This article was originally published here.
At the “101” level, a company board is an appointed or elected group that provides oversight for the activities of an organization. Your company board’s role will vary depending on your type of business. Here are some tips for how to get started and insights on what to expect once you have a board…
3 practical tips for getting started with a company board of directors
#1: Be aware of investor participation on the board.
“The first consideration is that in most cases, venture investors have negotiated for a seat on the board in their financing terms. Typically, every class of voting stock will have a board representative; in some cases, because of relative ownership, a class of stock may be entitled to more than one board seat,” said editorial partner Vince McCord who served a diverse portfolio of early-stage and other companies as CFO and board member before coming to Early Growth as Consulting CFO.
Outside counsel is also important to a company board because they generally serve as corporate secretary for the business, continues McCord – “as such, they’ll oversee the responsibility of tracking decisions to be made, definitive outcomes, next steps, and recommendations for the whole company.” It takes the administrative and legal workloads off the leadership team (CEO et al) so it can focus on growing the business.
#2: Understand the differences between a private and public board.
“It’s a great time to get on a private board,” McCord explains when asked about the distinction between private and public boards of directors. Not surprisingly, private boards tend not to face the same level of scrutiny as their public counterparts. You may find that presentation requirements for private boards are stricter or more dynamic (versus reports-only for larger, public boards), and the cadence of meetings is more frequent in many cases (monthly versus quarterly for public boards). In every case, they’re highly-instructive and integral to overall business success. They keep the company heart beating.
#3: Appreciate the value the board brings to the company.
The CEO should recognize and appreciate the value a venture-backed board brings to the company.
From providing potential candidates for key staff to enlisting valued business partners; from instilling discipline and rigor in key business processes like human resources, supply chain, and sales and marketing to sharing industry best practices and practical examples of what (not) to do; and, finding investors for the next round of financing, the company board is a wealth of resources.
Lean on them for support, not just financial – and make the most out of your partnership by leveraging their insights to drive business decisions and accelerate growth.
Two make-or-break things to remember when engaging your company board
#1: No surprises.
It may seem like common sense, but as McCord points out, “Your board has the power to stack votes against you. You want them to be your ally. Communicate with them, be proactive.” He then described an experience in which a company’s CEO pitched a funding need at a board meeting to the tune of several million dollars. Not only did the board not grant their request, they pulled out of the business altogether and negotiated an asset sale of the company. Make sure to send out your financials at least a day ahead of time. Include the basics (unless otherwise requested): full financial forecast, current cashflow and state of the business, and any requests for support.
For tech companies, McCord says be prepared to answer these questions before they’re asked: How are bookings/sales going? How is product development going? Have you filled all key hires and, if not, how is recruiting going?
#2: Communicate, don’t complicate.
This ties directly into the “be proactive” advice above. If you need to ask for something, especially financial support, don’t dance around it. Be forthright. Put it at the top of your list of new business to cover at the next board meeting, and make sure your members walk into the meeting knowing what’s coming. The CEO’s role in communicating with the company board is another critical piece of this. Whether in the name of politics or protocol, McCord suggests that any direct communication with the board of directors come from the company’s CEO (versus functional leaders). This perpetuates the perception of alignment and helps address the need for “no surprises” across the entire organization.
Discover more practical insights on building, growing, and maintaining your startup, check out some of our other Business Planning posts here.
To learn how Early Growth Financial Services can support you along the way, contact us today.
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