How a Board of Directors Can Springboard Startup Success for Women Entrepreneurs
You're getting your startup off the ground. You know you've got to create your first-ever board of directors, but there are so many urgent tasks to handle. When are you going to have time to select board members, get to know them, plan for meetings?
Women entrepreneurs face extraordinary challenges compared to their male counterparts -- and a board can help. So make the time. You don't want to rush the process, or bring in the wrong people, but this group of executives can springboard your startup to success. The following are just a few of the many reasons to embrace creating a strong board:
- Directors are often formidable talent that usually would be too costly to hire. You'll be able to gain firsthand experience in critical areas such as finance, strategy, sales and marketing, public relations and social media.
- Board members can introduce you to influencers and investors. They have access to and personal experience with trusted professionals in functions from accounting to law. They could even put you in contact with new customers.
- Boards add governance that can provide keen oversight, often protecting a company from issues that could discourage future funders or potential buyers.
So, how do you determine who your directors should be, what the board will look like, and how and where it fits in your company?
Choosing your board members
You have substantial say in who should be on your board. Still, if you have investors, solicit their advice. Making a limited number of them directors could work; they do have a vested interest in your company. They might also have recommendations or network connections. Regardless, getting them onboarded can cement buy-in and ensure everyone's on the same page.
Assemble a board that's balanced in terms of interests and talents. An odd number of members is preferable, because it can help in decision-making and stimulate useful debate. Initially, five is optimal: two executives from your company, two investors and an independent board member who has experience that your company needs.
Independent directors are particularly important, because they have no material or monetary relationship with your company, which means they'll provide objectivity. Look for in-depth industry knowledge and/or high-level operational experience based on what your company needs. Perhaps you could use product expansion guidance, cybersecurity expertise or marketing leadership?
In general, here are some qualifications you should look for in board members:
- High integrity, well-respected and trustworthy
- A candidate aligned with the culture and goals of the organization
- Expertise that augments management strength and brings expanded knowledge
A diverse board outperforms
Everyone wants to pick the best candidate for the job, and when it comes to representation parity among your board, keep in mind that statistics show companies benefit more financially and attract better talent if they're more diverse and inclusive.
McKinsey research found diversity within executive teams -- whether gender, ethnic or cultural -- helps companies outperform others and correlates to financial gains. Additionally, the 2017 Spencer Stuart U.S. Board Index has unearthed interesting data and trends related to boards and directors among S&P 500 companies. The makeup of traditional boards is changing:
- The 2017 Index marked the first time more than half of the new S&P 500 directors were women and/or minorities.
- Independent directors now represent 85 percent of all S&P 500 board members, a new high for the Index.
- The Index cited that 45 percent of new directors appointed are serving on their first public company board. Overall, they're more likely to be employed in an executive capacity elsewhere.
The above data pertains to large companies, but the same principles apply to startups and mid-sized companies.
How will your board function?
You play a major role in determining how your board functions. First, consult other members and determine meeting frequency. Things change quickly and a good board will want to stay updated. To avoid surprises, stay in touch regularly. Many startup boards meet monthly or bi-monthly at the outset, but it's important to keep members up-to-date between meetings.
You are on this journey together, so create and maintain strong working relationships that are open, candid and productive with both the board as a whole and individual members. Work with your board to determine what information they expect and how frequently. Your board packet is a reflection of the tools you're using to manage your business and how you compare against key metrics.
If you're unsure where to begin, a board packet must include any major contracts that require ratification. Here is a great resource for information on what to prepare for your board members. This can be time-consuming, but your board will appreciate your efforts and make better decisions with the information you provide.
"Your board packet, if presented in a clear, concise manner, will further their confidence in you and your confidence in yourself," noted Marilyn Matz, co-founder and CEO of Paradigm4, a Golden Seeds investment company. "Furthermore, boards don't like surprises, so make sure you are transparent and accurate: don't inflate potentially positive scenarios or downplay potential challenges."
It's about the end-game, not ego.
You're an equity holder in the company. Your financial reward is dependent on a successful exit. To achieve optimum return, you may need to accept advice based on the experience of board members that have steered companies through volatile marketplaces.
This can be tough. It might require changes that don't exactly match your vision. Funding priorities could shift, you might need to reshape management to take your company to the next level.
Still, getting the highest valuation for your company isn't the only measure of success. You likely have other goals like creating jobs or having an impact on an industry or society. A strong board will appreciate and help you reach those goals.
They should understand not everything always goes as planned. As co-founder and former editor-in-chief of The Huffington Post, Arianna Huffington once remarked: "We need to accept that we won't always make the right decisions, that we'll screw up royally sometimes -- understanding that failure is not the opposite of success, it's part of success."
A good board will keep that in mind, too.
So, make your board a priority. Keep an open mind, listen, use them as a sounding board. They've likely been through this themselves, perhaps many times. It's all about the end-game, not your ego, and their insight is not common -- so value it.