Forming your board requires a bit of a balancing act. The board should push a founder’s strategic thinking but not hinder the CEO’s ability to lead effectively.
A board of directors should prove beneficial in your startup’s initial stages, especially in the long-term. A board of directors is a body of elected or appointed members, ideally 4–6, who jointly oversee your startup’s activities. Board members are comprised of venture capitalists (VCs), angels, and your advisors from when you were just getting started. Board members have voting power, but decisions are typically based on consensus. Many boards include board observers who may be a requirement from some of your minority (but still important) investors. Board observers (usually VC associates) don’t have voting rights but can negatively influence a board meeting if not fully up to speed on the agenda.
Board members are quite literally and figuratively invested in your startup and have a fiduciary responsibility to ensure their investment is appropriately managed. But it’s the human capital that the board members provide that might have the most significant upside, such as leveraging their network on your behalf. It’s imperative to know who you are partnering with. Ultimately, the board is formed to reduce wind resistance and energy expenditure.
Here are some questions to consider when forming your board:
- What are the members’ powers and responsibilities?
- What does the board composition look like?
- Where does each member contribute value?
- Will there be board terms? Staggered terms?
- What’s your vision on how the board will operate?
- Will there be directors & officers liability insurance?
- Do you have the resources secured by your startup to execute?
- What is needed to be a treasured board member?
- What is the raison d’etat among the competitive landscape of other programs and offerings? (In the case that you’re a non-profit startup)
- What’s the definition of success for your startup and method for measuring utility being generated by your board?
- How will you best communicate your startup’s cash position and runway?
- How will you optimize performance during meetings?
A good board member:
- Contributes productively
- Provides mentorship
- Helps with strategy
- Pushes back on your assumptions
- Gets along well with others
Outstanding board members force you to accelerate even faster than you would on your own. Ultimately, they genuinely want to help you!
“Trust, shared values, open communication, a common goal, and cognitive diversity are often the determinants of success than a gaggle of high-performing individual contributors out for riches or extolment,” wrote Aaron Sean Poynton, U.S. Army and Senior Vice President at Federal Resources, in 5 Things You Can Take from the Battlefield to the Boardroom.
A bad board member:
- Has a bad temperament
- Is unprepared
- Doesn’t listen
- Won’t recruit new key hires
- Hijacks board meetings to influence her agenda
Unfortunately, if you encounter any of these issues, then I’d suggest you read Mark Suster’s post on how to stay in control of your meetings. It’s always best to take precautions before receiving investment from a potentially lifelong partner, so consider wisely when forming your board. However, this is your board that you’re assembling. Consider executing the Military Decision Making Process (MDMP), a proven analytical approach to problem solving that facilitates collaborative planning and preparation. Select wisely, make sure you control the meetings, and follow the plan with respect for the limited time you have everyone together.