Upon raising a round of financing, entrepreneurs are flesh with cash and another important resource: Their board of directors. This group is a valuable asset as these people provide experience, insight and a network.Consequently, it is essential for entrepreneurs to maximize the impact of these individuals through relationship management and strategic communication.
As an entrepreneur, your board of directors is more than a group to report to -- they are a talented and connected group of business experts to leverage as you grow your business.
At my startup Travefy, an online group travel planner, our directors (and advisors) have been invaluable as we’ve grown.
From our experiences, here are some key tips to get the most value for your startup from your board of directors.
Know what the board does and how it can help your startup. Silly as this may sound, there is an important distinction between the board of directors and the board of advisors that is not necessarily intuitive to a first-time entrepreneur.
- Board of directors: This is a legally appointed group of corporate managers with a fiduciary duty to represent the interests of a company’s shareholders. This role comes with enormous rights and influence over a company’s strategy including the hiring or firing of the CEO. The board also keeps you grounded in your progress, helps you continually learn and pushes you forward.
- Board of advisors: This is an unofficial group of mentors that helps your company strategize, problem solve, or, really, anything else. Advisors are fluid both in their commitment to a startup and how you define their role. Different advisors are typically engaged at different points in time to fill gaps in certain functions or domain expertise.
While a board of directors is universal, the need for advisors and how they are engaged varies depending on your needs.
Identify the best board members. Set yourself up for success and identify the best board member among your investors who will both champion your team and product but also challenge you to be better.
At Travefy we thought through several criteria, which led us to our ultimate board member. These criteria included invested capital, company involvement, domain expertise and miscellaneous outstanding factors like partnerships and additional resources. Also think through qualitative factors like relationship dynamics.
As a note: This level of choice is often reserved for seed rounds of capital or angel group led rounds without a clear lead investor. If you are raising a Series A and beyond, you may not have a say in your "newest" board member. (That said, you definitely have a say in who you take money from.)
Communicate regularly to maximize time spent together. One of the most challenging aspects of working with your startup board is knowing when and how often to communicate. This includes both regular communication as well as board meetings.
- Regular communication: It’s important to keep your board members regularly informed of trends, product innovations and key metrics. Having this constant baseline of understanding allows you to quickly and efficiently advance important questions or issues without wasting time getting up to speed. At Travefy we have a template for regular reporting making it simple for our board to engage and compare performance. (Here is our template)
It is also important to establish the best method of regular communication for each board member. Some people love emails, others calls and some prefer regular coffee meetings.
- Board meetings. Typically a startup will hold quarterly board meetings, though the frequency is based on preference. In these meetings, entrepreneurs often address key quantitative indicators such as performance metrics and financial statements, discuss challenges and address future strategy and goals, among other important topics.
While it is not uncommon to find an entrepreneur apprehensive before an official board of directors meeting, struggling to craft messages and fearful of the reception, you should never find yourself in this situation. If you are communicating to your board on a regular basis nothing being reported should even be remotely surprising.
In addition to saving you a headache, this preparation allows you to appropriately leverage the captive time at the meeting to focus on topics vital for discussion, allowing for advances in strategy and product, rather than playing catch up.
Don’t be afraid to ask for help -- it’s what they’re there for. Remember your board members have a vested interest in your company. If at any point you have a request -- be it for advice or even something more concrete like an introduction -- don’t be afraid to ask. Still, you should be smart and strategic when asking for help. Understand the bandwidth constraints of your board members and make these requests only when necessary and in their preferred manner.
All taken the together, a smartly chosen and informed board of directors is an invaluable asset for a young company.