How to Get the Most from Your Startup’s Board
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Approximately 10% of startups fail within the first year and 90% fail over the long run.
While there are many reasons for this failure—one of the most overlooked aspects is the effective utilisation of the startup's board. It's not just about selecting high-profile names but also about leveraging their expertise, network, and insights to improve your business. However, the secret behind the success of any board lies in how we utilize it.
Quite often, founders treat their board of directors as a necessary evil rather than an asset.
This article will help you turn that perspective around and get the most out of your startup’s board.
What is a Startup's Board?
Simply put, it's a group of individuals who oversee the activities and growth of the company. But this is more than just a supervisory role.
They also contribute their own skills and experience, drawing on a broad array of industry knowledge and contacts. A good board doesn't just watch from the sidelines—they roll up their sleeves, get involved, and help shape the direction of your startup. With a strong board, your startup's potential can soar.
For example, consider a fast-rising tech startup.
They might have board members who are tech mavens with a solid network within the industry. These individuals don't simply attend meetings; they actively engage, sharing insights on market trends, competitor strategies, and potential partnerships. They might even help recruit top talents.
The result? A startup that navigates the market with greater agility, staying ahead of competition and continually innovating. This is just a glimpse of the kind of value a robust board can bring to a startup.
PS: If you are a small business operating as a Delaware c-corporation in the U.S., you can file Tax Form 1120 here.
What Qualities Define an Effective Startup Board?
Several key qualities define an effective startup board. Let's take a look.
Understanding these qualities is the first step. The real challenge is making them part of your startup board.
That brings us to the next part: how to cultivate these qualities and build a board that truly aids your startup's growth.
Read more: What is a Pitch Deck?
How to Build an Effective Startup Board?
In this section, we'll delve into practical steps to construct a proficient board for your startup.
- Celebrate Diversity: Aim to include members from different backgrounds with varying skills and experiences. They will bring fresh ideas, challenge norms, and push the startup towards innovative solutions.
- Highlight Open Communication: Establish a culture of open dialogue where every opinion counts. Encourage honest feedback and proactive participation.
- Encourage Mentorship: Find individuals who are not only experts in their fields but also committed to sharing their knowledge. This mentorship can greatly ease the startup's journey.
- Value Active Participation: Seek members who show eagerness to get hands-on and contribute not just in meetings but between them.
- Promote Accountability: Establish a board where members hold each other accountable, promoting a high standard of operation for your startup.
- Cultivate a Learning Environment: Encourage a continual learning spirit in the board where all members grow together, learning from successes and failures.
- Maintain Strong Ethics: Uphold a high ethical standard within the board; it will set the tone for the whole organization.
Remember, choosing the right board members is just a start; equally important is nurturing these characteristics in your board over the long run.
Read more: Learn all about Advisory Shares for your Startup
What are the common pitfalls to avoid?
Amidst focusing on the perks of an effective board, an important aspect to consider is the common mistakes.
One slip can lead to a domino effect, derailing the startup's course.
Some mistakes to steer clear of include forming a board too early, picking yes-men, overlooking diversity, and ignoring conflicts of interest. In essence, your goal must be to curate a balanced board that prioritizes the startup's needs and success over individual agendas and unconscious biases. Let's elaborate on this with a few examples.
For instance, let's say you hastily form a board to meet venture capital requirements. The immediate consequence might be a lack of synergy and clear direction, leading to haphazard decisions.
Similarly, if your board is composed of 'yes-men' who always agree with your strategy, you might miss out on important counterpoints and fresh perspectives.
Overlooking diversity can lead to a homogenous board that lacks varied insights.
Furthermore, conflicts of interest, when not addressed, can bias decisions, undermining the startup's growth potential. In fact, these conflicts can create an environment of hostility and undermine trust within the board, further inhibiting productive collaboration.
How can you keep your Board Engaged and Accountable?
- Creating a sense of ownership: Assign specific roles or tasks to board members that align with their expertise, fostering a sense of ownership and responsibility.
- Adopting performance metrics: Establish clear performance indicators for board members. Regularly evaluate their contributions based on these metrics, keeping them accountable.
- Providing continuous learning opportunities: Offering workshops, seminars or access to resources that expand their knowledge, maintaining their interest and engagement.
- Cultivating a feedback culture: Implement regular feedback sessions where board members discuss their victories, challenges, and potential areas of improvement. This helps them stay engaged and continually enhance their performance.
- Keeping transparency: By openly sharing the startup's progress, challenges, and plans, board members will remain involved and can provide informed decisions and suggestions.
If you continually update and involve the board in your startup's journey, they are more likely to stay committed and actively participate. But remember, it's not just about keeping them informed. Celebrate their contributions and acknowledge their efforts to keep them motivated.
Let’s Recap!
There you go—you have a comprehensive guide on how to build a powerful board for your startup. It's crucial to remember that the journey is as essential as the destination. Pay attention to nitty-gritty details, actively solicit input from board members, and finally, do not rush.
In the process, software like Inkle Books can be super helpful, allowing you to manage your startup's finances in the best manner possible. It can support you in ensuring your startup's healthy growth, setting the stage for your board to function optimally.
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