Tips for Successfully Serving on a Startup Board
Peggy Wallace, Managing Partner of Golden SeedsJune 4, 2019
In a recent blog, I looked at why a strong board of directors is important to a startup’s success and what to consider when assembling yours. There’s a flipside to this. As a business leader, you have expertise running a company, market familiarity, valuable connections and more. Your professional experience could be just what a startup needs.
As the Spencer Stuart U.S. Board Index points out, the makeup of boards is changing. S&P 500 companies are bringing in directors with fresh skills and points of views. We’ve witnessed it at Golden Seeds. Our investors have held more than 100 board and board observer positions in companies that have received investment from Golden Seeds, 90 of those held by women.
It’s a good trend to see. Yet, while being asked to join a board can be flattering, exciting and even offer new opportunities, it’s a big commitment. You need to understand what you’re getting into and how you fit the needs of the company.
The following tips can help you make the most of your board appointment, onboard successfully and perform your duties effectively.
Are You Ready?
Gail Hoffman, a board member of Groupize, a Golden Seeds company that develops technology for corporations to efficiently manage events and meetings, noted: “Board members are often coaches and mentors to management of early-stage companies, providing guidance in countless ways.”
As a board member, you are fully aware of the many challenges of getting a company off the ground. You want to make sure you add value. So, know what’s required of you and determine if you’ve really got the bandwidth to do this at this time. If not now, you may be able to consider it in the future — better to do this right, when you’re able to truly have an impact that will enhance that company and your reputation.
That said, remember that a board seat is usually for a period of two to six years. For new companies, meetings are frequent and throughout the year. You may need to travel, and perhaps lead a committee. When there’s a crisis, you’ll need to drop everything, and that will happen. Remember, these are often small companies that have many ups and downs. They rely heavily on their board members. Small companies need close guidance.
This is just the start. It is important to study the basics of board governance to understand all your fiduciary duties and take a course, if possible. This will help you grasp the obligations and whether being on a board is a commitment you’ll be able to do justice.
Protect and Prepare
Joining a board can potentially bring personal risk. Ensure the company has directors and officers (D&O) liability insurance. If legal action is brought against the board or management, this is important protection.
Become familiar with director-related documentation like protective provisions, voting agreements, bylaws and committee structures. You’ll be involved in decision making and you’ll want to be certain that all actions are in accordance with the documents.
Further, realize you might not always agree with a company’s actions, and that you may know investors who have contrary opinions. That said, be prepared to act in accordance with your role as a director. You need to act as a fiduciary for all shareholders — that’s where your ultimate interest and loyalty must be.
Understand Your Duties
Boards usually have an odd number of members to avoid reaching an impasse when it comes to voting. A five-director model could include the founder, CEO, two investors and an independent director. The latter usually has particular expertise the company needs. Boards need to have fulsome conversations and can hopefully reach consensus on all or most matters.
If you’re on the board of a funded startup, know that you need an exit to provide returns. Boards for these companies need to be focused on positioning the entity as an attractive acquisition or IPO candidate. This is done by meeting relevant milestones and metrics and building a fundamentally sound business.
Keep in mind that goal, and further, that you’re not there to run the company. You’re there to advise the leaders so it’s important to maintain the higher level view — guide strategy, review financials, develop measurable goals. Know your place and don’t get caught up in management minutia.
The Board Journey
Sheri Anderson, a long-time board member for children “edutainment” company, Little Passports, recently said: “You never know what opportunities and challenges a company may have, but serving on the board allows you to take the journey along with the entrepreneurs.”
If you’ve been offered a board position and can truly commit — you’ve done your due diligence and are aligned with the role — go for it!
It’s an exciting role and a real rush to have a hand in a successful startup. And make no mistake, you’ll build your reputation, skills, expertise and networking connections throughout it all.
I can assure you that you’ll never be bored on a board — and you’ll always grow.
Learn more about how women entrepreneurs are achieving success with Golden Seeds.