Start Your Startup | A Founder’s Guide to a Board of Directors
Your Board of Directors – Why Bother?
Stephen Semprevivo is a firm believer that the right board of directors can offer your company invaluable guidance, allowing you to move your business forward, develop new products, and grow at a manageable rate. Taking the time to think about your board of directors early in your business planning can help you make the best decisions for your company.
When you first start your business, you might be the sole member of your Board of Directors. As you grow and secure investors, you will need to start adding new members to fill out your board.
When to Form a Board of Directors?
During the early stages of your startup, you and your co-founders (if you have any) will become an informal board of directors. You are the decision-makers. Each of you has a financial and personal stake in the company’s success, so you should all be included in major decisions.
This informal setup can work until you are ready to get funding. Once investors start coming into your business, you will need a more formal board of directors to advise you and vote on critical business decisions that impact the bottom line. Investors who serve on the board of directors often receive compensation in the form of equity, in addition to being reimbursed for travel expenses when they need to visit you in person
Who Should be on Your Board ?
It’s common to have the founders sit on the board of directors, but they should not be the only members once you are into the funding stages. Expect to gain a new board member after each round of funding, as lead investors often require a seat on the board as part of the investment deal.
Because of this, it’s critical to consider what type of person you want to sit on your board. It’s tempting to accept anyone who will invest in your company, but this is the wrong approach. Consider your company values along with the gaps of knowledge that exist among your current board members.
Bringing in a board member who believes in your business and can offer new ideas by seeing things from a fresh perspective can be invaluable. On the other hand, bringing in a board member who will be combative or who does not share your outlook on your company can be detrimental to the business.
How a Board of Directors Benefits a Startup ?
Your board of directors is responsible for making significant decisions in the company, including hiring and firing key stakeholders, awarding compensation, developing an exit strategy, and acquiring new companies.
Founders often are intimately connected to their business and might have a hard time seeing the bigger picture. Board members have an outside perspective. They act in your shareholders’ interest and can offer valuable insight that benefits the business, not just your personal goals.
Final Thoughts
It’s never too early to start thinking about your board of directors. Founders who spend time strategically planning their board before they start fundraising can have a better idea of who they want to pitch to and what types of board members to bring in as advisers.
As a successful entrepreneur, Stephen Semprevivo is always looking for new businesses to mentor. If you have an idea for a startup and are ready to take the next steps, apply for the Stephen Semprevivo Startup Scholarship. Two student entrepreneurs will receive a $2,500 scholarship along with mentorship and guidance. Learn more about the scholarship program and apply today. Remember, the best time to start a business is NOW!