Tom Burke (Chief Financial Officer of Hydra Biosciences), Joshua Fox (Partner at WilmerHale), Mike Massaro (Chief Executive Officer of Flywire) and Sameer Sabir (Chief Financial Officer of SevenOaks Biosystems) spoke at WilmerHale's QuickLaunch University on Best Practices for Building a Board of Directors and Board of Advisors. Over the next several weeks, we will share comments on the topic. This week, we take a look at selecting and managing a board of directors.
Forming a board of directors is like completing a jigsaw puzzle: a founder has to find the right people who fit with the company's culture and can guide its management from a strategic perspective. The company's life stage and industry are often critical in determining the composition of a board. A company could have a small board initially, then as it grows and raises additional rounds of funding, the board can expand and evolve. It is difficult to remove a board member at a later time, so starting out small is usually a good strategy.
When forming a board, startup founders should ask: if my company hits rock bottom, can I work with these individuals and can they work with each other to resolve the problem? It is important to get a read on each potential new board member before appointing them, to see whether or not they will form a good working relationship with existing members.
A founder should also get a good mix of people on the board, identify gaps that need to be filled, and start with expertise—after all, a board should provide strategic insights to the founders. When possible, a founder should also seek someone who has prior operating experience at a company—they've probably already seen the problems the company is facing and can be more empathetic when it comes to making decisions. Often times an investor will get a board seat, but it is important to note that this is not always the case; sometimes investors will only get observer seats, and even then it depends largely on how much money is invested. When an investor does join the board, a founder should get to know the individual who will be representing the fund, since they contribute to the dynamics of how the board will operate and make decisions.
Forming a board is only the first step. A founder will also have to manage the board and find efficient ways to maximize the value that each individual brings to the table. A board member is not involved in the day-to-day operations of a company like an employee. A director can provide guidance to the company's management at a strategic level, and while a founder won't be contacting them every day, relationships with board members cannot be limited to board meetings alone. Management should keep the board updated on progress and challenges between meetings as well.
The management team should be well prepared for each board meeting. This often means knowing the likeliest outcome even before going into a meeting, and understanding the board's questions and concerns. The board wants to speak not only with the company's CEO, but also with the CEO's direct reports—this builds confidence and lets the board know that the CEO is surrounded by a strong team that is effectively running the business.
Our next post in this three-part series will look at independent directors.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
