So You Want To Be On A Startup Board of Directors

I'm on a couple of boards of directors and it's fun! 100% do recommend. And, once you're on one board of directors it's a lot easier to find additional opportunities. How you get on a board of directors and what you get out of it varies a lot by stage of the startup. So let's do a chronological walkthrough of how a typical startup's board of directors will grow and change from the earliest stages through an IPO and how you can position yourself appropriately. Pre-seed startups Typical board size: 1-2 Typical board members: the CEO, possibly another cofounder, and possibly an angel investor especially with younger founders. The pay: None. It’s part of your job. The rationale: As soon as the founders are ready to incorporate a startup (assuming they do so as a Delaware C- corp) the startup legally needs a board. This is often as informal as just the CEO. If there’s a second cofounder with roughly equal ownership, often they'll both be on the board. Occasionally, you'll find an angel investor on the board when they've written a first smallish check to the company. This is usually an inexperienced Angel investor and/or an Angel investor who has taken too much ownership of their investment. They’re on the board because they assume their presence will make the company more successful. This is generally utterly irrelevant to the actual success of the startup, but so be it. This person should not expect to stay on the board after a VC round is raised unless they co-lead that round, which is unlikely given the funds most angels are willing to invest per deal. How to position yourself for this board: Be a founder or a cofounder! If you're the non-CEO cofounder and you ever want a board seat, you need to fight for it now. As soon as investors get involved in the next round, they are unlikely to want to add you to the board, but they may also hesitate to remove you if they're concerned it may cause you to be unhappy and make you more likely to leave. Fight hard. There's no reason for you not to sit in the boardroom. Seed stage and Series A startups Typical board size: 3-5, possibly with observers Typical board members: If the round was led by a VC, a three-person board is typical. It's usually the founder/CEO, the lead investor, and either the other cofounder or an independent who is often an industry luminary. If it's a CVC, you may well have the irritation of a five-person board. This is often two cofounders, the lead investor plus one operational person from their company, and one independent. You should expect your investors to control two seats, the common shareholders (in other words, the CEO) to control two seats, and the independent to be agreed on between you. The pay: None for cofounders or investors, ~.2%-1% equity for an independent, vesting over 2-3 years The rationale: A VC's goal with a three-person board is to make board meetings as quick and easy as possible and to avoid saddling either the investor or the CEO with a lot of coordination with multiple board members. They often won't even care very much who the third board member is. The reason is that it doesn't really matter. Board meetings are useful for VC's to get a sense of what's going on in the business and to give advice, but nothing that's voted on at the board level at an early-stage startup matters. If your company’s performance or attitude irritates the VC, they will simply make it impossible for you to raise your next round - your next round comes from your investors talking you up to the people they know at a slightly later stage. CVCs have different goals. The source of their funding is the corporation that employs them. They need to both bring in startups that may be useful to the corporation but also continually prove their worth to corporate leadership. The lead investor will claim two seats; they'll sit in one, and the other will go to some up-and-coming junior executive in the business. It's one of the ways that the venture fund interacts with the operations so they can get their startup pilots with the operational team and so that they can show the business the value that they're bringing to the table. Note that the operations person likely has little to no board or startup experience, and this can make them a distraction in board meetings. It is the job of your lead investor to counsel and control them. How to position yourself for this board: The independent seat is going to go to either a highly impressive advisor to the startup (like a retired CEO) or to someone in the VC’s network who has relevant experience. These are difficult to position yourself for unless you’re already serving as an advisor or have been a repeated advisor to the VCs. The flip side is not common, though – most startup advisors never become board members, and the same with VC advisors. This likely isn’t the stage to target as a new potential board member. Mid-stage startups – Series B to not-quite-ready-to-IPO Typical board size: 5-7, plus observers Typical board members: CEO, possibly the CFO or COO, lead investor and large investors, an independent or two. The pay: None for cofounders or investors, <1% equity for an independent, vesting over 2-3 years The rationale: There are more investors around the table who have written big checks, so they want a seat in the boardroom to see how the business is growing. The founders or the investors may want to add independent directors with skills and/or relationships the founders and senior employees don’t have. How to position yourself for this board: Note that VCs will want to bring in independents in their networks; founders will want people untainted by the VCs networks and will want to find independents through their own relationships. Nonetheless, founders and investors usually need to agree on independents. If you buddy up with mid-stage founders for these roles, you’ll usually do it by serving as a highly skilled (and high-paid) contract advisor. Don’t confuse this with an advisory board, though – once a founder has you on an advisory board, they don’t need you as a director since they already have your advice. Advisory boards can be interesting to be part of, but they tend to run a little more junior. Or, if they are super senior people, they’re very uninvolved and mostly lend