Board composition is a key differentiator for successful start-ups. But here is the thing I have noticed throughout my career: Boards are more likely to break a company than help it.
That is why being intentional and thoughtful when establishing a new Board of Directors for a start-up is so important. Properly constructed, the board plays a significant role in setting the start-up’s strategy, including fundraising, hiring and firing c-suite executives, setting budgets and determining an exit path. That requires a board that understands its role is to provide advice and guidance, not get down in the weeds of operations.
Of course, it is up to the founder or founders to build the board. The founder is the person who negotiates term sheets and ultimately decides which firms they take an investment from. That decision can make the difference between failure and success. It’s more than just finding “smart money.” It’s also about good people, good partners and good advice.
The best start-up teams understand that building a board needs to be as intentional as other aspects of architecting a start-up. Founders should plan out how the board will evolve, what skills they need around the table and at what phase in the company’s growth cycle.
I’ve seen good boards contribute significantly to a start-up’s success. I’ve also seen the opposite, with highly intelligent and experienced board members who ended up with disproportionate influence on management or other board members, or boards that lacked the subject matter expertise needed to ensure the start-up made real progress.
Taking part in the Kauffman Fellows program, I have been thinking a lot about the factors that lead to start-up success or failure. Board composition and good board meetings are vital. I’ve written a brief ebook on this topic. You can download it here.