What's the best way to set up a board for a venture-backed company?

Founder syndrome is real. It applies to boards, as well. Many founders like advisors for the credibility shine (often for free), but don’t like the governance restrictions of an actual board. What startup CEO wants to be accountable to a board that can fire her? A CEO who ignores the investors once he has their money, and doesn’t avail themself of the wisdom of the board, better have the cure for cancer. As an investor, I am done serving on any boards without compensation, even though there is a compulsion to “add value“ to the investment.

Setting up a board for a venture-backed company is crucial in ensuring strategic guidance, accountability, and effective decision-making. Here are some key considerations to help you navigate this process according to my experiences: 1. Diverse Expertise. 2. Founder Representation. 3. Investor Involvement. 4. Advisory Board. 5. Regular Board Meetings. 6. Committees. 7. Governance Policies. 8. Succession Planning. 9. Independent Directors. 10. Board Evaluation. The composition and structure of the board can evolve as the company grows and faces new challenges. Flexibility and adaptability are key. Hope this insights help to set up an excellent and effective board for your venture-backed company.

When setting up a board for a venture-backed company, it's vital to grasp the board's role as the compass steering the ship. Think of it like a team of seasoned advisors and decision-makers, guiding the company's strategic direction. Consider diverse expertise on the board, like having a finance expert, a tech expert, or industry experts. Ultimately, the board should sync with the company's vision, offering valuable insights and helping navigate through crucial decisions.

The main role of a Board is to ensure that the CEO is successful through her team. Let’s celebrate Boards who help CEOs and their Executive Teams shine!

While spending a short while working in Non-exec and Chair recruitment, I was lucky enough to work with a wonderful MD, who was experienced and wise. For Chris Spencer-Phillips it was all about diversity of the board. He'd say "as an exec team you have the opportunity to 'plug the gaps' you have in your day-to-day". This however, I believe takes self-awareness and a lack of ego to recognise what is lacking. Ben Francis is a great example, I think of someone who has excelled at this. To go fast go alone, to go far, go together...

Yes, those are all traditional roles a board plays. In scale up businesses the board is more hands on and often mentors senior leadership along with lending their network to help professionalize certain areas of the business.

These are the classic functions of any corporate board. For VC-backed company boards, often directors are mentors to the executive team; help make introductions and find talent to fill out the organization as the company grows; and make introductions to potential customers or partners.

The board's primary roles also include guiding and overseeing the company's strategy; providing feedback on risk profiles / management; M&A activity; fundraising and more.

It's always important to have independent thinkers who can challenge you without fear or favor to strive for greater heights...

The board in a private VC-backed company is primarily a check on the CEO's power. This can be helpful or an impediment. With the right board members, the balance of power can beneficial because it leads to a healthy tension for the best ideas.

Setting up a board for a venture-backed company is a bit like assembling a team for a game. Each member, be it investors or executives, brings something special to the table. It's all about finding the right mix—ensuring everyone's voice is heard while keeping the company's goals in sight. The key is Communication. The investors might provide the strategy, while the executives execute the plan, making sure the game is played well.

As a founder, you should create clarity in the purpose, responsibilities, and impact you want the board to provide. You should recommend how you want the board to communicate with you and others in your leadership team and how you expect the board members to collaborate with each other. Having a couple of independent board members can provide balance relative to the investor board members, creating more meaningful strategic discussions.

Each board director has a role to play, expertise to bring to the table, and a set of priorities in addition to the company’s success. Investors have returns and exits to manage. Founders have vision to see through. Independent directors have other compensation, credibility, and network aspects to manage. As the CEO, you need to truly understand, don’t simply assume, what the motivations and priorities are of your board directors. Check in with them regularly, one to one to and listen to what they have to say. Don’t be afraid to change out your directors if motivations shift beyond reasonable alignment. Be cautious though to not have a revolving door of directors as this will make it difficult to attract both capital and talent.

