Why Start-Ups should get a strong board governance quickly ?

Author : Xavier Pansaers ; Co-Founder

Start thinking about constituting a board of directors before it becomes essential. 

Startup boards are different. Indeed, the majority shareholders are founders in most cases. Founders are also CEO's and the management dynamic is much different than in larger companies. The urge for executive's oversight is less pronounced and it's not priority until suddenly investors starting to request board seats, implying a shareholder agreement which board matters and more.

Founders may react with some fear or unnecessary stress and some of them can fail in that process. It's a this very moment, the independent board member (IBM) come into play. Appointing an independent board member is crucial. In many cases, the IBM is a talented and experienced person who have been through the same process years before. 

The IBM is an entrepreneur backing up the founders and turns to be a fantastic moderator between the founders and the investors. The Founding team can count on him to balance smartly any board resolutions and perform on demand duties like pricing analysis, product strategies, or participating to some key hiring processes. 

 Something to keep in mind from the early beginning is to make a clear distinction between l "Board discussions" and "Shareholders discussions". It looks that the line in between is not always clear and as a consequence it could blurry the board dynamics. 

The management team relationships, and roles of the CEO/founder(s), shareholders, investors, and board of directors rapidly change in a successfully scaling startup. Who makes what decisions is rapidly changing. A lack of clarity and common understanding of who makes what decisions and is accountable for what results can cause confusion, and slow down or prevent scaling.

By the way, Govrn is free for startups below €2M Annual Revenue !

In a nutshell:

  • Think Board governance early enough Hire an independent board member

  • Between 4-5 board members to start with (Founders, Lead Investor, IBM)

  • Focus only on the company value creation plan ; no time to waste in board admin ;-)

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