New Operate Podcast: Founder & Publisher of socalTECH
New OC Startup Job Listings: Hospii, Big Purple Dot, Weedmaps, KIOXIA America

Startup Board of Directors: What You Need to Know

An article we liked from Thought Leader Baz Banai via Medium:

A Founder’s Guide to Startup Boards

Everything Startup Founders Need to Know About Setting-Up a Board and Running Board Meetings  Guide to Startup Boards

You’re a startup founder. You’ve spent days, weeks, and months building out your minimum viable product. You’ve pitched countless venture capital investors (VCs), and now secured your Series A round of funding. Should you set up a formal board of directors?

The board of directors (the ‘Board’) is by far the most integral part of a startup’s internal management structure. A startup’s strategic direction is almost entirely dependent on the decisions of the Board — this includes fundraising, acquisitions, IPOs, hiring and firing of C-suite executives, budgets, new product lines, etc.

It’s often said that startups should think about setting up a Board only once they’ve raised their first round of funding. However, the benefits of forming a Board earlier in the lifecycle of a startup, irrespective of raising funds, are undeniable. Among the many potential reasons for a startup’s failure are those which are self-inflicted. Disagreements between the founding team, overconfidence, and lack of expertise — these issues can all be avoided with a strong and supportive Board.

Board Basics

First, before we get into the details, let’s take a look at a few basic principles that every founder should know when it comes to establishing a Board.

  • Legal — It’s a legal requirement in most jurisdictions for private companies to have at least one director (i.e. it can just be the founder). Public companies, however, usually have more than one director (depending on the jurisdiction) on their Board. The Board is subject to fiduciary duties, which, in a general sense, obligate them to act in the best interest of the company.
  • What — It’s the Board’s responsibility to ensure that the interests of the shareholders are being considered in the strategic management and overall direction of the startup. At the early-stage, the interest of the Board and shareholders are aligned as the shareholders are the founder(s) and VC investors.
  • Who — The composition of a Board (discussed below) can vary depending on the stage of a company. However, the typical startup board is comprised of the founder(s), a VC (as the lead investor of a funding round), and independent board members.
  • When — Startup boards are usually formed at the initial round of venture capital funding (if not earlier), and upon which, the size and composition of the Board are a negotiating point in the term sheet phase.
  • How — The frequency of board meetings can range from monthly to quarterly, but startup board members may also hold more frequent ‘informal’ meetings to address unforeseen circumstances (which there will be plenty by virtue of being an early-stage company).
  • Remuneration— The remuneration of board members will depend on the circumstances. For example, VCs taking a board seat in their portfolio companies are...

Read the rest of this article at medium.com...

Thanks for this article excerpt and its graphics to Baz Banai via Medium.

Want to share your advice for startup entrepreneurs?  Submit a Guest Post here.

WHAT’S YOUR NEWS? - Does your company have articles, events, or announcements to share?

Submit your news, deals, opinions, or job listings here for FREE PUBLICITY.

See the Directory of OC Startups hereJoin the OCSC to get your company listed, too!

AND - Subscribe for FREE OC Startup News here!

OR, WHAT DO YOU THINK?  LEAVE A COMMENT BELOW!

Comments

Verify your Comment

Previewing your Comment

This is only a preview. Your comment has not yet been posted.

Working...
Your comment could not be posted. Error type:
Your comment has been saved. Comments are moderated and will not appear until approved by the author. Post another comment

The letters and numbers you entered did not match the image. Please try again.

As a final step before posting your comment, enter the letters and numbers you see in the image below. This prevents automated programs from posting comments.

Having trouble reading this image? View an alternate.

Working...

Post a comment

Comments are moderated, and will not appear until the author has approved them.

Your Information

(Name and email address are required. Email address will not be displayed with the comment.)