Startups & Optimal Boards

The first response to this is the grad school saying of, “it depends” (your evergreen, go-to scapegoat answer). But getting to a realistic answer is that ‘it depends’ on your stage and structure. The below information is tailored to the startup and not non-executive director (NED), which I’ll address in another post.

What is important is that you (1) have an effective Chairman, (2) an effective board, and (3) an effective company that’ll allow you to create positive outcomes for all shareholders.

Frequency: Boards are best run on a basis that’s dependent to your business cycles and situation. Quarterly Chairman meetings are normal. Some companies may hold monthly board meetings given cash flow and restructuring, which isn’t the norm for a majority.

Agenda: board meeting agendas are important. It’s important to send your board materials (packs) a week in advance if possible. When beginning your board meetings, review if there are any conflicts of interest which need to be immediately addressed. It’s best then to cover any risks (health & safety included) as well as your strategy. The strategy piece should be 80% forward looking and 20% backward looking. This is of course if there aren’t any cash-flow issues needing to be addressed immediately.

Size: there’s no magical answer to this. If you’re seed stage, usually your board would be the seed stage lead investor, and executives (3-4 in total). Once you get to series A, perhaps a second NED joins the board (4-5 in total). Series B and beyond is dependent on the company. With series B, you already or have just appointed a Chariman. It’s also dependent on what your capitalization table looks like and appointed NEDs. This section is also highly dependent on the type of company: family business in consumer products or enterprise SaaS (5-7 in total). Post series B your board members would normally start to get rotated out.

Minutes: ensure that you keep a diary of the meetings. Keeping a record of everything is useful and necessary if needed for referencing at a future state.

Chairman: initially, it’s worth noting that your CEO may be it’s current Chairman given it being in seed or series A. Not to worry though if that’s the case, as long as the CEO views a separate line between the roles of what a Chairman is and their CEO responsibilities. A Chairman is probably more important that you think and better to have earlier than expected. A good Chairman will facilitate the board meetings in a manner that brings everyone together; executives and non-executives alike. The Chairman should (1) be responsible for choosing the agenda, (2) leadership of the board (and even mentoring to the CEO/s), (3) ensuring that effective communication happens with shareholders, (4) arranging reviews of the company, board and committees, and (5) ensuring a positive contribution of the NEDs happens.

Technology: try some of the companies servicing this area instead of using email as the only medium, it’s almost 2020. A few companies are BoardPad, BoardPacks or Board Intelligence. They are good choices and different price points for differing services.

Lastly: (1) Remember that it’s the boards responsibility to develop, deliver, and monitor the business plan. It’s the boards responsibility to ensure that the company is meeting it’s objectives. Keeping this in sight is important. (2) Ensure that board meetings don’t become information sharing sessions or forums to ask general questions. These small items are best asked and answered before your meetings. Adding onto this, no large surprises should come out during the meetings: sensitive queries should be addressed or submitted to the Chairman beforehand. (3) Ensure that your Chairman meets a test of independence. (4) Ask your investor how many boards they plan on sitting in while engaged with you. Most individuals can manage 2-3 boards effectively and some 4-5. What matters is when one portfolio company needs extra attention and pulls away from others, and your investor still needs to do their day job.

Is there anything else you’d add?

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