their name to the startup. If you buddy up to VCs (instead or in addition to), and they think of you for an independent board seat, you are probably either a decently successful portco CEO in a similar industry or with a similar business model, or you’re a senior advisor they call on again and again for your expertise. Late-stage startups preparing for IPO Typical board size: 7-9, possibly with observers Typical board members: Investors (VC or private equity), the CEO and possibly the CFO or COO. Several independents. The pay: Possibly some cash (<$30K/yr, usually), equity (share count set based on value, not % ownership) The rationale: Companies preparing for IPO typically need to make three changes to their boards: Add someone who has been through an IPO before. Someone who was a CEO or a CFO through this transition. Add directors who meet the SEC definition of independent. Public company boards must be majority independent. In addition, newly public companies typically have a year to add enough independent board members to cover the SEC requirements for the three required committees – audit (all independent), compensation (at least two independents), and nominations/governance (at least two independents). Directors can serve on multiple committees, but it can become a lot of meeting time. Add diverse directors. It’s pretty common for a board to be entirely male, entirely white or a mix of white and Asian members, and entirely straight. Some of the bigger investment banks won’t take a company public if their board doesn’t have some diversity. There’s also a lot more scrutiny in a public company, and an obvious lack of board diversity can cause unwanted publicity. How to position yourself for this board: Ironically, these are the easiest boards to get on (other than starting a company yourself and joining your own board, of course). These companies typically have to add several independents, and they are looking for complementary skills. If you are a CPA or otherwise considered financially sophisticated, you will likely be in demand for the audit committee, as these can be hard to staff. Similarly, if you’re a corporate lawyer or someone with significant compensation experience, you’ve got obvious skills for a board. What might be less obvious, though, is that often the investors are also trying to shore up weaknesses in the C suite before they step off the board, as most will at IPO. So, if the founders did not come from the industry the startup operates in, they may look for an experienced operator. Or if enterprise bus dev is an area where the CEO needs to play and needs help, someone in that arena might be a good choice. The best way to network for these types of board seats is to make sure the most senior people in your network know you’re looking for a board seat with an easy-to-remember one-sentence blurb of what you bring (referencing what these boards need). Once you’ve interviewed for one board seat, the magic phrasing is: “I’ve started interviewing for board seats. The people I’ve talked to have been interested in my [deep financial skills, legal background, operating experience at y company]. If you’re ever in a room where someone’s looking for a potential board member like me, would you mention my name?”. This is an easy yes for them, and you’ve primed them with an answer if they’re in that situation. The other way to find these seats is through the big executive recruiters. Note that they have specific board practices – if you’re not talking to a member of that practice, it’s not going to help you. This is definitely the second-best path for most of us – these folks are very good at placing retired CEOs on boards but aren’t likely to take a chance on someone with a profile that veers too far from that. And if you’re a retired CEO, you’re probably not reading this article. A final note on finding board seats There are a million and one board consultants, board lists, and board training programs out there. Most of them are utterly useless for getting on boards. Board members aren’t chosen because a paid program promotes them, and board training doesn’t strengthen your candidacy. These programs can be great for your personal learning and development, but you’ll get a board seat because of your network and your willingness to self-promote for the role. Good luck! I'm on a couple of boards of directors and it's fun! 100% do recommend. And, once you're on one board of directors it's a lot easier to find additional opportunities. How you get on a board of directors and what you get out of it varies a lot by stage of the startup. So let's do a chronological walkthrough of how a typical startup's board of directors will grow and change from the earliest stages through an IPO and how you can position yourself appropriately. Pre-seed startups Typical board size: 1-2 Typical board size: Typical board size: Typical board members: the CEO, possibly another cofounder, and possibly an angel investor especially with younger founders. Typical board members: Typical board members: The pay: None. It’s part of your job. The pay: The pay: The rationale: The rationale: The rationale: As soon as the founders are ready to incorporate a startup (assuming they do so as a Delaware C- corp) the startup legally needs a board. This is often as informal as just the CEO. If there’s a second cofounder with roughly equal ownership, often they'll both be on the board. Occasionally, you'll find an angel investor on the board when they've written a first smallish check to the company. This is usually an inexperienced Angel investor and/or an Angel investor who has taken too much ownership of their investment. They’re on the board because they assume their presence will make the company more successful. This is generally utterly irrelevant to the actual success of the startup, but so be it. This person should not expect to stay on the board after a VC round is raised unless they co-lead that round, which is unlikely given the funds most angels are willing to invest per deal. How to position yourself for this board: How to position yourself for this board: How to position yourself for this board: Be a founder or a cofounder! If you're the non-CEO cofounder and you ever want a board seat, you need to fight for it now. As soon as investors get involved