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Building an effective Board of Directors

A seasoned Board of Directors should help you chart the strategic growth of your new venture. In addition, the Board acts as a screen, letting VC's know you are the real deal. Identify individuals who can add value strategically. Easier said than done. As you bring venture equity into the picture, the lead VC will require a board seat. Make sure you have a Board Member of your choosing prior to this event. Someone who understands your business operationally and can assist and guide you.

Choosing the members of your company's Board of Directors is rather important in defining the type of company you intend to become. A solid board, composed of experienced advisors with specialty knowledge which complements the business of your company, helps investor comfort levels.

Additionally, investors often wish to maintain at least one seat on your company's board. That being the case, such investor board members would benefit from the counsel implicit in a seasoned board who would be able to offer the investor board members related expertise.

Because of the fiduciary and legal obligations a Board of Directors member is held to, it may be challenging to get the truly seasoned people to serve on your board that you would want. These individuals must trust you to be the person of character and business acumen who can effectively drive the agenda of company's mission. Also true is that you must trust them to be
able to guide the long term direction of your company's mission.

Other concerns regarding a board may include compensation and whether or not the company maintains Directors' insurance policies.

Boards of Directors are put in place by the company stockholders. The Directors, in turn, are responsible for placing the best possible management team in place to manage the day to day operations of the business. As a majority shareholder, one can control the actions of a company's Board of Directors. Once the effective control is in the hands of others, you, as the originator, had better darn well have had a good management contract in place or be able to walk on water.

Even then, they may not believe! Get good counsel on management contracts.

It is easy to get someone on your Board and hard to get them off. Choose colleagues who bring real value, and share your passion for your business. (Like Starbucks: They must have a passion for coffee and the coffe experience!)

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