“Now picture if you will a bunch of business men
Stuffed in the boardroom like pigs in a pen”
The Lonely Island, “Boombox“
Note to startup founders: you have options when it comes to your startup’s board members. Considering that a company’s board greatly influences — or, even dictates — major decisions, entrepreneurs should take a deliberate and strategic approach to forming the board.
In general, the ideal board consists of members with expertise and experience in a multitude of areas that are strategic to your startup. Great board members are also available to interview key employees, assist with sales, make key business development and financing introductions, etc.
So if you’re a startup founder, how do you build a winning board? Consider the suggestions below.
1) Choose Your VC Like You Would Your Spouse
Typically, a startup’s board includes one or more individuals from its investments firms. Remember this when choosing your VC. A good VC is always available to the CEO, not just at board meetings. Good VCs are happy to provide support and advice; at the same time, they have faith in the CEO to make independent decisions. Watch out for VCs that don’t take the time to understand your business. Assess whether a potential VC will be supportive (financially or otherwise) when the company goes through a rough patch (most do, at one point). In some cases, VCs can be so overbearing that they consume valuable CEO time and force ill-suited opinions on the company.
2) Call Me…Promise?
Only one out of ten entrepreneurs have requested references in a potential investment deal with IDG Ventures. Hopefully, this is because our reputation is well-known, or these entrepreneurs have done their research and homework. But really, there is no better homework than speaking with a VC’s current and past CEOs. In these discussions, be sure to ask the following questions:
- How active was the VC?
- Did the VC understand your business?
- What specifically did the VC do to help/harm your business?
3) Size Matters
Keep the board small and manageable. Too many people around the table will take away the intimacy needed to share the thoughts needed to be effective. The ideal size IMHO is five board members. Even though it is tough, consider asking earlier VCs to step off the Board if you have too many VCs in the room. The easiest way to do this is to address it years in advance, ideally at the time of investment.
4) No Place For Family Ties
Please please please don’t have relatives on the board. It looks bad, and it is bad. Often times, it is hard for relatives to be objective. I’ve been there, and it sucks.
5) Independence Day
Find a local independent director or two that can add value. Since they are getting equity (they should), make them work for it. If you bring on a chief product officer of another company, involve them in company offsites and use them as a resource for your own head of product Independent directors are critical for corporate governance, especially when your financial investors are conflicted. It is important for you to bring them on in advance so they are up to speed when a situation arises.
6) What to Expect When You’re Expecting
Make sure your board members know what to expect before they join in terms of frequency and value-add. End your board meetings with a to-do list that you recap, e.g., “Phil, you are going to make an introduction to TenCent and spend some time this week with our CFO to walk through our debt financing options between SVB and Comerica. John, you are going to…”
Remember, it is NOT easy to change your board. I have seen CEOs talk to partnerships and make a switch. However, it’s almost as difficult and painful as reversing a vasectomy. So set up your company for success and be smart from the beginning about your board.