What is the role of the board in an early stage startup? – TechCrunch


A framework to drive success

What is the board? role in an early stage startup?

Startup founders frequently ask me about the role of a board of directors. A board can be a crucial asset in an early stage start-up.

Here’s a framework of how you can help drive success in your business: Strategy, People, Image, Finance, and Systems for Compliance, or “SPIFS.”

Anyway, what is a board of directors?

The board of directors helps with the governance of the company. US law requires any business to have one, although it does not require how large it should be. By generic definition, the board of directors is made up of elected persons who represent the shareholders. It is the governing body that oversees the company and helps establish business policy and strategy.

On a more practical level and in a startup environment, the board can help create a successful business strategy, build the right management team, develop branding, develop good financial habits, and avoid legal and compliance issues. The needs and composition of the board will change based on the stage of start-up, management, and funding history (for example, whether there are preferred shareholders, investors requiring a board seat, and more).

Investors often ask founders about their board – it says a lot about their character, their judgment, and their willingness to be challenged.

Investors often ask founders about their board of directors for two reasons. First, it says a lot about your character, your judgment, and your willingness to be challenged. Typically, the founder can choose who is on his board of directors (through careful selection of investors and advisers) and negotiate his preferred board structure.

In general, a healthy board will have a good balance between common shareholders, preferred shareholders, and independent. It also helps investors and analysts understand who will ask critical questions and give important advice to the company’s executive management, especially when the going gets tough (it inevitably does!).

What exactly can help you make a table?

After 20 years as a venture capitalist and board member, I reduced the value of a board into five main pieces under the acronym SPIFS: Strategy, People, Image, Finance, and Systems for Compliance.

SPIFS matrix describing the role of a board of directors in early start-up

Image credits: Dell Technologies Capital

Strategy

Setting business strategy is one of the main ways the board helps founders, especially if it’s their first time running a business. It is a valuable sounding board to validate that you have soberly considered the market and have the right plan to develop your product and acquire customers.

The board should ask these questions when guiding founders through establishing a strategy:

  • How did I win?
  • What problem am I solving?
  • Why is my product the best to solve that problem?
  • How am I different from my competitors?
  • Do I have the right marketing strategy?


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