Why a startup needs a board of directors

by Michael Schlossberg on Oct 5, 2022

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One of the primary ways a board can help a startup is to develop a great business strategy. The purpose of a startup board is to validate the founders’ ideas and assist the business in acquiring customers.

Boards are critical to the success of any business startup.

A startup’s board should be a valuable sounding board for validating ideas and taking a sober account of the market. Board members should ensure the business has the right strategic plan to develop products and acquire customers.

When properly composed, a board of directors will attend board meetings, help hire staff, set policies, create a business strategy, create a positive culture, and ultimately turn the company into a significant and successful business.

In most cases, companies know what they are looking for in a board member. They need experience, advice, and money. However, there are plenty of times that a business needs things from their board that they may not even realise.

This begs the question: What do startups need from their board of directors? And what sort of director training and corporate governance is required to provide effective leadership?

In the video below, Julie Barber, CEO, board member and No. 1 best selling author discusses early-stage strategy for startups, how they can get funding and why a good board can save a startup and ensure it thrives.

Startup board members need to be fully committed

Picture this scenario: Someone starts a new business and builds a world-class board to help the company get off the ground. 

This person holds board orientations, signs legal documents, explains the job responsibilities to the board, and then – nothing. 

The board member goes dark. 

They don’t attend board meetings, answer emails, or respond to calls to action. This individual is not capable of being on a board of directors. 

A time commitment is required of board members. They may not be able to attend board meetings (or even most). They may not be able to contribute to sub-committees or read extensive reports. 

However, a founder or board member has to be clear about time expectations. 

Some individuals may be so valuable to a board that the founder wants them on, regardless of how much time they can give. That’s fine, provided the founder are clear about what their expectations are for them. 

Furthermore, the founder may have board members who can only give advice or input on a limited basis. As long as they can answer a call or be available when needed, they serve value to an organisation and should be a part of a business in the future. 

Startup board directors need to be strategic guides for founders

All boards need expertise and must input towards company strategy. Indeed, providing this critical insight is one of the most basic functions of any board.

All board members should be capable of giving specific strategic advice or guidance about the direction of a business or startup. Only in this scenario will a board truly be able to function and provide effective leadership.

To better explain this idea, let’s go back to the primary purpose of a board.

The goal of a board is primarily to set the organisation’s strategic direction as it advances.

Such input is particularly vital for a business’s early days.

A company can have the greatest accountant or fundraiser in the world on a board. Still, if they can’t see the bigger picture or help position a business for long-term success, they aren’t able to ultimately help the company succeed.

Does every board member have to be a strategic master? No. However, at a minimum, a board member must understand how their role plays into the strategic success of the business in the future.

They must be able to understand their specific role, how it fits in with the greater needs of the business as a whole, and look at their responsibilities from a holistic perspective.

A startup board needs a contrarian voice that asks tough questions

It may seem counter-intuitive, but there is no question every board needs someone who will ask the tough questions. 

One of the greatest dangers of any board is that its members will “go along to get along.” 

In other words, there is always a concern that a board will fall prey to groupthink

Groupthink can be dangerous, allowing a board to lose perspective and insight. 

Groupthink means that board members will enable their thinking, advice, and actions to be supplemented into the greater culture of the company. As a result, board members will stop operating as independent units and instead think like everyone else.

A contrarian can bring up alternative perspectives, challenge staff members, and make sure that the board is thinking of alternative views. To be clear, a contrarian should still work within the board to make changes. 

The proper role of any board member is to advance the interests of the business in question, and this should be done within the broader board and corporate governance system. 

However, there is real value in constantly encouraging board members and staff to think differently. All board members need someone capable of reminding them to do that. 

When it comes to board membership, it’s not just about finding board members who are intelligent, wealthy, or well-connected. 

To properly function and help a business, a board must have various skill sets that are customised to meet the needs of the business they serve. 

More often than not, this can’t happen on its own. Boards also need help and training. 

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Diploma in Corporate Governance

Enhance your career as a director. Develop the practical knowledge, insight and global mindset to be a great board director.

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