We all know starting an early stage tech business is hard. Quite often the founder moves from industry into the CEO role and has to take on the full responsibility for a business. This means looking after everything not just their area of expertise. This covers operations, finance, sales, admin and much more spinning of plates.
So when founders ask when is the right time to create a Board, we say as soon as possible.
Why? Because a Board will support you with the high level strategic decision making required to take your business forward. Executives and Non-executive Directors around a CEO can provide objective guidance on both strategy and governance and, moreover, NEDs can also act as mentors to the CEO.
Ruth McDonald from Narratology points out that early on startups might simply have a number of trusted advisors known to them through existing connections in the founder’s network. This is an opportunity for 1-2-1 support without having the legal and governing commitments of a Board of Directors. However within a short period of time, a startup should look to create a Board to ensure accountability, expertise and fresh perspective from the outset.
To do this, the founder should have a mix of Non-Executive Directors and employed Directors from the Executive Team as it grows. When recruiting for Non-Executive Directors they should look to add capability or skills to the Board that might not exist in the Executive Team or the founder may feel they aren’t so strong in. For example if a founder is great with sales but not with finance and governance, they may want to hire a Finance Director to the Executive Team or ensure they have a NED with strong legal and compliance skills.
Culture is key to building a strong Board as it sets the foundation for the wider company as it grows. Hiring for Non-Executive Directors should be treated in the same way as hiring for Executives – shared vision and values are essential.
Quite often in early stage startups, the directors of the Board are made up of early stage angel investors. It is also important that the founder looks to build a Board with a mix of Directors who have and have not invested into the business. This gives a level of independence and diversity when it comes to decision making. It is also recommended to look at adding to the board with directors from different backgrounds or industries to add to the diversity around the table.
In terms of enticing people to become either an advisor or a Board member, it is key that the startup talks about the opportunity to be part of a growth journey. And can maybe offer equity as an incentive to join the board.
Is remuneration required, well at Raise we tend to think no unless it is absolutely necessary. All directors should be founder friendly and aim for any cash to be spend on the business not on the salaries of NED’s. It is not a given that investors become Board members and that Board members need to invest.
Overall the search for directors can be challenging. It should start within the founder network and then move out with the help of advisors and head hunters to find the right people for the right roles.
Some key resources when on building a board are