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How to get the best out of a start-up board

Start-up board

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The company's board of directors can be an invaluable help when it comes to leading the company to success. However, to get the best possible benefit, the board must be well thought out.

Below, we provide some tips on how to build a successful relationship with your start-up's board and get the maximum benefit for your business.

The purpose of a start-up board

When start-ups present their start-up board, they sometimes think of a group of strict investors who look over their shoulders and pay attention to mistakes. While monitoring is part of the purpose of a start-up board, it's too short-sighted to assume that's the sole purpose.

The main task of a start-up's board is to provide advice. The board brings in a range of experiences, from people who want the start-up to be successful. While it is true that there can be negative consequences for founders in very extreme scenarios — for example when investors work to push the founders out — in most cases, opportunity costs are the biggest risk.

If you don't look carefully at your board of directors, you miss out on the chance to get help, feedback, or advice that can improve your company. This could be advice on how other successful start-ups have dealt with similar challenges, or market-based information about the right path for the next round of financing. It is in the company's interest to make optimal use of the board.

Composition of the start-up board

The first step to getting the most out of the Founding Advisory Board is to attract the right people to the Board of Directors. It's a good idea to think about this before you even start fundraising.
In order to make the Board successful, members with expertise in areas from which you can benefit should be elected. If the founding team is highly tech-savvy but has little sales experience, a board member with deep sales knowledge can help develop that part of the company and recruit executives for that area. Board members who were entrepreneurs or founders themselves can advise on hiring employees and help decide how to grow the company as it grows.

It is important that common mandate expectations are defined and coordinated. In order to know exactly what you can expect from a potential board member, you should find out about their previous work on the board of directors.

In general, there are three types of board members in start-up companies: founding members, investors, and independent individuals. For early-stage start-ups, it is common for the main Series A, Series B and Series C investor to get a seat on the Board of Directors. In addition, seats can be reserved for independent members, usually for external experts who are believed to be valuable to the company.

The composition of the Executive Board influences voting dynamics. If the majority of the seats/votes on the board are filled by founders or persons appointed by the founders, there is broad scope for setting the agenda. Nonetheless, an external perspective and expertise should be sought from time to time. When planning the composition of the Board of Directors, careful consideration should be given to what is to be achieved and where the greatest benefits can be achieved. If the company is successful, many board members, in particular the main investors, will serve on the board of directors for decades.

Make optimal use of supervisory board meetings

Most board members meet on a quarterly basis. However, sometimes the supervisory boards also meet monthly in the initial phase, depending on which phase the company is in. These supervisory board meetings have several goals. On the one hand, it should be ensured that board members have enough up-to-date information about the company to help obtain feedback. On the other hand, they should provide actionable advice on business transactions as soon as they are on the agenda.

So how can you ensure that meetings of the board of directors of a start-up company are of maximum benefit?

Stay in touch

It is important to maintain a continuous 1:1 dialogue with board members, whether in the form of a planned monthly vote or in the form of ad hoc text messages, so that there is no black box between quarters and strong relationships can be established. Some companies host dinner or lunch on the eve of the board meeting.

Provide context

As a founder, you know the day-to-day business of the company very well — the Supervisory Board, however, does not. The supervisory board does not necessarily know everything that is going on in the company and cannot give good advice without the right context. The Executive Board should therefore be informed about the vision, changes in the company and developments since the last board meeting. This should be done in a few, clear words (e.g. in a one-page “CEO update”). It's impossible to say everything that's happened in the last three months in three hours, so it's helpful to set priorities!

Define where you need help

Before you meet with the board of directors, you should consider in which areas the board has the necessary expertise to help you and in which areas you would like to involve them. For a newly founded company in the initial phase, this could be advice on an important personnel recruitment or an important sale, for an already established company, for example, this could be a decision on the right goals for the year.

Be specific

The board would like to help. However, he can only do this effectively if he knows where help is needed. As the person closest to the company, the founder always knows best where the expertise of the board can be most useful. If you tell the board specifically and specifically what you want to spend your time on, and if you make sure they know the context to understand why, they'll help you get what you need.

At Numarics, we are happy to help you set up a company and make strategic decisions.

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