When should your startup have a Board of Directors? That’s a question that many young startups either ask, or at least pretend they know the answer to. First off until you have venture money on board, a Board of Directors isn’t necessary. You may choose to assemble an advisory board, but it’s typically when you get VC’s to the table that they want to have a formal seat at it.
Now you may run into an angel that gives you a big chunk of seed money and wants to get on your board. When you decide to take that money you want to also make sure you want that particular angel involved in your decision making process. You may want to pass on that angel and find someone who will let you grow to a series A round before adding decision makers into your company.
Rule number one in this case is very important:
Investment and Equity does not necessarily = board seat.
We will dive more into the board in another post, but as a general rule of thumb, once you start adding a board of directors, you’re not the only one calling the shots.
Of course the opposite also holds true. You may know someone, an investor or not, that strategically makes a lot of sense for your business. You may also have someone that adds clout to your board. In that case you may want to add them to your board, but again take into consideration what that means for your startup.
First Round Review, First Round Capital’s blog for entrepreneurs and by entrepreneurs, took a really good look at “The Secret To Making Board Meetings Suck Less.” Jeff Bonforte co-founder of Xobni which sold to Yahoo, Mike Maples CEO of Floodgate, Dan Rosensweig CEO of Chegg, and Nirav Tolia all weighed in on this important discussion.
Once you have a board of directors you have to have board meetings. Those can be extremely intimidating for almost any entrepreneur turned CEO. If you’ve been an entrepreneur all of your life or left a traditional “job” to become an entrepreneur your first board meeting may feel like you have bosses, because you do.
“Board meetings are the height of insecurity for a CEO. Basically it’s a group of people who can both judge you and fire you based on that judgment,” Bonforte told First Round Review. Bonforte found that board meetings at his previous startup iDrive were nerve racking and that was stemming from the fact that his board was constantly criticizing and “attacking” him. He decided that from then on he would find board members vested in helping him rather than attacking him.
Bonforte gives these reasons that board meetings typically suck:
- Board meetings are long, grueling, and hard to focus.
- It’s nearly impossible to capture your company’s story accurately when you’re obligated to only talk about certain things, i.e. how money’s getting spent.
- You can’t always get who you want on your board. Sometimes you have a choice, but most of the time one or two members will not have been your first pick and there’s nothing you can do about it.
- Too many boards are too big, and too many board members invite observers and general hangers on — all who want to chime in with something to sound smart.
- If you present a deck from the front of a boardroom, you’re asking to be judged and picked apart. It’s like you’re pitching your company all over again, only this time to people who can take it away from you.
The single biggest take away from Bonforte on all of this is:
“Every single entrepreneur forgets that the board works for them,” Bonforte says. “They’re in meetings getting their asses kicked and walking out with even more work to do. They feel like they have to prove their vision instead of proving that everyone in the room should be working together to solve the problem. As the CEO, you feel like it’s your job to carry the ball across the line, but it’s also the board’s job too.”