Platt Perspective on Business and Technology

Boards of directors and startups

Posted in startups by Timothy Platt on February 2, 2010

Usually I do not write four postings in a row on virtually the exact same set of issues but I decided to flesh out my set of three to date on boards of directors with one more. I started with two postings on boards in general to set a foundation for further discussion where boards become involved. I then added a third on boards and nonprofits to address some of the issues specific to them for that context.

Boards of Directors and Corporate Culture and Strategy.
Boards of Directors and Accountability.
Boards of directors and nonprofits.

This posting will complete this set, at least for now with a discussion of startups and some special issues related to boards of directors for these newly forming businesses. As with my discussion of nonprofit boards, I will focus on functional boards here that follow a strategic alignment model as outlined in my first posting, above. In this case the word strategic comes into particular focus as the blend of required skills, experience and other qualifications that would be sought can and do vary depending on the intended exit strategy the startup is to follow.

• Is this a long term venture that will be maintained as a privately held business by the founders?
• Is this a long term venture that is heading towards an initial public offering (IPO), assuming all goes well?
• Is this being developed with acquisition in mind where the emphasis is on building a resource that another group or organization would acquire?

There are a number of other possibilities in this and goals might change as to what exit strategy is being followed due to changes in circumstance and as unexpected opportunities arise. The key here is that the skills and experience that prospective board members bring to the table take on different levels of importance and priority depending on end strategy plans and objectives that the founders are working towards.

Some qualifications would always be important for startup board members. This list would include but not be limited to:

• Experience working with or setting up at least one startup – in this it would be helpful to have people on the board who have built and worked with successful startups, but the real world learning curve experience of seeing how a startup can fail can be of real value too.
• I point out in that regard that people who have tried and failed with a startup, and who have really learned from that experience can be viewed quite favorably by venture capital investors as they select ventures to fund.
• A willingness to pay it forward and contribute in time, effort and probably some money too in advance of any possible direct return on investment.
• A certain tolerance for risk, coupled with a drive to find effective, workable ways to help reduce that risk.

Other qualifications enter in depending on the intended exit strategy. So for example:

• Experience with mergers and acquisitions (M&A) may be very helpful for a board if the goal is in building to be acquired.
• Experience working with angel and venture capital investors and meeting their due diligence requirements would be vitally important if it is anticipated that outside funding will be sought.
• Businesses developing toward IPO need to be prepared for dealing with a lot of extra organizational and regulatory compliance and reporting requirements and board experience there would be of real value.

Particularly for first time startup founders, an ideal board member would be a good mentor who brings at least one area of critically important experience and insight to the table – for that startup and in anticipation of its intended goals.

I have not mentioned industry experience yet and do so now as being of particular importance, and both for establishing credibility in the intended market space and for being able to offer focused, real world insight.

Would I want a venture capitalist on my board if my goal was to seek out venture capital funding? Probably not, and certainly not if the venture capitalist I would bring on board works with a funding source I would seek backing from . Venture capitalists virtually never want to have one of their team members on a board for a business they fund and specifically because of conflict of interest issues that are certain to arise. So building a board can be just as much about who not to include as it is about who to include. Here, intended and pursued exit strategies can create different sets of barriers to board membership just as they can create reasons for bringing specific types of people onboard.

As I final thought I will simply add that boards need to be able to evolve as the business goes through its growth and development processes and as new needs arise from that. This can be true within the startup and early stage steps and it certainly arises as the business takes off and begins to mature. So a good board is an evolving process.

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  1. glabeptadleli said, on February 28, 2010 at 2:15 am

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    • Timothy Platt said, on March 4, 2010 at 8:47 pm

      Hi Dennis and thank you for sharing this insight.

      I agree that key words and search engine positioning are important and closely connected, and that if you want to be found, start by listening and reading to find the wording that would resonate with your intended audience. Be creative here and look to a range of sources for this including the web sites of target companies, LinkedIn and other profiles for individuals in areas and in positions you want to reach, and job descriptions – yes businesses expose their in-group language when they look for people to join their in-groups.

      I advocate this approach in writing an effective resume when you are looking for a new job. I give the same advice when helping to develop a new web site, with the target audience and search engines in mind. This definitely applies to blog postings, and effective, thought provoking wording can make the difference in any marketing, online or off.

      Start with the wording and the message you share directly with your audience and with your larger, intended audience in mind. Follow through on this with any and all of your marketing. Then look into the details like the key word meta-tags that show to search engine spiders but not directly and visibly to site visitors. Identify and cover the bases.

      As a final thought here I add that you simultaneously want to strive towards two sometimes seeming conflicting goals. On the one hand you want to be consistent and to keep your message coordinated so as to develop an effective brand. On the other you need to track the numbers – your web analytics or whatever counterpart would make sense for your marketing context and adjust your message to more effectively target your audience. The trick is to keep the message fresh and still keep it focused and consistent enough to create and maintain brand.

      Thanks for your posting comment and please feel free to share more of your insights,

      Tim Platt

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