Why a board?
A good board:
- can be extremely helpful
- is particularly valuable around capital events • i.e. fundraising, valuations, taking on debt, a sale
- is an untapped resource that you should strive to unlock
- spends time discussing real challenges and priorities
- is a single channel of communication between all stakeholders of your business
A bad board:
- is an inefficient time suck for all involved
- ends up as a dreaded, unhelpful overhead
- becomes a “group reading” meeting
Forming a board
From a timing perspective, don’t rush things a form a board too early. It is preferable to focus on your company and the business first and when time is right you will feel the right moment to call a board more seriously (if needed).
If you decide to go ahead, please consider the diversity in experience, including people from various background and strenghts.
For an average serie A we usually see 5 people with 1-2 founders included. It is worthy to note that the serie A will affect the makeup and limits of a board.
For the remuneration, it can vary greatly but a good range would suggest from 0.5-1% equity with 5-15K$/ year. For advisors, we do not recommend to neither pay or give equity. If advisors become consultants they get paid as such.
When board go south
It is preferable to hire full time directors with a flexible renewable contract (a min. of 2-3 years is recommended). By describing all rights in advance in a partnership agreement, you can avoid emotions, and unpleasant decisions as behaviours would be guided by what’s written in a contract.
This is also for these reasons we never recommend ending in a 50/50 model.
Running the board
The CEO should request meetings on his convenience and not the opposite. A good frequency is set around 8 to 10 meetings per year depending on your life cycle. Don’t book a board member in the summer or December.
Board packages should include the minutes from the last meetings, as well as financial information. Do send them few days in advance by email as pre-read.
For the meeting itself: no more than 2h. Focuses on the financial points, the forecast and the business impact questions.
At the end, keep your meeting minutes snappy under 2 pages and regularly communicate updates if they occurs in-between board meetings.
Find the right chairman
Having an independent chairman can be helpful as you get experience and industry knowledge immediately, with the impartiality of a neutral voice. Consider bringing one when you see multiple investors involved especially for new entrepreneurs.