A guide to early stage board composition Tuesday, April 10, 2007

Will Price has the following guidance to offer on early stage board composition

For aspiring entrepreneurs, I would seek a board with the following characteristics
  1. small and nimble
    1. 3-5 total directors (CEO, 1-2 VCs, 0-1 independent)
    2. start-ups are fast paced and iterative; often board issues are event driven and pre-scheduled meetings often fail to coincide with the natural cycle of progress
    3. being held hostage to scheduling logistics drives CEOs nuts and delays the time to decision and action
  2. economically aligned
    1. if the economic incentives of the board are different, consensus regarding financings, M&A events will become more complicated
    2. if people make money at very different exit outcomes...
  3. empowered
    1. ensure the VC board member is well established at their firm and has "juice."
    2. the start-up road is long and bumpy, VCs with limited internal power are often more proxies than decision makers and their limited internal power may unfairly taint the credibility of the company
    3. their political weakness will limit their ability to support the company in times of peril
  4. value-added
    1. VCs must be able to accelerate the cycle time to success and understand the business
    2. The best VCs truly understand the human, financial, and market dynamics of their companies
  5. effective CEO-board and director-director communication
    1. CEOs must share information - both good and bad
    2. Directors need to work well together in executive session issues: compensation, audit, financing and other core issues
    3. Failure to act quickly on compensation/bonus programs and other executive session issues impacts morale and limits the effectiveness of company management
  6. informed directors
    1. Early stage companies need to begin to track, measure and report on relevant and timely data. Good board packages make for good board meetings.
    2. This is normally an iterative process but data and KPIs enable informed decision making and analysis
  7. productive processes and meetings
    1. Develop well structured meetings with adequate frequency and cadence
    2. Focus the meetings on critical path issues

As companies grow, the size, make-up, and roles of the Board change with it. This post reflects my observations of the critical success factors for healthy, functionining Series A boards.

For a more in depth analysis, please read "The Basic Responsibilities of VC-Backed Company Directors."

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