Almost every bootstrapped (early-stage) startup is missing one crucial component: a board of directors. The good news? This is completely normal. But don’t be fooled into believing your company is too young or too small to start building a board.
Perception in the Early Days
In a startup’s early days, there’s often a perception that the founder is the only real shareholder. There might be a few co-founders, but because so few people are involved, it seems like your small team is working as a de facto board of directors.
With everything else going on, founders often wait too long to set up their board. They delay until investors are at the table who need to make sure a company governance is in place. Consequently, this short-term thinking can hinder a company’s growth from the start.
The Power of the Board
Maybe it's too soon to think about company governance, and you don't want to waste time on things that won't move your startup forward. But when it comes to boards, entrepreneurs should shift their mindsets a little.
Think of it Differently
Change the thinking around building a board of directors -- right to begin with. Instead, think of this as creating a board of advisors.
Directors get a real say in the company. Their votes matter, and they have a fiduciary duty to the shareholders, not the CEO.
Advisors on the other hand, are there to help you find the right direction in the first place. These advisors can include mentors from previous business endeavors, former bosses, founders of companies you admire, and even industry experts who have provided great advice in the past.
Advisors can help you gain access to the things (and people) you need to build your startup, whether it's back-end supply chain, front-end customer acquisition, or unbiased third-party insights. They will provide functional expertise and connections to a larger network of potential partners, investors, retail channels, and employees.
What This Process Will Do for You
And guess what? When it's time to bring on those investors and other shareholders, an established board of advisors adds credibility. When you've brought in impressive advisors, you prove to the outside world that you are resourceful, strategic, and driven. Leaning on your network is a signal to investors that you are someone who can handle taking advice from industry leaders and that you are thinking about the long-term success of your company.
It's like building your credit score. You can't earn "good credit" or "large lines of credit" unless you actually borrow money to buy something and pay it back. Similarly, as you work with a board of advisors before you have shareholders and investors, you gain valuable communication, presentation, and relationship-building skills that will come in handy down the road, in addition to providing credibility to future investors.
How to Build a Strategic, Engaged Board of Advisors
Building a board isn't just about gathering smart people around you, though. You need to be thoughtful and strategic about who you bring in and what role they play. Here's how:
1. Address your blind spots.
What are the challenges ahead, and where are your weak or blind spots? For example, if you know you have a knack for fundraising, that's not necessarily an advisor type that you need. On the other hand, if your connections are weak or your presentation skills are lacking, a fundraising superstar should be exactly who you seek out.
Let's say you're building a physical product for the first time. You don't know where to start or how to establish relationships with potential factories. After all, you don't know what you don't know. In this case, you need an advisor who has a background in product development and manufacturing, preferably with a Rolodex full of top manufacturers.
2. Provide an attractive opportunity.
Keep in mind that the people you approach might have their own goals as to why they want to serve on a board. Some simply want to pay it forward. Others might want equity or literal payment. And some might have a career goal to join a board to round out their experience and develop new leadership skills.
Understanding individuals' motivations and knowing how to use them is a key skill that you will need for the rest of your career. Use your search for advisors as a chance to practice it.
As you approach people, prod at these underlying intentions. View the opportunity through their lens, and frame the offer accordingly. Offer compensation to the people who want it, and drill home the "mentorship" angle with people who seem genuinely interested in helping out of the goodness of their hearts.
3. Know your advisory board members' expectations.
Similarly, depending on his or her underlying intentions, each member will have different expectations regarding the time commitment, level of involvement, and frequency of meetings.
Someone who just wants to lend his or her name to your company as a credibility boost will quickly disengage if you call every night to pick his or her brain. On the contrary, someone who is willing and able to roll up his or her sleeves and actually lend a hand might be happy to sit down with you on a monthly basis to brainstorm new ideas.
You'll want to communicate at least quarterly, but there are different levels of involvement beyond that. Early on, make it clear how advisors can help you and what involvement really looks like. Know what they expect, and don't push them too far out of that lane. Overall, be OK with different strokes for different folks.
Founders have a lot to learn and a lot of decisions to make. While it might seem like a small detail, taking the time now to build a smart board of advisors will get you further than you can get on your own at this stage — and it'll get you there a lot faster.