There are many misconceptions about boards, but one of the most popular may be that boards are only necessary for companies of a certain size or stage.
There are many misconceptions about boards, but one of the most popular may be that boards are only necessary for companies of a certain size or stage. It’s not that founders and CEOs fail to grasp the value of boards—they place them on the backburner. All too often, boards become a checklist item that many CEOs choose to deal with down the road.
“When we get funded.”
Or, “When we hit X revenue milestone.”
Or, “When we need to make a board, we’ll take care of it.”
The truth is, delaying your board is akin to leaving money on the table.
The right board can deliver incredible value regardless of what stage you’re in. It’s an opportunity for CEOs to gather valuable feedback from diverse perspectives, to ensure they have advisors in their corner to help them navigate any issue that comes their way, to gain confidence and credibility, and to open up revenue streams and identify game-changing partners. Truly, boards can elevate and strengthen a company at any stage. Here’s how.
The earliest stages of a company are overwhelming. You don’t know what you don’t know. You may be entering an entirely new market or field; you probably don’t have a giant rolodex of critical contacts just yet; you’re testing for product-market fit; your business model is rapidly coming together (or falling apart).
In this early stage, there’s a good chance a board may be the furthest thing from your mind. However, surrounding yourself with a team of advisors—even informal ones—can be a smart move to help you define your product and strategy.
Scott Tavenner, founder and CEO of Savino, knew he needed outside expertise when he launched his company. Savino makes a wine preservation system. While Scott was enthusiastic about the idea, it was an entirely new market for him.
“I didn’t know retail. I came from software,” he explained. “I needed to learn everything—about manufacturing, retail, product development, how to get my foot in the door at retailers.”
Rather than operate in a vacuum, Scott turned to outside help from the beginning. He started with his immediate network. He reached out to contacts in a very personal email with very specific requests. Which trade shows have you found to be most valuable? How did you start selling at this retail chain? He took the time to do research and to hone in on specific contacts who could help him tackle specific challenges.
As Scott gathered information and refined his product along the way, he continued to expand his circle of contacts. He would get introduced to others outside his initial “layer” and leverage them for advice and industry expertise. But as he refined his business along the way, he would continue to go back to contacts he had already spoken with and check-in again. It was a meticulous, interactive process of learning, refining, and validating his early-stage product using a “concentric circles” approach.
“I would listen to feedback and then make an active decision whether to follow it,” he said.
In addition to gathering insider knowledge, Scott structured his business to mimic that of a VC-backed business—with a similar governance structure. He made that choice to make the transition easier when and if the day came that it was necessary. He pointed out that when you start selling, things will only get busier and you’ll have less time than ever—so go through the board and governance process now.
What happens when you gain some traction and hit revenues ranging from hundreds of thousands to millions? This is what I refer to as the “product stage,” where you may have a combination of individual advisors at your side and a formalized board of advisors. The individual advisors serve as critical connections as you build your rolodex and seek to gain credibility in the outside world. And, your Board of Advisors guides you as you determine product-market fit.
This stage of a company is complex, if only for the slew of decisions that you must make combined with the enormous pressure to perform. Founders and CEOs must make decisions such as whether to accept outside funding, whether to trade ownership for advisory positions, and more. They’re also typically new to the role of managing a board—building those relationships and getting the most value from them.
“I had one seat to fill. And I knew I wanted to fill it with a woman, someone who can navigate new markets, someone comfortable with Silicon Valley,” reflected Mowgli Holmes, founder and CEO of Phylos Bioscience. He knew what he wanted in his last board director. At this point, his startup, which specializes in genetic certifications for the cannabis industry, had raised minimal funding but had grown to over 50 employees. Pioneering a new industry opened up canyons of opportunity for him and his team. It also meant the stakes were high. Mowgli was set on building a board that would help him navigate all the complexities before him.
“A lot of people choose board members for the optics,” he said. “I wanted to make sure we were doing the right thing. We didn’t want to make the classic mistakes. We wanted to make intelligent decisions.”
Mowgli knew a board could help him get there. This is a crucial stage that can make or break a company. He spent countless hours looking for his perfect board candidate, but something happened along the way: he met numerous experienced leaders in bioscience and tech. These were people who were passionate about the industry, excited about the potential, and enthusiastic about helping Mowlgi find his way. So, while Mowlgi launched his search with a laser-focus on finding one individual, he wound up with numerous advisors. His challenge now: continuing to navigate a more formal structure and making some serious decisions about board seats and advisory roles.
“I’m not sure I want to give any of them up,” he said, referring to the pool of candidates he discovered. He’s got some tough decisions to make, but he’s absolutely right to believe that he doesn’t have to give anyone up entirely. Each of these connections is a competitive advantage. Each of these advisors can help Mowgli and his business secure their relevance in a fast-changing, tech-driven economy. This is the power of advisors as you grow your company.
In the tech world, hitting revenues of millions and multi-millions is impressive, but there’s much more to be had. As you take in more investor dollars, the pressure is on to drive value and dramatically increase your customers and revenue.
If you’ve received outside funding, consider adding one or two independent directors. These outside viewpoints will help shape your company’s narrative and solidify your value. You should also think about them differently than the board members who came along with funding or founding. Instead, consider these independent directors the way a public company would: with a sense of tenure (to take us from here to there over a two-year period) and the ability to fill a critical gap in thought leadership at the board level around the key imperatives the company must achieve to get from millions to hundreds of millions. These directors are critical in shaping everything from go-to-market strategy and customer success to product scalability and vertical expansion.
If you’re self-funded, consider structuring your company with a true fiduciary board, or an advisory board that operates as if it were a fiduciary board. Remember, board members exist to help guide your company at the highest levels. They’re on your team, championing your success. Creating a more formal board structure (even for informal boards) isn’t just good for your business, it’s good practice for when you do require a formal board.
As companies mature and hit the tens of millions in revenue and higher, it’s critical to place even more structure around your board so you can gain the most value. This means you need to not only give thought to the value your board members bring to the table, but also to the greatest challenges your business is facing. You should be molding your board to address these challenges.
Crafting a board capabilities matrix can help. This serves as a visual map of capabilities and gaps, helping to highlight areas of weakness as well. It also means you should continue to build your committees and hold them accountable. A board that is positioned to address your unique challenges will be one that can steward your company to the next point on the horizon.
Forming a board takes work, and managing a board takes work. But founders and CEOs who work to build boards, starting from the very early stages, gain immediate ROI. And established companies who put thought and strategy into their board structure gain a competitive advantage in a market where every move counts.
It can feel like it’s you against the world. But it doesn’t have to be. Choose to take outside feedback. Choose to put the strongest, healthiest structure in place to help you find solid footing. Choose to get laser-focused on doing what’s right for long-term success. You can achieve this by building your board with intention.
© Athena Alliance 2024
