Exploring founder mode for your startup board: Part 3
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.
This time around we’re focused on that period of growth where you’ve found product-market fit and the focus is on scaling, to capture or grow market share. In this transitional period from Series A to B, you’ve proven your business model and scaling pathway, and are seeking funds to continue to rapidly build scale. By the time to get to Series C, ideally you are on your way to building a large business.
It’s in this transitional period where how the business is managed changes, because it needs to, and with that, the interplay between the management team, board and investor base (your shareholders) changes to meet the new demands. For example:
Your startup is now a scaleup with relatively less risk than in the earlier stages, and will attract different investors than those on your existing cap table, such as later-stage growth investors; and,
There is now more of an asset to protect, being the value within your scaling business, so the board’s role transitions from strategic support to a more traditional role of supporting the company with governance oversight*, and starts to become more sophisticated in itself, to support the growth of the business.
*It’s important to note here that when we set these distinct roles, please note these are the practical focus of the roles only. Legally the board is always responsible for oversight of the business, regardless of the business’ size.
We’re also taking our Part 1 and Part 2 as read, as all is still supportive here, and we won’t repeat it.
In this Part 3, we’ll go through:
What skills you need on your board as you scale
How to use and manage your board effectively in the growth stages
If you want to know more and build the skills you need to manage your company, board and investors successfully, our next Startup Board Course cohort kicks off on 6 November 2024: apply to join us here.
PART 3: Series A - C
In this Part 3, we’ll go through:
What skills you need on your board as you scale
How to use and manage your board effectively in the growth stages.
1. What skills you need on your board as you scale
To understand who you need to have around your board table to best suit you and your startup turned scaleup, you first need to understand your own skills and experience, and the skills and experience of your existing management team and board, and how this complements your current and future direction. It sounds simple, but it can be something that is not considered in great detail, because the immediate focus is on iterating the business model to find a viable path, and building out the management and broader team to propel and keep up with growth. While getting the right people for your team is obviously critical, we are going to focus here on identifying who might be the best board members for you and your startup.
Skills Matrices are a widespread tool used the world over to determine breadth and depth of your board and to identify any gaps that you need to fill, but there are other dimensions to this for a startup/scaleup that can be helpful as prompters to ensure you’re thinking more than 2 steps ahead in regards to your board.
Here are some helpful prompters when thinking about building your board to help you accelerate growth in the right way, as opposed to stifling it:
What skills and experience in a strategic advisor (not a day-to-day executor) do you need now?
What skills will you need to achieve your vision/in the future?
How do you think these skills/gaps of 2) will be best filled - operationally or on your board, or both?
In helping to round out your thinking on this, we love drawing on TDM Growth Partners’ (TDM) Board Member Handbook, available here. The purpose of the Handbook is to outline TDM’s perspective on the role of the board, how they think about ideal board composition, and best practices for non-executive directors. The beauty of this too is that TDM are experienced growth-stage investors - their wisdom is gleaned from real life experience and perfectly positioned to support companies in this stage. And, knowing this wisdom earlier can help you to know what you should be looking for from the outset, to set yourself up for success when it comes to building your board right from the start.
TDM talk about board composition in terms of directors having not just skills, but attributes, and how the board as a team needs to have these attributes, to best support the business. On this:
‘We think of the board as a team. We care about the chemistry, cohesion and level of trust within the board team. We look to thoughtfully combine a diversity of skills, backgrounds, styles, gender and other attributes required to best serve the company…
… The most common method of determining the value of a director on any board is via the application of a skills matrix – what specific skills the potential or current (director) can bring to the board. The hope is always that across the entirety of the board, there will be enough diversity of expertise and experience to ensure strong coverage across the entire matrix…
… We have found that most boards are very skills matrix oriented, but sometimes overlook the other attributes which lead to a great board... In our experience, these other attributes can be harder to assess than specific skillsets because you can’t simply gauge them by looking at a CV...’.
For more on these important attributes, see TDM’s Board Member Handbook here.
2. How to use and manage your board effectively in the growth stages
As we foreshadowed above, in these growth stages your board shifts from strategic support to strategic support plus increasing governance oversight - the more traditional role for a board in mature companies. To note here again, while the board’s role is always to provide governance oversight and ensure the company (and its directors) is meeting its legal obligations, the practical nature of directors in the early stages is to support the founder to achieve their vision, while not skipping out on the important legal requirements of the company and its directors.
As the company becomes larger and more sophisticated, how you interact with your management team, board and investors will change and naturally become more sophisticated too.
If we take this back to basics, all of a scaleup’s stakeholders are (or should be) still aligned to the main goal: achieving your vision. So the question really is, how can you, as a founder CEO, get the most from your board and investors to support you in this?
The key requirements here are:
Having the right people on your board to support your growth (covered above); and,
Building effective working relationships with your directors, as well as board processes, to ensure that you can glean as much value as possible from their support individually and collectively, in a generative way.
In this Inside the Boardroom article and in the Startup Board Course, we touch on some of the key characteristics that are foundational to building great working relationships between the management team, board and investors, at any stage. They are:
Integrity;
Transparency;
Consistency; and,
Reliability.
In practice, a founder CEO embodying these characteristics can look like:
Being truthful and transparent with directors, and expecting the same from them;
Doing what you say you are going to, even if you’re saying that the plans need to change or that the plan isn't going to plan, and managing expectations;
Communicating regularly and reliably in a mutually agreed cadence, even if it’s brief; and
Knowing that it’s never too early to flag an issue, or even a potential one, so that nothing is hidden and you’re truly utilising your board as a team to support you to manage the business.
When you as the founder CEO, and others, embody these in your day-to-day, it leads to building trust and confidence in each other and in you as the founder and the management team, which can support building a boardroom culture (and wider culture) of psychological safety, to ensure truthful, vulnerable discussions can happen as needed. Having this relationship with your directors will ultimately better enable you as the founder CEO to be most supported by your board.
Bringing this together, Jacqui Purcell, TDM’s Operating Partner and the ex-CFO of fast growing startups, Deputy and Culture Amp, shares:
“I think that sometimes there’s a false belief that everything that goes to your board needs to be filtered, sanitised, and polished with a marketing spin because, for early-stage companies, your directors are often your investors too. What we find is that actually flipping this mentality, and being clear, transparent and matter of fact about the business is the best way to start to build trust and good relationships with your directors and investors.
From there you can cultivate psychological safety and vulnerability - the key ingredients to continue to foster these relationships and ensure you can have safe, honest conversations at the board level. Oftentimes people are afraid to show vulnerability with their board, but the best impact happens when founders are vulnerable, particularly on things that are new to them or that they’re learning how to do. It’s only then that you can get to the real crux of the good, the bad and the ugly of the business, and where directors can be of most help.
The best founder CEOs I’ve seen are those that just tell it how it is - they’re clear about when things are going well and explain the successes and why they’re having success, and they’re equally clear when things aren’t going well, and sharing the reasons for it, and what they are doing about it.”
The other aspect of this we are yet to touch on here are board processes and reporting, which will be explored in more depth in next week’s Part 4 - stay tuned.
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.
