Creating a startup is a complicated process. Organising investment rounds, product, liaising with customers, it can all be overwhelming and you can be tempted to look for outside help. And you should! Running a startup solo is next to impossible, and a board can be a good way to keep the organisation on track.
But a board can also be distracted, uncommitted to the organisation, or just generally hard to manage. And anyway, you and the other founders can just take a long lunch and do all the board duties whenever it’s needed, right? So are they always necessary?
Understanding Your Options
At this early stage of a startup there are two main types of board: governing and advisory. A governing board is your traditional kind - their decisions are legally binding and they (ideally) have a strong degree of investment in the startup. An advisory board is an informal group who simply give advice and are typically not compensated.
There is also the option of having no board at all - which, if you already have the manpower amongst your founders to do all your governance duties, can be a perfectly viable option. Analyze your company, your workflow, and your governance requirements and answer these questions:
- Do we need someone to provide concrete direction and management?
- Do you need someone you can regularly go to for advice?
- Do your investors need any third-party (or personal) oversight of your company?
- Are you getting everything done? Governance, legal requirements, investor/consumer reports, all these things can slip through the cracks while you’re focusing on the product or service you’re building.
- Do you want a board at this stage?
If you answered yes to any of these, you’ll likely want to set up a board. Talk to people in your industry, find people who have experience with startups, even check in with local incubators and accelerators to see who’s out there. Ideally, you probably want no more than five members on your initial board, but keep it informal for a little while before finalizing any relationships so you have some wiggle room.
Who Wants You to Have a Board?
Often, a startup will find themselves beholden to their investors. These investors will typically want a say in how their money is spent - which sounds reasonable, right? So setting up a governing board where these investors have a seat is the easiest way to keep everyone happy and keep the company alive.
But when these investors are pressuring you to form a board, think hard about why, remember whose organisation this is, and remember that, unfortunately, politics are a big part of this industry. If, while you were reading the previous paragraph of the article, you realized that you’re getting along really well and don’t need a board yet, that’s amazing!
Don’t let yourself be swept up in the flow of the people offering you money. Do your research and stand your ground on whichever decision you make, and it’ll end up working out for the best.