Are you wondering what to expect from board members?
As a startup founder, your board of directors can be one of your most powerful tools for success. It is also one of the factors of starting a real business that few entrepreneurs really have experience with. That can also make it one of the most precarious parts of running a true fast-growth startup that scales.
So, what should you expect from board members?
What Is A Board?
You will need to legally have a board of directors. This is a group of individuals who are jointly tasked with supervising the operation of an organization and that also have a fiduciary duty towards investors.
They are really the ultimate decision-makers for a company. While they may join your board and take seats for a variety of reasons, and with their own personal motivations, they are technically bound by a fiduciary responsibility to look after the best interests of the entity itself. Of course, they may also have their own opinions on what that is. This is why it is so important to educate yourself on how boards work, as well as to select your board members very carefully.
Who Makes Up Your Board?
Before you even wonder what to expect from board members, it is key to know that board roles and titles include:
- Chairman of the board
You may also end up with geographic and department committee board members and chairs.
Your board of directors will often be made up of:
- Investors and partners of Venture Capital firms
- Independent observers
Typically when doing fundraising a critical piece of the negotiation is who gets a board seat to represent the investors that are participating on the round.
For a winning deck, take a look at the template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.
Remember to unlock the pitch deck template that is being used by founders around the world to raise millions below.
What To Fear & Expect From Board Members
When figuring out what to expect from board members keep in mind that boards need to be respected. They have a lot of power. The future of your venture and even what you can do on a quarterly basis can be dictated by your board.
As a founder of a startup, you’ll have routine interactions and meetings with these individuals. You may call on them individually for advice. Most experienced, repeat entrepreneurs also recommend reaching out and providing updates on status prior to structured and mandatory board meetings. This way, your official meetings with all of your board members are efficient, respectful of people’s time, and productive in making essential decisions.
Some of the top fears entrepreneurs have about boards, and which are warranted, include:
- Voting on your personal compensation as an executive
- The ability to fire you from your own startup
- Failing to act on or accept great M&A offers
Yes, they can force you out of your own company. They can even decide if and when you can sell the company, and for how much. Some have seen fantastic exits sail by due to their boards holding out, only to have missed the peak value opportunity for getting acquired.
What You Want From Board Members
So, ideally, what could be the answer when wondering what to expect from board members? Aside from the legal responsibility to fill these roles and hold meetings and record minutes, why do you want to build a board and invite these individuals into your organization?
Expertise & Advice
You’ve got the idea and energy. Yet, no matter how intelligent and educated you are, there are going to be things you don’t have experience in. Your board members should be there to offer the benefit of their experience, and to help you foresee what you don’t know that you don’t know. As well as helping handle difficult decisions. Remember, if you have big aspirations for your startup, you are going to be competing against the biggest and most experienced corporations and organizations in the world. It helps to have some team members on your side who have already played at that level and won.
When you are thinking about what to expect from board members this is one of the most important value adds. One of the best benefits of good board members is being able to leverage their sphere of influence and contacts. Sometimes, just aligning and involving the right board members can make all the difference between being a struggling new small business, and becoming a notable rocketship.
You want them to be able to introduce you to the investors you need to fund your venture through your upcoming financing rounds.
You may be able to leverage their personal brand and reputation to win consumers, press, and partnerships.
Hopefully, they can also aid in connecting you with high volume distribution channels, as well as other valuable operational resources.
They may even be able to aid in recruiting by sourcing and recommending highly qualified talent.
Branding & Credibility
The right board members can give your venture and an enormous amount of instant credibility and add millions to your brand value.
Support In Making Great Decisions For Your Startup Business
While they may actually join your board to protect their own investment in your company or in exchange for compensation through a percentage of your equity, the idea is that this group of experienced advisors is there to make decisions that are first and foremost in the best interest of the company.
You want top-level help in analyzing and making many decisions. That can run from expanding into new areas and lines of business to navigating regulations, managing executives, structuring fundraising and M&A deals, and more. The hope is that they share your vision and values and will help you live it out, without burning your customers, team, and the sustainability of the company, just for their own short term financial gain.
With all of this in mind, choose your board carefully. Who ends up on your board can be far more important than the number of dollars raised in a round, the valuation they give you, or the terms of an investment.
One thing to note is that as you continue to raise more financing the number of board members will continue to grow. If you are interested in understanding how rounds of financing work for startups you may want to watch the video below where I cover this topic in detail.
Hopefully, this post provided you with some guidance on what to expect from board members.