Important Questions To Consider When Building Your Board
Reducing Wind Resistance
A board of directors should prove to be beneficial in the initial stages of your startup and especially in the long-term. A board of directors is a body of elected or appointed members, ideally 4–6, who jointly oversee the activities of your startup. Board members are comprised of VCs, angels and your advisors from when you were just getting started. Board members have voting power, but decisions are usually based on consensus. Also, many boards include board observers which 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 make sure their investment is being managed properly. But it’s the human capital that the board members provide that might have the greatest upside such as leveraging their personal 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 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 truly valuable 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
- Listens
- Provides mentorship
- Helps with strategy
- Fundraises
- Pushes back on your assumptions
- Gets along well with others.
Really good board members force you to accelerate even faster than you would on your own. Ultimately, they truly want to help you!
“The overwhelming majority of VCs I’ve worked with get up in the morning and think about how they’re going to help their portfolio companies that day.” — Mark Solon, Highway 12 Ventures
A bad board member:
- Has a bad temperament
- Unprepared
- Doesn’t listen
- Won’t recruit new key hires
- Hijacks board meetings to influence her own agenda
If you are, unfortunately, encountering 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 precaution before receiving investment from a potentially lifelong partner so consider wisely.
