Updated: Apr 26, 2020
By Tahmina Day
What can a board (of directors or advisors) do for a startup? A lot! Boards add expertise and guidance, brand recognition and trust, contacts and investments. Startups that understand the value of boards strive to establish a board as early as possible. However, once formed, many of startup boards become dysfunctional, dissolve or even never take off. Understanding why startup boards fail will help to prevent failure and leverage this powerful strategic tool.
Lean Board Plan
Startups are simple in structure and lean to their bare bone. Time and money are their biggest concerns. Founders try to keep everything plain and to the minimum. (And, they should!) Nobody has time to pause and ponder over the way how things should be done, let alone to put it in writing. However, having at least basic rules on place will take you a long way and prevent a startup board from failing.
Spending a couple of hours planning for the way the startup board will function is often all it takes to make it a success.
Spending a couple of hours planning for the way the startup board will function is often all it takes to make it a success. Answers to the following questions will define your startup board game plan:
How will you communicate with the board members? Phone, emails, Skype, web meeting platform (a combination of all)? Creating an email group and having all the contact data handy helps to communicate efficiently.
If a startup board is an advisory board, what exactly is expected from the board. How far should the board go with guidance and support?
How to keep the board informed? What kind of information and how often to share with the board?
Will you have a schedule for board meetings or the collaboration will be handled on an ad-hock basis?
What the members of the board should expect in return of their contribution? Deferred compensation, stock, volunteer-base membership?
Forming a startup board is not a small task. A founder has little to offer but needs a lot in help. Often it is tempting to get on board just anyone who agrees to serve. That could be a huge mistake that should be avoided.
Startups deal with a ton of uncertainty. You, therefore need risk-takers, people who are comfortable with uncertainty and support the startup idea. Some directors with extensive corporate board experience might not be a good fit for a startup board that lacks clear practice and processes.
Because the ultimate pay is not guaranteed, startup board directors should be willing to take a risk and invest their time and efforts to a venture whose financial success may not be warranted. They also, must be willing to go over an ordinary list of functions, roll up their sleeves and help in any other way possible.
What directors would agree to do all this? Those who understand startups, trust the founder and management team and feel comfortable in a startup environment.
Boards could be formed for multiple reasons. Keeping your objective in mind is crucial for properly forming, running and, as importantly, measuring the success of the board.
The startup board interaction should not be casual periodic chats about how a startup is progressing. It should be driven by a specific goal and direction. Defining that goal will dictate the direction, which will align everyone’s interest and contribution. Most importantly, it will help to measure the progress as you move along the way and re-calibrate the actions.
Let’s assume you have created an advisory board to seek input on launching your company, completing the product and testing it out in the market in the next twelve months. Here are just two steps that you should keep in mind:
First and foremost, the board should be informed of your expectations and what you consider to be success for the company. Seek the board’s counsel. They may agree with you, but may also bring other ideas or issues that should be considered.
Secondly, you should pause along the way and ask yourself if the board is being successful in helping you to achieve your business goals. If yes, great. However, if it’s not, understand why. Could it be that the composition of the board is not a good mix and you need to replace a member or two? Or, did you as the founder do a good job of communicating with the board?
Whatever is the reason, understanding what constitutes success for the board and assessing it against that definition is a great troubleshooting exercise.
Have the right people in the board, set up simple rules and know the purpose to make a startup board a great success for your company.