Okay – maybe they didn’t invest 150 million in Snagsta but I did convince one of the members of the Atomico team (European VC Group) to buy me a mineral water for 150 pence at last week’s Second Chance Tuesday event. We joked that it might not be the last time they put their hands in their pockets for us. The Early Stage Funding Workshop we attended was fantastic. One of the messages that came back from Simon Murdoch (and echoed by the rest of the panel) was: “Don’t raise money!”. For most of us unfortunately that’s not possible (despite the fact that according to Paul Graham setting up a start-up is cheaper and easier than ever before). So as we give away equity in exchange for cash we have to think very carefully about our partners – choosing people (if you have the luxury of choice) whose involvement will add value but not muzzle your creativity. We’ve been very lucky so far (thank you seed investors!). This extends to board members and advisors too. Finding wizened, battle-scarred advisors can really help you avoid mistakes, see things you may have missed, and keep your eye on the ball. Mentors that won’t provide you with all answers, but rather challenge you in ways that’ll help you find them on your own.
There’s a joke my dad likes to tell about board members. It goes something like this: What’s the difference between a non-executive board member and a supermarket trolley? A trolley has a mind of its own and you can get more food and drink into a non-executive.
But it’s a serious subject so I’d like to wind up with a great post on this topic from one of my favourite blogs – “Musings of a VC in NYC” by Fred Wilson.
I am a professional board member. I’ve been sitting on boards for almost 20 years and I’ve seen a lot. I’ve seen some of the best board members in action and have tried to copy them. I’ve seen some of the worst board members in action and have tried hard to forget them.
Here are some thoughts on choosing board members. This advice is for everyone, but it’s of particular use when you are a bigger company, maybe public, and need to fill your board with good people.
1. Avoid “big names” For the most part, they are useless.
2. Select people who will attend each and every meeting, who will pay close attention to the business
3. Select people who have an affinity for your business, who understand your challenges and your opportunities
4. Avoid putting someone you can control on your board. In tough situations they will have a fiduciary duty to do what’s right and you won’t be able to control them when it matters most to you.
5. Don’t let conflicts get in the way of selecting the ideal board member. Conflicts will be disclosed and can be managed. Many times the people who will understand your business best are conflicted in some way. There are ways to deal with this problem.
6. Make sure to have an experienced accountant/auditor on your board and have them run the audit committee. That is no place for amateurs.
7. Make sure to have at least two or three CEOs of comparable companies on your board. Make sure they are on the comp committee. Compensation issues are best handled by people who understand the talent market.
8. Select people who have the time to do the job right. Being a board member is a job. It’s not a retirement perk. If someone cannot commit to attend each and every meeting and to spend at least several hours a week on your company, they are not the right choice.
9. Select people who will get along with each other. The very best boards I am on are friendly social active groups. Serious business doesn’t have to be stilted and formal. It can and should be fun.
10. Above all else, look for great judgment and ethics.
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