April 18, 2017

198: How to Build a Board of Directors

In today’s episode, Steli and Hiten talk about building your board of directors. Steli and Hiten share their thoughts on the right time to create a board and what to look for in those who want to be a part of your board. Steli and Hiten share cautionary tales of what might happen if you overlook who sits on the board. They also share key advice and tips that act as preventative measures to potential conflict—like doing your due diligence and laying out your expectations as a board of directors from the get go.

Time Stamped Show Notes:

00:05 – Today’s episode is about how to build and design your board of directors

00:28 – While this will be predominantly for startups raising money, this is also for those companies who have already raised, but still need to build their board of directors

01:24 – Ideally, when you’ve finished a seed round, it is not the right time to build a board

02:19 – In the beginning, you just have to focus on your business—a board can be a distraction

03:06 – Your investor turned board member might pivot your business in a direction you do not want

03:26 – Hiten says true investors just get out of your way because they know that in the early stages, things can still change

04:07 – Steli says that the board should not be heavily involved in the business

05:52 – Steli says the agreed upon time to create a board is when you get into the series A

06:30 – When you have a lead investor in a series A round and are raising millions with a firm putting in 50-80%, that is when you usually begin a board

07:03 – You want to have an odd number of board members for voting purposes

08:09 – Hiten says it is ideal to have 3 people on the board – 2 founders and the lead investor

08:50 – Steli says the dynamics of the company shift when you have a board

09:10 – The board helps you make decisions on crucial matters, so you have to be selective

10:05 – Steli asks Hiten how he chooses board members and manages the dynamics between board members

10:38 – Hiten says your expectations must be clear between the investor and founders

11:17 – It’s good to ask the investors what they’re expectations are as board members

12:06 – Kissmetrics used a diagram for seven months to explain to the board the development of their infrastructure

13:28 – One of the best practices is to prepare a board deck, send it 24-48 hours before the meeting, and then discuss the deck in detail during the meeting

14:20 – In a previous episode, Steli and Hiten talked about using a deck as an internal tool in managing the business

15:23 – Steli says there is a possibility that those who sit on your board might be different from the people you have built relationships with

16:45 – Steli says based on experience, he’s had to replace a board member and it worked out well in the end

17:04 – Steli also knew of a negative experience where a replacement was “new” and created disruption

17:13 – Hiten says it is difficult to get rid of a board member

18:14 – It is important to institute a system and maintain control of the meetings

18:23 – You have to be careful about who is on the board

18:36 – Hiten says one of the biggest problems in business, today, is dysfunctional boards

19:02 – Steli says founders cannot rush or be complacent about who sits on the board because they will have real power

20:10 – To collaborate on pitch decks and board decks, go to GetDoGo

20:49 – End of today’s episode

3 Key Points:

In the early stages of pre-seed and seed raising, having a board may just be a distraction from actually building your business.

It is important to choose the right members for your board, as they will have power in making crucial decisions.

It is difficult to get rid of board members,

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By Steli Efti & Hiten Shah: Serial Entrepreneurs, Sales & Marketing Experts, Startup Investors & Advisors, CEOs running multi million dollar SaaS Startups

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