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?
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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.
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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.
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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.
You may find interesting the video below where I cover in detail what to expect from board members.
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.
Hopefully, this post provided you with some guidance on what to expect from board members.
FULL TRANSCRIPTION OF THE VIDEO:
Hello, everyone. This is Alejandro Cremades, and today we’re going to be talking about what to expect from board members. Board members are incredibly powerful for any startup. They’re going to determine many, many critical aspects of the business; it’s also going to add a lot of credibility depending, obviously, on who you have. In today’s video, we’re going to be breaking it down for you so that you have full visibility and understanding when it comes down to what to expect from any board member. With that being said, let’s get into it.
What is a board? A board of directors is ultimately that group of individuals that are sitting at the top helping with the strategy and the CEO, who is reporting to the board with any aspects that have to do with the execution of the business. They are ultimately providing that strategy and handling that strategy to the CEO and the management team so that they get to execute.
The board has a fiduciary duty to the investors, and they have the responsibility to always look for the best in the business, and they can ultimately fire the CEO. So they have that level of power. Again, the board is supercritical and very critical, especially when it comes to the strategy of the business.
Who makes the board? Ultimately, you’re going to have people that are from management, investors that have also invested in the business, and then outsiders that perhaps you’re bringing in. Some of those roles or members of the board are the following.
- The Chairman of the Board
- The Vice-Chair
- The Treasurer
- The Secretary
- Founders of the business
- Investors and partners of venture capital firms that invested
- Board observers
So, when fundraising, a critical piece is going to be the board. People that are ultimately leading a round of financing, which is putting a price tag so that everyone else can come and invest; those are going to demand that they get a board seat so that they can continue to oversee and monitor how that investment is performing over time.
What to fear and expect from the board. Ultimately, those members that are part of the board are going to have a lot of power, and there are definitely things that you should expect from them like essentially being able to bring them some of the critical issues, the strategic issues that you’re facing on the execution side so that they can help at a strategic level in order to find some of the answers. Maybe even opening doors that can essentially bring those solutions to the problems that you’re facing.
Now, when it comes to fears, some of the biggest fears could be some of the following.
- Voting on your personal compensation
- The ability to fire you from your own startup
- Failing to act on or accept great M&A offers to acquire your business
- Failing to act, as well, on fundraising rounds
Yes, they can actually kick you out of the business. They can even block a potential round of financing or your company getting acquired for millions or billions. So that’s why you want people on your board as members that are ultimately aligned with your vision and your mission and that you really get along with.
When it comes down to what you want from your board members, you’re definitely going to want them to have operational background expertise, meaning that in the past, they have actually executed a business or they’ve had experience with your own segment, so that they know some of those critical issues that you’re ultimately facing.
Another thing that you want is that they have a great network. That network can actually be applied in different things. It could be a network of talent; mainly, they have access to people that you can potentially recruit over the course of time. It could be a great network when it comes to distribution.
Maybe they can just lift up the phone and help in securing some of those great partnerships that are going to help with scaling things much faster and quicker on the distribution side. They could also have a network that it comes down to investments. Maybe they can just lift up the phone and make that introduction to an institutional investor or any kind of investor that could put an investment in your business.
Another type of thing that they could bring to the table is experience or perhaps contacts around potential acquisitions. Maybe they know people that they can actually call or maybe facilitate an introduction to that can ultimately be interested in acquiring your business. Those are ultimately some of the best board members, and you definitely want to make sure that you’re taping on their networks.
So we would love to hear on the comment section below how you’re thinking about putting together your board and the members that you’re going to be assigning to it. Also, subscribe to the channel so that you don’t miss out on all the videos that we’re rolling out every week.
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