Start-up Boards of Directors should be more than just a collection of big industry names added to an Investor Pitch to increase credibility and help convince hesitant investors. They can indeed deliver real value for the entrepreneur, the start-up and its shareholders. For this, they need to be well-structured and follow appropriate governance.
As a member of an early stage investor network, I regularly meet entrepreneurs looking for capital to develop their start-up idea. Joining the cap table often means that our group gets a seat at the Board. This opens the door to leading the entrepreneur through an educational journey as to the role and value of the Board.
In this bonus post in my series “How to be an outstanding Board Member of a Start-up” I look at start-up Boards from the other end of the stick. I summarize below the key steps entrepreneurs should take to ensure they get maximum value from their Board, as well as any Advisory Board they have set up.
7 Strategies to choose and lead a Board more effectively
Navin Chaddha leads Mayfield, a VC based in the Silicon Valley. He is a serial entrepreneur turned venture capitalist. Navin invests in enterprise and consumer-facing companies and has invested in over 40 companies, of which 13 have gone public and another 15 have been acquired.
In this article (7 Strategies to choose and lead your Board more effectively) he gives some critical advice as to what entrepreneurs should look for in their Board.
Navin highlights that entrepreneurs should keep their Board responsive to business realities, by using the board meeting for problem solving and asking Board Members for personal commitment to at least one future action.
He also advises to cultivate a learning mindset through probing in interrogatives rather than directly pursuing solutions, and to also create a trusting environment by building empathy with the Board (to defuse any potential tension) and by asking Board Members to interact directly with employees, so they develop a sense of the organisation’s culture.
Finally, he recommends recruiting Board Members diversely, so the Board includes complementary skills as and when required (with members stepping aside when their skills are not required anymore).
What more will an Advisory Board give you?
Christopher Mirabile is a full-time angel and Chair of the Angel Capital Association. He has personally invested in over 70 separate fund-raising rounds in 45+ start-up companies and is a limited partner in four specialized angel funds. Christopher is also a board member, advisor and mentor to numerous start-ups.
In this article (Wardens and Sages: What is the Difference Between a Corporate Board and an Advisory Board?) he explains the difference between the two sorts of Boards and highlights what benefits entrepreneurs can expect from their Advisory Board, on top of their Corporate Board.
Christopher distinguishes the missions of each Board:
- Corporate Boards provide reporting, essential corporate governance, oversight and controls and avoidance of downside risk
- Advisory Boards are a source of advice, guidance, technical know-how and critical industry credibility, as well as source of key customer introductions and/or investor connections
The Advisory Board is also more focused on mentorship, growth, development and strategy than the Corporate Board, especially in the early stage of development, when the Corporate Board primarily comprises the officers of the company and focuses on governance topics.
Christopher acknowledges that picking the right Advisory Board is not easy and entrepreneurs should centre on where their start-up’s weaknesses lie. Personal chemistry and ability/willingness to help are the most important criteria to look for in a potential Advisory Board member.
Christopher also underlines entrepreneurs should not forget they remain the engine of their start-up: advisors, although very wise, will always remain advisors only.
Making the most of your advisors’ network for your start-up
Since you started your project, you have most likely been surrounded by numerous persons that have helped you frame and develop your idea. As your project progresses and gathers traction, organising this support in the form of an Advisory Board initially, then a separate Corporate and Advisory Boards once you have received some seed capital, will help you increase the value and impact of the advice you receive.
- Do your homework
As the entrepreneur, you remain the driving force behind the growth of your start-up. You should not expect the Corporate Board and/or the Advisory Board to be normally involved in day-to-day operations. Both are available to guide you and provide support as sparring partners and mentorship, but execution will always remain clearly with you and your team.
- Diversify your Board recruitment
Boards are the best way to tap into additional pool of knowledge and expertise that a start-up does not have directly on its payroll. Before appointing Board Members, always identify the gaps you are seeking to plug and ensure the appointments remain flexible, so the Boards can be remodelled overtime as the needs evolve.
- Be clear what you expect from each member and each Board
Formulating each Board’s mission and making sure it is understood by each Board Member will allow you to get the most from both Boards, while managing potential overlaps and possible susceptibilities. It also allows you to be very specific in the topics you address with each Board, and helps you harness the competences, expertise, experience and networks that are most adapted to the challenge(s) at end.
Apply those 3 recommendations to make your Board(s) work for you and support the success of your start-up, for the benefits of your clients, your investors and yours partners.
More reading about Boards of Directors for Start-ups:
- How to be an outstanding Board Member of a Startup – Board basics
- How to be an outstanding Board Member of a Startup – Managing finances
- How to be an outstanding Board Member of a Startup – Crisis management
- How to be an outstanding Board Member of a Startup – Board due diligence