Chapter 2The Board's Purpose
Why have a board of directors in the first place? What do they do? How big should they be? Do you even need one?
A board is legally required the day you incorporate your company. Frequently, the board consists of the founders, or even just one founder, until a startup receives outside financing.
Waiting to build a board is a mistake.
Your board can be a powerful strategic asset. If you choose the right directors, build and manage your board effectively, and actively engage your directors, the board can help you dramatically accelerate your business. When you run into trouble, which all startups inevitably do, the board can help guide you through the tough spots. As Jeff Lawson of Twilio is fond of saying, “As the founder and CEO, I get to build two teams to help me—my leadership team and my board.”
Clint Korver (Ulu Ventures, Partner), who used to teach a course at Stanford University titled “Startup Boards: Advanced Entrepreneurship,” says, “The most common mistake startups make is not having a board at all.” Clint points out that research shows that most startups fail due to self-inflicted wounds, including internal decisions about founding team roles and equity allocations. “Founders who are overconfident or choose to avoid conflict often miss an opportunity to bring in fresh perspective with input from appropriate individuals,” says Clint.
Depending upon the stage of the company, three kinds of boards exist: (1) a working board; (2) a reporting ...
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