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Agony Lance: Boards 101 for tech startups

In your experience, what’s the most effective mix of exec and non-exec directors on a board for a tech startup? @RyanBaker

For context, Ryan is a founder of Timely, one of the next great New Zealand success stories.

The answer here is generally related to three things: funders, need for advice and company stage.

As companies move through rounds of funding, larger shareholders will increasingly expect or demand independent and/or their own directors. The wise approach is to get that independent person in place before the fundraising starts, being smart about picking someone palatable to new investors and founders alike.

Also, make sure that the investor-director will be valuable in the board room, supporting the CEO to look after the long-term interests of the company, rather than just their own stash.

The board has three main roles: to hire and hold the CEO to account, to work with the executive team on strategy and major issues, and to make sure the compliance work is done. While the earliest stages are generally just the founders in a room or two, as the business becomes viable founders can potentially gain a lot from having an outsider, at least one independent or at least non-executive director, involved.

At the very least the company should have a trusted adviser on tap, recognising that the discipline of a real board does focus the attention.

An external director forces the company to write (short) board reports, have regular board meetings, and to regularly ask each other the hard questions. For early stage and rapidly growing companies these hard questions are incessant, so access to great advisers is important, if not necessary for most decisions.

As a company grows more mature, expanding internationally or into new industries, looking at mergers or acquisitions or just dealing with growing up into a corporate, then it’s smart to add people to the board who have appropriate experience. But, as with all directors, the founders and shareholders should be vigilant, and if the directors are out-grown by the company or just stop being useful then look to replace them. 

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