Building a Board That Works for You
Your board of directors is a crucial piece of your startup puzzle. It's much more than just a governance and oversight body — if built well, your board can connect you with important resources and provide you the support, advice and engagement you need at critical moments in your startup journey. But, how can you build the right board for your startup? When should you form it? Who should be on it? How should you set expectations for board members and manage those relationships?
We sat down with Olympia De Castro to answer these questions. She serves as Independent Board Member to Enduring Planet and a Board Advisor to Gratitude Railroad, an impact collective of investors and alternative investment platforms. She is currently the Chief Financial Officer, Chief People Officer, Head of Legal Division and Treasurer of the Board at Datacubed Health.
To make things crystal clear, if you form a corporation for your startup, you legally must establish the Board on Day 1. Typically, this is just the founder/founders and reflects the day to day governance of the business. For the purposes of this piece, our definition of a “Board” moving forward refers to a Board with NON founder members.
Most often boards get expanded beyond the founding team during the first priced funding round for a company, with the lead investor taking a board seat. However, entrepreneurs have the option to form a board with “outside directors” anytime, if they believe having these directors will have an impact on their success. This can be because the individuals they select are prominent stakeholders in the community, have deep networks of prospective customers, etc. When starting a company, it's common to have advisors and mentors, both formal and informal (e.g. angel and seed investors), who may be willing to serve on your board. When should you formalize these relationships into board director positions?
The answer is largely a function of growth trajectory, anticipated capital to be raised, and degree of complexity of the business itself. Board directors can be a powerful tool for entrepreneurs when they offer complimentary networks, perspectives, and skills, but having a board also comes with a big shift in governance and control, so the decision to form one shouldn’t be taken lightly.
Fundamentally, forming a board PRIOR to a priced funding round comes down to a tradeoff: do the benefits of bringing new Board Directors into the fold outweigh the change in control and added administrative burden? Every entrepreneur must make this decision for themselves.
Picking your Directors
Founders get a say on who sits on their board in one of three scenarios:
- They’re forming a Board themselves, not as a requirement of a funding round– in this case they get to pick every member
- They’re adding an Independent Board member to their Board; i.e. 1-2 additional Directors beyond their investors and the founder(s)
- They have a pick of a number of potential leads for a given round, and the lead they pick will then place a Partner on their board
As you think about the optimal candidates to serve as independent board members, the choice effectively boils down to 3 key questions:
- Can they help drive revenue? Do they have the relationships with the client base or relevant customer acquisition channels to actually drive revenue growth.
- Can they provide access to talent? We all know one of the hardest parts of building a business is finding and retaining talent. Having a board member that has access to identifying and recruiting a strong talent base is key.
- Can they help raise capital, advise in scaling the company responsibly and successfully and get you IPO/exit ready (to the extent such exit is a part of the strategic plan)? In the evolution of a start-up there are a myriad of considerations in how to approach capital raising at the various stages, how to position your raise, how to expand into new markets, build your growth story and best position your company to succeed and become IPO/exit ready. Having a board member that can support you throughout that journey is key.
Beyond that, it’s good to consider:
- Who helps provide a diversity of perspective, in particular in terms of race and gender (there is lots of evidence that more diverse boards are associated with better performing businesses)?
- If you are a first time founder, who can help you understand aspects of the business you are less familiar with and help you become more well-rounded as a leader?
When your company is in its early stages, the composition of your board can make a particularly big difference — think about who you will want around during the turbulent moments, whether hyper growth or failure.
If you're adding a board director as part of a raise, you lead investor's participation on your board will likely be the partner you’ve engaged with most– this is where you can also have some influence. Make sure to talk about who you need on your board up front with yor prospectie investors. Do your homework to understand who the various partners at a firm are; call other CEOs and co-investors so you understand who this person is who you’ll potentially be meeting with every quarter (or even every week). You want to vet the person as much as the firm.
How many👨🍳 in the kitchen?
There is no right size board. It's not necessarily bad to have a big board, but more cooks in the kitchen can slow the meal down. It's a tradeoff between what value directors bring and the overhead they might create. Take the time to figure out how they might disrupt instead of add to the process at key moments. And remember, the bigger the board, the more relationships you have to manage.
An independent board director: Your (not so) secret weapon
Founders are not generally encouraged to add independent board directors. This is a mistake — the sooner you can add an independent, the better off everyone is. An independent voice can counteract the inevitable biases (created by their explicit financial interest) of VCs and management. Moreover, you and your VCs might have interests and goals that don’t always align — an independent member could provide external perspective to help you make more balanced, unbiased decisions.
As most VCs are White men (and therefore most of your board will likely also be White men), adding an independent board director can also be an opportunity to add needed diversity to your board and your overall governance. After the director has learned the business and how to work with you, it can also be a good idea to appoint them as your board chair, putting board management in the hands of an impartial party. This will also lighten the operational load for the founder, who often serves as board chair in the early days.
How you manage your board should evolve as your business grows
Boards evolve as a business grows, and so the management of your board also changes. It’s SUPER important to be very intentional with setting the tone, structure, and process behind board meetings, updates, decision-making, etc. as you go. This will drastically improve the efficiency and efficacy of your board, and increase the value they can bring. Spend time in the early days to establish meeting cadence, information access, typical agendas, and even communication preferences.
At Enduring Planet, we’ve found that for early stage companies, a monthly short sync and a quarterly long meeting generate great results. This gives your board enough day to day visibility to be helpful, but doesn’t overly burden the founder with significant administrative overhead. This model also creates a culture of reporting and transparency that can serve the company well as they get larger and raise greater sums of institutional capital. The executive team should always provide a written update ahead of time (at least 48 hrs), allowing for the actual meetings to be focused on issues/blockers, rather than just reporting progress.
Olympia De Castro is a finance and impact investment leader focused on driving capital toward social and environmental investments. She serves as Board Member to Enduring Planet, a Fintech providing non-dilutive capital to climate tech entrepreneurs and a Board Advisor to Gratitude Railroad, an impact collective of investors and alternative investment platforms. She is currently the Chief Financial Officer, Chief People Officer, Head of Legal Division and Treasurer of the Board at Datacubed Health, a growth-stage technology company providing behavior science led digital health solutions in the life-sciences space. In addition to this, Olympia is a Senior Investment Consultant to the United Nations Capital Development Fund and serves as advisor to several family offices and a venture fund.