The Board of Directors of a startup is one of the most useful tools for the company, if executed correctly. We, at DILA Capital, wanted to put together a document for our portfolio companies that we can use a guideline for Board Best Practices. We asked our founders, investors and fellow board members for their advice on the best practices for startup boards and have decided to publish it so it is available to all founders, not just those in our portfolio. The idea of this post is for everyone who reads can send us their comments and inputs, so we can create an ever broader and more complete guideline. I hope the experiment works.
The goal of a board meeting should be to maximize the value you (the founding team)get while minimizing the amount of time you spend preparing. It should therefore focus less on results and more on strategy and problem solving. The best boards are those who are very close to the Management Team and have constant communication. It is the Management Team’s job to have a close relationship with their board members. The closer they are, the more helpful they will be.
Advise on how to keep your board members close, engaged and interested:
- Require the board to study the external landscape
- Have monthly calls with the board members
- Send KPI information monthly, even if you don’t meet once a month
- Involve board members in specific projects
- Invite board members to spend a day in the company
- Be honest and transparent, there is no need for hiding anything
- Give all the bad news, talk about the negatives
- Talk about what is keeping you up at night
- Give and receive constant feedback
- Get your CFO to support Board of Directors and vice versa
A good board meeting should not last for more than two hours. You must have an agenda and stick to it. Most startup boards meet quarterly and in-person.
Tips for a great board meeting:
- Send information to Board Members with at least 5 days in advance
- Have a call one day before the board to discuss financials and specific questions the board members might have.
- Invite key employees to present their areas or plans
- Have someone taking notes and preparing a minute of the board
- End with conclusions, key take always and next steps. It is important to set an action plan with deadlines and true accountability.
- Have a debrief call with all board members in order to recap and give feedback
One of the most important things for a Board Meeting is sharing all key elements of the business effectively and efficiently. And to this end, a well-structured deck is the right tool to achieve this. A board’s job is to give advice, help solve problems, reinforce best practices, and so on. When all of this is on topic, it can help guide you through the company-building process. We believe this is a great general structure for Board Meetings:
- General Update, Highlights, Lowlights
- What is keeping me up at night
- Where we need help
- KPIs, Financials
- vs Budget
- Financial Planning
- Next round of capital
4. Legal and Corporate Manners
- The presence of the company´s attorney is always advisable, so all legal and corporate manners are in order
General tips for Management Teams during Boards:
- When you are going to present a crucial decision, always have a recommendation
- Book all yearly meetings in advance. Send calendar invites.
- Listen! This is your chance to listen to others speak about your business. Don’t be defensive, don’t jump at criticism. Really listen.
- Once a year, there should be a Budget Board Meeting that revises and approves next year´s budget. This budget will be used as a reference in all next year´s board meetings.
- Ask for strong criticism. Ask your board members to really question your plans, strategy and numbers
- It’s important to report to the Board using as many of the materials you use to run the company as possible.
- Having independent board members with industry experience is extremely helpful. Entrepreneurs are the best independent board members. However, it can be tough to have independents because startups usually can’t afford to pay them. So, you can either have an option pool for independent board members or you can give them the option to invest.
Looking forward to you comments and input.