Exploring founder mode for your startup board: Part 1
A roundup of the best advice on building and managing your startup board for success.
We’re bringing together the best startup board advice from around the world into what will be an ever-growing compendium.
We’re sharing this advice through the typical investment and commercial stage gates of a startup, because once a startup has taken on external investment, the founders have a responsibility to shareholders other than themselves and it generally impacts on how the board must operate.
If you don’t take on external investment and bootstrap your growth, it still helps to have a board that can support you to run the company and to grow it beyond what might be in your immediate toolkit.
So where to begin? We’re beginning where we always like to start - the foundations - before we’ve even begun. This is Part 1, and in the coming weeks we’ll bring you Parts 2 - 4, and the best advice on building and managing your startup board for success.
If you want to know more and build the skills you need to manage your company and board, our next Startup Board Course cohort kicks off on 6 November 2024: apply to join us here.*
PART 1: Before you even begin
We introduce three key elements here that help us all to start from the right place. They are:
Knowing yourself and having self-awareness
Knowing the obligations of companies in Australia (or elsewhere)
Knowing your motivations and the motivations of those you’re seeking to partner with
Let’s get into it:
1. Knowing yourself and having self-awareness
"The most important quality in a CEO is determination, but the second most important quality is self-awareness." From ‘How to be a Founder’ by Paul Graham, Co-founder of Y Combinator (YC), and author of the founder mode essay based on Brian Chesky, Co-founder and CEO of Airbnb’s, speech at a YC event.
Self-awareness is a trait that’s getting more airtime in terms of just how important it is in anything, but particularly for founders embarking on their startup journey. When you know and are aware of yourself, you know your strengths and weaknesses, and what you don’t know too.
The more self-aware you are, the more you'll be able to identify and manage what you bring to your startup throughout the journey, and when scaling up, if and when it might be time to bring in new talent to support the company to go to the next level, even in founder mode. Not many of us are great at everything all the time, but being skilled in knowing this and being able to see past ourselves is a really valuable skill to have.
"Great leaders are confident but self-aware. They know they don’t know everything and aren’t afraid to admit it," from Fred Wilson, Partner at Union Square Ventures, via his blog: AVC Blog.
2. Knowing the obligations of companies in Australia (or elsewhere)
If you're a founder and you choose to incorporate a company to house your startup (or, start a company), the need to understand the obligations of running a company and being a director of that company started the day you incorporated.
When you’re small and just starting out, these obligations still exist but they can be addressed in less formal ways, although, when we say this, we are not advising that your company tax return is done by anyone other than a tax professional, for example! It’s more that the process of this return can be done in a straightforward way while not having to go through as many layers before it’s completed - the process is right-sized, but it still gets done, because it has to be.
All the requirements of the company are ultimately the responsibility of the directors, no matter how big or small your startup is. So, when you’re just starting out, you can’t ignore this or put it in the too hard basket, as it doesn’t go away. It’s important to be on top of it and manage your obligations, and you can be assisted to do this through multiple ways, including having professional support, such as having startup friendly specialist legal and accounting advisors that we are at LUNA.
From one of our earlier Inside the Boardroom articles, Maxine Minter, GP of Co Ventures, shares: ‘... Unless you have come from a context that has allowed you to practice the skills you need to manage a company, you will need to build these skills early on. That includes familiarising yourself and gaining sufficient knowledge about governance and legals to manage the board and your investors, as well as knowing your financials and the compliance needs of your business to meet the requirements of your jurisdiction. You need these core skill sets as a founder and CEO of a company, and when you're a director.’
It’s your choice as to when you learn these things or get support to do so (and Maxine has more advice on this in our article here), but ultimately it’s a necessity to know this and execute, otherwise it will limit what you can do in future. For more on this, see our earlier Inside the Boardroom article on “Seeking funding this year? How investable is your company?” here.
3. Knowing your motivations and the motivations of those you’re seeking to partner with
What is your why?
“The most important thing is for founders to be clear on what they want and who they are,” from Peter Thiel, in his book "Zero to One".
This blends with ‘knowing yourself and having self-awareness’: knowing what you are seeking to achieve, why you are doing this, and what your vision of success is is a really fundamental place to start in determining which relationships are going to support you best. Knowing your own motivations will help you anchor your trajectory (even if ‘how’ you get there is bound to change) and help you find those that are aligned with you and your vision.
Ultimately alignment between the founder, team and investors is such an important aspect of being able to achieve your goals, and it’s something we discussed a lot on The High Flyers Podcast episode 171, with Adam Milgrom of Giant Leap, Jacqui Purcell of TDM Growth Partners, and Ashleigh Camm of LUNA, with host Vidit Agarwal - check it out here.
What to look for in investors?
"You want an investor who not only gives you capital but also believes in your vision and can help you achieve it. Misalignment can destroy a startup." From Ben Horowitz, Co-founder of Andreessen Horowitz, in his book “The Hard Thing About Hard Things".
Before contemplating fundraising from Venture Capital (VC) investors, it helps to know that if you’re going for this type of funding, this is not a transactional relationship where you’re just getting money in the door and that’s it. Bringing on a VC investor, to use the relationship cliche, is more like entering into a long-term marriage where divorce is not really an option. The VC business model dictates the kind of partner they will be as well, which you’ll want to make sure you know and you’re aligned with before you get married. We discuss this and more on the business model of VC investors and how they are incentivised in our Inside the Boardroom article, “What to think about when you’re bringing on investors”, here.
And to close out this section ahead of diving deeper next week, have you seen Reid Hoffman’s “Building a Great Startup Board” mini-series? In Part 1 he talks about “What Weaknesses Should You Watch Out for in Board Members?” which talks about the pitfalls to watch out for when bringing on VC investors, which are great to know in advance and can help when you’re doing investor due diligence too. Find it and all that Reid shares on this subject here.
Do you have wisdom to share here? Get in touch with us to be included.
Become more confident in your board and company obligations: apply to join our next Startup Board Course cohort - find out more here.
