This post includes extra content from Startup Mixology, my upcoming book on starting up – including how to prepare yourself for the harsh reality and celebrate positive moments along the way. Go here to pre-order the book (due July 8) and subscribe to updates!
If you raise funding, you’ll probably be required to form a board of directors. A board is a group that meets regularly to discuss company progress and challenges. The board’s job is to promote the interest of all shareholders and hold the CEO accountable.
Some actions that your startup may want to take require board approval. A board’s role changes as you move from the startup stage to revenue to growth. It can go from an active role to a shaping and nurturing role to a governing and monitoring role. In addition to directors, boards often have board observers who sit in on meetings, who could be VCs, cofounders, or your lawyer.
The book Startup Boards by Brad Feld and Mahendra Ramsinghani offers some insights on whom to choose for your first board, how they can support you, the role of culture amongst the board, and even how to run productive meetings. One important lesson learned is that ideal board members have the mentality of a mentor and coach, pushing you ahead but not doing the work for you. They have an understanding of startups, with entrepreneurial experience from being a CEO or from sitting on many boards. They may also have experience in your industry or specific skills, like product development, customer development, fundraising, or team building.
You should start building your board early – you probably don’t want to wait until you raise money. “While a great board can be a guidepost and a positive catalyst, a bad board can cause angst and frustration, destroy value, and occasionally kill a company,” write Feld and Ramsinghani.
Board members you don’t want are those with conflicts of interest – for example, they already funded a similar company to yours or are best friends with the founder of your biggest competitor. According to Startup Boards, you may be tempted to recruit celebrities, but they probably won’t be as available as you’d like. And no one is a great board member unless they fit with your culture.
You should recruit board members just as you would team members. Get introductions via email, meet them for coffee, do face-to-face interviews, and let other board members interview them. Check their references by calling founders who have worked with them and asking: how does this investor add value? How do they respond in a crisis? What are their shortcomings? Don’t be afraid to say no if things don’t feel right.
Matt Blumberg, the author of Startup CEO, has managed his board at Return Path for over a dozen years. When recruiting board members, he says, look for people who come to meetings prepared, on time, and willing to be honest. They should have a rich experience to draw from, so their advice doesn’t sound like a broken record. And the best directors take the time to get to know other directors and your team. Finally, Blumberg says, board members should be able to challenge your assumptions, help you see the broader picture, and point out patterns they’ve seen before.
You may think it’s too early but, as with team building, it’s best to make a wish list so you’re prepared and can start building relationships.