You Need A BoD — Now.

How to design a Board of Directors photo @seefromthesky By Tom Nora One of the glaring problems I see with many early stage startups without professional funding is the lack of a real Board of Directors. The way I can usually tell is when I ask the question there’s a long pause, then a protracted explanation. But the answer is eventually “no, there is no professionally run board.” There was an article recently in VentureBeat about how much control and flexibility the startup CEO founder has over his/her board of directors. Unfortunately, this actually isn’t true in most cases, especially for first time founders, for many reasons. Mainly because they wait too long to build their board. OK, then. You’re incorporated or have formed an LLC, you have bylaws, a bank account, possibly even revenue, but you’ve delayed the whole “board thing”. Or you have yourself and your spouse or other employees as board members, none of which have the proper experience. And you’ve never had a real board meeting. Why no board yet? Usually it’s lack of understanding, intimidation, unfamiliarity of the details of what a board does, how to run a meeting, where do I start, etc. Avoiding this part of startup building is a mistake, and will hurt you later on. Investors will “help you” with this when/if you get funding, but that will give them several advantages in negotiating and running the company. How to Build It Many factors come into play in early board formation and growth, including the founder’s goals, investors, cofounders, early appointees, advisors, professors, family, and friends. A well designed board can be the critical driving force in making a startup successful; while the wrong board can create disagreements, misdirection, angry members, awkward board dismissals, power struggles and can actually bring a company down. First time founders usually aren’t sure how to populate the board, and first money from FFF (friends, family, fools) blinds them a bit to their best instincts. Typical Pre-Funded Board — 1.0 Here is the typical order of board formation before any professional funding comes in: 1. Founder/CEO 2. Co-Founder(s) 3. Other early employees/officers (mistake #1) 4. one of the FFF investors (mistake #2) then maybe… 5. A “grown up” — former boss, relative, early (non-professional) investor 6. Industry luminary (mistake #3) This is supposed to bethe group that must help grow the company properly, attract professional funding and make industrial strength business decisions. Is it? Most of this 1.0 group does not have much BoD experience, i.e. what it means to be on a board, how to optimize it, what the points of leverage are, what a natural disagreement is vs. a problem of discord. Usually the group is not experienced or cognizant enough to optimize this asset early on. A Better Way photo Dmitri Popov / Berlin, GermanyHere I’ll lay out some key steps to making this organization an asset rather than one with little to negative value. Step 1 — The Founding Team on the board.It’s fine to have the founder and maybe one cofounder on the board; after all that’s all you have to draw from and you must be the leader(s) of the board early on. The key to success here is to STUDY the topic of building a board, learn everything you can. Then start having regular board meetings, following proper board processes. Seek outside experts who can possibly become board members. Also, do you you actually have something worthy of funding and building? Do you have a real business that is operating? product(s)? financials? a team? Revenues? Or just an idea? Asking for funding or even someone’s time too early can be the kiss of death, so make sure you believe in your future before engaging experts’ time. Step 2 — Add an OutsiderIf you’ve done the above, look for an outside member to join the board. This can be a major positive growth step if done right. In any startup ecosystem these days you’ll find many people who have an interest in your business. The word “Startup” now gets the attention of any community — Government, universities, local incubators. Find the best of the best here and weed out the poseurs. About 80% are poseurs. They’ll all want to know if you have potential, and will ask who’s on your board. Your answer is a marketing and positioning opportunity. Among these people, there are real professionals that can become board members. But how do you do it? Whom can you trust? How do you compensate them? Where are the consultants that help with this process? Try Before You Buy It seems like almost everyone is suddenly claiming some startup expertise or “entrepreneur cred”. If you’re near Stanford or in San Francisco, every other person you meet seems appropriate and qualified. But the majority of people you meet are not qualified to help lead a board. Ideally you want people who are qualified but also who come to you via an organic process — you read about them, found them through your own research, stumble upon them, meet them, or they’re recommended by people you know. And they have backgrounds that match your needs. One option is to hire them for a few months before making them a board member. Rent them out. Keep asking around and you’ll find the right people. And remember, make sure you have a real company first. Contact me if you have a going company and this is a hole for you, I’m one of the people I mention above who can help and know plenty of others. But don’t contact me if you just have an idea, or are thinking about starting a company; wait until you have something concrete to discuss.