I really didn’t think about getting a board until I got into my first accelerator and was told that I should start to build a board. My instinct told me it was a little bit early - but who was I to know as this was my first company. So while in the accelerator I met lots of mentors and people wanting to help - when I started to mention I was building a board - lots more people jumped out of the cupboard. This included someone who wanted to charge £30k a year for sitting on my board.
Bear in mind here I was early stage pre VC funding and this person was very well connected to Government and within my field. I was honoured that someone so prominent wanted to be involved with my little company but fortunately I also had the sense and support from others to say no.
Over the last 6.5 years of Insane Logic I have ran a board for 3.5 years. I haven’t always ran it well but these are my learnings and thoughts with an eye to my situation before I finished my angel round.
Do I have to have a board?
The purpose of a board is to provide strategic support and to challenge and hold the founder/ directors of the company accountable. If you just want door openers then I suggest you build an advisory board. When you take on a substantial amount of investment then you certainly need to be held accountable. When you are taking on substantial contracts with legal responsibilities then you need to be held accountable. The board can guide you through legal, financial and people hurdles - give you advice based upon experience on growth opportunities or cuts to keep going. If you are looking for a sounding board then get a mentor not a board.
When is the best time to build a board?
It depends on your industry. If you work in tech like me and you are a first timer then post angel round is when you are likely to get your first 2-3 members. One of which will be an investor director. Before that just build an advisory board. If you are on your second company or more then you can probably hold out longer depending on the size of that angel round and their demands. If you are boot strapping then start to build (financial, legal, growth) board in when the revenue figures get a little bit complex and the contracts are getting numerous and you feel out of your depth. You will need them to help find your senior management team. Pre-accelerator and accelerator phase tech startups do not need to have a board. If you start building then you will end up with a huge board and all the complexities that go with it...talking from experience here. Keep it simple for as long as you can.
What papers do you need to prepare?
All monthly/quarterly management accounts should go out at least 5 days before giving people time to get back to you before then. Narratives and data around sales and tech development targets should go out with this. Links to new videos and case studies go out with this. It is their duty to read them. These are not for discussion in the meeting unless you have hurdles you want to discuss. If this is the case put these on the agenda which also goes out 5 days before as the main item for discussion. Speak to the main players prior to the board meeting so they can voice any concerns or issues around the information sent prior to the meeting. This is why it’s best to keep your board small in the early days.
Who should be the first people to get on your board?
In my dream world I would get someone who is not an investor but is a major player in my industry supply chain, they don’t have to be an entrepreneur but they do need to understand growth. The second person would be someone with a legal background - those lawyers will absorb all your cash if you let them so get one on the team. If you work in health or fintech then they are particularly important as it can be a legal minefield. In the real world you are likely to get an investor director first if you are a first timer. They want to keep an eye on their money. This is not always the best person particularly if they have no background in your field and they have not grown their own business. It sucks but that’s the way it is. If you need the money you’ve got to roll with it.
What is the dream board set up?
Experienced entrepreneur/growth expert, legal, finance/accounting, experienced CTO and then more of the first category later on. You will need to set up an equity arrangement if revenue is still tight and find out whether it’s equity or money or combo of both they are after. Set some terms of reference - ie how many days a month expected and what kind of contact phone/face to face meetings. Give them things to do for you. Use them wisely and well.
What about board observers?
This makes things complicated. People who sit in board meetings but can’t comment don’t contribute to the growth of the company. You don’t want them. Some VCs will insist, push back if you can.
How do you manage your board?
Most of the management should be done external to the board meetings. Don’t leave communication just to the board meetings. In the meeting having that agenda can work wonders. Allocate an amount of time to each section and have a timekeeper or do it yourself!
When in the meat of the meeting discussing a particular issue or trying to work out a certain strategy make sure you give them options, objective and the output you want to see and by when. On a board of 2-8 you can work quite easily together. I sit for another company on a board of 12 and we have to split into groups to work on issues. At the end I liked to pass round a list of people who were on my hit list for them to connect me with. Then at the next meeting made sure those who helped me were mentioned and appreciated. If relations are not going well with your investors then if you have an independent chair they can help to facilitate options and timelines for you.
Frequency of board meetings?
Early on, industry standard recommends once a month. I found this too much and I never stopped prepping material for it and speaking to them. Move it to 6 times a year if you can, then quarterly a few years down the line when you have a well oiled governance machine.
Where does an advisory board fit in?
This is key. In the beginning the advisory board can act as a very useful filter for that very first board member, you get to try before you buy. They should not want payment at this stage. If they do they are the wrong person. At Insane Logic we have an advisor for social care, one for education and a team for health/speech and language therapy - these are our fields. At this point they are all paid for work they do but I know they do far more than they charge me for and at the beginning they took no pay.
We are fortunate to have pro bono lawyers and long term accountants and I have my mentor an experienced entrepreneur and growth expert. This support around me is very important. Focus on finding people who “get” you and your vision and you think can help you get there faster. You may go through a few of these advisors as not all of them are that useful but I could not have got off the ground without them. They are essential.
Someone who has written much more eloquently and detailed than me on this subject is Mark Suster. Can’t stop learning from this man. This article gives some links to other ones he has written too.