands entrepreneurship can bring to a start-up venture.

Motize.com, a disruptive outdoor advertising start-up, is taking a different governance approach. Founders David Smith FAICD (far left) and Geoff Webber (left) will form an advisory board and recruit three non-executive directors within a year of the venture’s launch.

Smith is the former chief operating officer of Linc Energy, a non-executive director of various energy companies, and a former chairman of the Infrastructure Association of Queensland. Webber, a former corporate manager, has launched several start-up ventures.

They launched their first venture together, Yeehire, a collaborative consumption platform that helps people rent unused items, early in 2014, registered Motize.com later that year, and launched it in February 2015. After a positive reception, Motize.com became their main focus.

“Having worked in large companies and been on boards, we realise the power an advisory board can bring to a start-up early on,” says Smith. “We want to get the foundations right to support a much larger business, and see a board as a critical part of that process. A lot of directors want to get involved in early-stage, disruptive ventures like ours.”

Webber adds: “David and I know some boards work really well for entrepreneurial ventures, and others become a handbrake. It comes down to selecting the right people, having faith in the benefits of a board, and being prepared to listen and take advice. A board can bring strengths we may be weak in, or add networks and experiences we don’t have.”

A collaborative approach

Motize.com is a case study of how entrepreneurs work together, how they view boards, and how directors can help the founders of disruptive start-ups.

The idea for Motize.com came when Smith was stuck in traffic driving his daughter to school. He noticed how much time he spent looking at a trade vehicle covered in advertising, and how hundreds of cars could be potential moving billboards.

After discussions with Smith, they formed Motize.com to connect companies, charities and consumers through car advertising, and potentially disrupt the out-of-home advertising market, which is growing its share of Australia’s advertising market.

The concept is simple. Consumers register their interest to carry a transparent sign on their car’s rear window and potentially earn $150 a month. Companies choose which cars and locations best suit their advertising strategy and pay a small monthly fee.

Attracting charities as partners is a key part of Motize.com’s strategy. Consumers can choose to donate some or all the fee for carrying pre-screened advertising on their car to charities registered with Motize.com. The Royal Flying Doctor Service, Women’s Legal Service, Women’s Community Shelters, The MND and Me Foundation, SU QLD, So They Can, Spur Projects and Creativity Australia have registered with Motize.com.

“We want to do a lot with the charity sector and recognise our governance has to be very strong and very visible, if we are to help people donate to the sector through car advertising,” says Smith. “Forming a board with prominent directors helps us with strategy and compliance, and it also sends a message to our charity and commercial partners that we are very conscious about implementing good governance, and that we have a credible, independent board.”

Motize.com is growing quickly from a standing start. About 2,000 car owners on Australia’s east coast have registered, a dozen companies are using the service, and about 100 cars are carrying advertising. The venture had its first big win in June when Chemist Warehouse signed up to trial the service and promote some of its stores.

“When you launch a new concept you get early adopters, laggards and everybody in between,” says Smith. “That can make it difficult for boards because you are effectively creating a new market and disrupting how things have been done. You need a board that understands this environment and is prepared to expect the unexpected.”

Webber says the board of a disruptive venture must be capable of governing an enterprise that has explosive growth. “You can see the growth start to snowball and eventually you hit that tipping point where the business is suddenly 10 times larger. The founders and the board need to plan for that growth and ensure the right structures are in place to support a much larger business.”

Clarity between the founders and the board is critical. Smith, 45, and Webber, 52, bring different skills; the former is sales and marketing focused; the latter spends more time on the technical details of building the business. ”We’ve been around long enough to know you have to get the relationship right between the founders before the venture can grow, or before the founders can hope to have a good relationship with the board,” says Webber.

“David and I have mutual respect, an alignment of values, and are used to collaborating, having worked in large companies. We spent a lot of time on shareholder agreements, the company constitution, loan agreements and so on. These documents seem superfluous at the start, but they are critical as the venture grows. The key to a successful working relationship in our case is everything being split 50/50 – the financial contribution, equity, and our time.”

A successful working relationship between the founders and board is equally critical. “Whenever you do something new, you get detractors who say the idea won’t work. You have to be confident and energetic enough to push through, and boards can really support the founders, particularly when there are tough times and uncertainty creeps in. Also, there are times when David and I have heated, respectful discussions. A board can provide another perspective when you don’t agree on things.”

Smith adds: “The founders must be prepared for the board to question the idea, strategy or performance. It can be hard to accept negative feedback when you’re passionate about the idea. It all depends on your willingness to hear other points of view. But it’s the founders’ choice whether they implement those opinions.”