The board of any venture backed companies will have 2 parts to it - 1) nominee directors from the investors to protect their investment interests and ROIC returns 2) non executive directors (and or independent directors) who are essentially credible senior leaders who bring a set of expertise on the table which the founding team lacks and leverage from these members Finally, it’s all about keeping it unbiased, balanced and transparent communication across these stakeholders to ensure trust and collaboration.

Founders will want the board to be a founder, a founder CEO, and a VC. VCs will want equal founders and VCs, plus an independent board member. Three is a good number at seed stage. The number might go up to five at series A, or likely series B.

Most Start-Up boards are a mix of investors' representations and founders. The investors don't necessarily have the hands-on operations experience, but in many cases, so are most young first time founders. Thus, most standard start-up boards are missing operations experience. This can be mitigated by adding at least one external/independent board member with experience and maturity to guide and mentor the founders. Alternatively, an Advisory Board of few peope could serve in that capacity .

You should definitely build a skills matrix for the capabilities and backgrounds you want on your board. While this is required for public companies, it's a good exercise for private companies to do as well. The skills matrix can include various diversity characteristics as well. Major investors will likely want at least one seat on the board. Adding independent directors who can make introductions for customers, guide product roadmap decisions, build strategic partnership opportunities, or help navigate legal items will help your leadership team be even more successful.

“Ideally, you should have a say in who joins your board.” The question of board composition usually happens at the time when founders select their lead investor - whereby the lead VC Partner typically joins the board to guide the company and represent the shareholders. So the decision is centred around selecting your lead investor vs. picking the right board members. One caveat to this is the founders, together with the VC, will both have a say in selecting any independent board members.

After defining duties, responsibilities, proven experiences. relationships, influences each board seat must bring different focus and where crossover in skill sets are needed. Add track record of knowing and understanding the different lifecycles stages of a/the company. In combination, the Board must understand how to take and position the company out of strategic business risk as much as possible and set policy and strategies that ensure minimum execution risk. The CEO and team should bring those skill sets to take the company to consistent predictable profitable revenue. And this is just the morning discussions.

When building a board, a skill matrix can be especially helpful for identifying gaps and prioritizing the expertise you need from your next board member. Don’t forget to consider diversity of perspectives too!

As an entrepreneur, you want a board composed with people you enjoy working with. Then, people that have something to share with you : vision, experience, network, contacts. Everything that will help you move forward faster. Building a board with "big names" is tempting, just make sure they can help you and that they have enough time to do so.

You will want to understand these terms in detail. Having outside counsel of your own to talk you through the implications is essential. You'll want to consider how the board terms and composition may need to change as you raise additional rounds, make acquisitions, and grow. Outside counsel can help you scenario plan.

Some VCs might be happy to have observer rights. Keep this in mind as a founder when negotiating with the lead VC on your raise.

Engaging your board can be incredibly beneficial to your company's growth. It can also be very time consuming. Determine the cadence of board meetings (quarterly, monthly, etc.) and what events warrant a one-off, immediate meeting (lawsuit, offer to be acquired, etc.). Create clarity on what will be done in the board meeting versus be handled through other communications - email updates, board portal with pre-read content. As the CEO/Founder you should have regular calls / meetings with the board chair who can offer advice in a confidential 1x1. Appoint someone on your staff be the coordinator of board meetings and communications - scheduling, agendas, pre-read materials, notes, followups, etc.

Highly recommend meeting with all the board members before each meeting and walking them through your materials. This will make your actual meeting significantly more productive and rich as you will all have had time to process the content and incorporate early feedback.

Your board will change as your company does. Think through your exit options and change up your board in alignment with that a couple years in advance. If you plan to IPO as your preferred exit, add independent directors 2 years in advance and make sure your board has diverse representation in all facets.

Just as a company will grow and evolve its requirements to reach the next set of milestones, the board shall too grow and evolve. Areas of budgeting, governance, voting matters, conflicts resolutions, talent management and resource allocation, among others change as the company changes.

Don’t keep your Board interactions in the clouds! Share what happens at the Board level with your team and invite your Board to meet your team and customers. It’s a win-win for building a culture of transparency and for the engaging your Board members.