Believe it or not, startups have a lot more choice about who’s on their board than you might think. Sure, some folks might want to be early investors or a part of a company they see as promising, but that doesn’t necessarily mean they’re a good fit. Why? Because investment and advisory aren’t just transactions of money or ownership, but rather of ideas and vision.
Finding a Great Board
Finding a great board can be tough, but can also be what sets the foundation for a startup to be successful. Everything from their marketing goals to the risks involved in the industry at hand needs to be taken into account, with an overarching mantra of how this company will change the world.
Granted, that might sound high-minded, but it’s the honest truth. Quite simply, if you want a successful business, then you need to form a board that holds the same values you do, which is what I’m going to walk you through on how to find
They Understand That Investment Is A Partnership
One of the biggest things that startups look for in a board is early investors that they have industry experience in the field that startup is entering. This leads to an arsenal of potential partners and customers, as well as a wealth of knowledge on direction and forecasting. While for some it can be tough to find those that have had success in their field, the payoff could be monumental if done right.
According to The Angel Capital Association, angel investors provide over 90% of outside equity for start-ups, especially in the seed round. One of the reasons that this is so important is that most angels are a part of angel investing groups, which are generally based in a specific region or city. This means that in finding board members, where you’re located can play a huge role.
If I’m starting a FinTech company and the majority of the partners I want to work with are all in New York, then it might be advantageous to network the heaviest there. This will tap into a network of others in the FinTech industry, which could help secure not just advising, but further investment from VC firms later down the road. This early portion of the board is going to dictate not just the success of your company, but the culture it’s trying to form as well.
They Want To Bring On A Sense of Diversity
Perhaps one of the biggest problems facing the tech industry today is the lack of diversity across the spectrum. From founders to investors, women and minorities are grossly unrepresented, as according to a study conducted by Fortune, only 6.2% of board seats in unicorn companies are held by women. And in assessing the future of forming board members, the best companies are taking note.
Women and Minorities
Plain and simple, women and minorities need to be included in more board rooms because they’re going to influence the direction of the company heavily. As we stated above about finding folks who have industry experience, it’s especially important to find those that have been underrepresented in their industry.
Not only are they going to have a better grasp on things from a consumer standpoint, but they’ll additionally be able to point out the pitfalls of their industry. This is imperative in finding success, as too much of a single ideology or perspective will almost always lead to failure. However, I’ll note that failure is part of the game, and a successful board will understand this.
They’re Not Afraid of Failure
As most of us know, startups have a tendency to fail. In fact, according to a study conducted by Harvard Business Review on the success rate of Venture Capital backed companies, over 75% fail.
Generally speaking, companies supported by VC funds are better established and have a proven revenue model. And when it comes to finding board members, they have to understand and respect this risk, or everyone involved is going to be in dispute.
A Genuine World Change
If nothing else, this is one of the most important takeaways in forming your board: if they understand the risk of failure, they’re not just out for money, but to make a genuine change in the world. Some folks think investing in startups is this “high-risk, high-reward” model of investment like they’re gambling in Vegas. However, that’s simply not the case.
Does Your Board Have a Passion Like Yours
In finding investors and board members, the most important thing to consider is if they have the same passion you do towards your the end goal.
After all, this is your baby, your creation, and something you care for dearly. And if the person writing the check or voting on decisions doesn’t feel the same, is that really someone you want to have a say in your future.