As a start-up, you may chose to have a Board of Advisors and Directors. It’s not a necessity but definitely adds credibility and experience in your company. Lets first look at the key reasons why it’s useful to have a Board, – As a start-up you need to do multiple challenging things like building your team, raising funds, signing up clients, etc. If you know what challenges you have in various functions, you may chose to bring in some experienced people who can guide you in running those functions better, as well as do the appropriate introductions for you, or just using their name maybe very useful for you.
For example, you may know a senior banker or finance person who may help introduce you to some target investors and help you think through who else could be a potential investor – Board members can genuinely help you review the performance of your business periodically. If you hold the board meetings every 3 months (the norm), you can get an opportunity to step back and pen down what you did in the last quarter. Board members can help you give an and external and constructive feedback which you may find useful. – If you manage to convince and get very strong professionals in your Board, it may help you tremendously while you raise funds, hire people, make partnerships, etc.
How do you setup a Board?
Key things you should consider:
– The Board should have at least 2-3 external candidates. Up to 5 is a good number for the initial years of a start-up – You don’t get until you ask. Do not hesitate to ask very senior candidates what you are doing and they would like to help you. If you sell your story well, various experienced professionals are willing to help and are genuinely nice people. Typically, they are more willing to help than you are willing to ask. On the flip-side, be sure you want those people on your Board who are credible and constructive, and you get on well with them.
– They may join the Board for free. But you should try to incentivize them somehow so they are also constantly motivated to help you. You may chose to issue them options.
– Director on Board carries lots of rights and obligations. You must be very careful in giving this position to anybody, and every responsible Board member will definitely be very careful in accepting it. On the other hand, Advisor does not necessarily carry any rights or obligations (in most cases, unless you define it differently in your legal agreements / company setup)
– You should try and get Directors insurance to protect them from any liabilities
– Be honest to your Board about your challenges, and don’t be shy in asking for favours, and taking their opinions in matters which you are unable to resolve. That’s the whole point of having the Board.
– Allow for a constructive debate in Board meeting, it’s ok to disagree but it you must respect the Board members opinions