in the next round, they are unlikely to want to add you to the board, but they may also hesitate to remove you if they're concerned it may cause you to be unhappy and make you more likely to leave. Fight hard. There's no reason for you not to sit in the boardroom. Seed stage and Series A startups Typical board size: 3-5, possibly with observers Typical board size: Typical board size: Typical board members: If the round was led by a VC, a three-person board is typical. It's usually the founder/CEO, the lead investor, and either the other cofounder or an independent who is often an industry luminary. If it's a CVC, you may well have the irritation of a five-person board. This is often two cofounders, the lead investor plus one operational person from their company, and one independent. You should expect your investors to control two seats, the common shareholders (in other words, the CEO) to control two seats, and the independent to be agreed on between you. Typical board members: Typical board members: The pay: None for cofounders or investors, ~.2%-1% equity for an independent, vesting over 2-3 years The pay: The pay: The rationale: The rationale: The rationale: A VC's goal with a three-person board is to make board meetings as quick and easy as possible and to avoid saddling either the investor or the CEO with a lot of coordination with multiple board members. They often won't even care very much who the third board member is. The reason is that it doesn't really matter. Board meetings are useful for VC's to get a sense of what's going on in the business and to give advice, but nothing that's voted on at the board level at an early-stage startup matters. If your company’s performance or attitude irritates the VC, they will simply make it impossible for you to raise your next round - your next round comes from your investors talking you up to the people they know at a slightly later stage. CVCs have different goals. The source of their funding is the corporation that employs them. They need to both bring in startups that may be useful to the corporation but also continually prove their worth to corporate leadership. The lead investor will claim two seats; they'll sit in one, and the other will go to some up-and-coming junior executive in the business. It's one of the ways that the venture fund interacts with the operations so they can get their startup pilots with the operational team and so that they can show the business the value that they're bringing to the table. Note that the operations person likely has little to no board or startup experience, and this can make them a distraction in board meetings. It is the job of your lead investor to counsel and control them. How to position yourself for this board: How to position yourself for this board: How to position yourself for this board: The independent seat is going to go to either a highly impressive advisor to the startup (like a retired CEO) or to someone in the VC’s network who has relevant experience. These are difficult to position yourself for unless you’re already serving as an advisor or have been a repeated advisor to the VCs. The flip side is not common, though – most startup advisors never become board members, and the same with VC advisors. This likely isn’t the stage to target as a new potential board member. Mid-stage startups – Series B to not-quite-ready-to-IPO Typical board size: 5-7, plus observers Typical board size: Typical board size: Typical board members: CEO, possibly the CFO or COO, lead investor and large investors, an independent or two. Typical board members: Typical board members: The pay: None for cofounders or investors, <1% equity for an independent, vesting over 2-3 years The pay: The pay: The rationale: The rationale: The rationale: There are more investors around the table who have written big checks, so they want a seat in the boardroom to see how the business is growing. The founders or the investors may want to add independent directors with skills and/or relationships the founders and senior employees don’t have. How to position yourself for this board: Note that VCs will want to bring in independents in their networks; founders will want people untainted by the VCs networks and will want to find independents through their own relationships. Nonetheless, founders and investors usually need to agree on independents. If you buddy up with mid-stage founders for these roles, you’ll usually do it by serving as a highly skilled (and high-paid) contract advisor. Don’t confuse this with an advisory board, though – once a founder has you on an advisory board, they don’t need you as a director since they already have your advice. Advisory boards can be interesting to be part of, but they tend to run a little more junior. Or, if they are super senior people, they’re very uninvolved and mostly lend their name to the startup. If you buddy up to VCs (instead or in addition to), and they think of you for an independent board seat, you are probably either a decently successful portco CEO in a similar industry or with a similar business model, or you’re a senior advisor they call on again and again for your expertise. Late-stage startups preparing for IPO Typical board size: 7-9, possibly with observers Typical board members: Investors (VC or private equity), the CEO and possibly the CFO or COO. Several independents. The pay: Possibly some cash (<$30K/yr, usually), equity (share count set based on value, not % ownership) Typical board size: Typical board size: Typical board members: Typical board members: The pay: The pay: The rationale: The rationale: The rationale: Companies preparing for IPO typically need to make three changes to their boards: Add someone who has been through an IPO before. Someone who was a CEO or a CFO through this transition. Add directors who meet the SEC definition of independent. Public company boards must be majority independent. In addition, newly public companies typically have a year to add enough independent board members to cover the SEC requirements for the three required committees – audit (all independent), compensation (at least two independents), and nominations/governance (at least two independents). Directors can serve on multiple committees, but it can become a lot of meeting time. Add diverse directors. It’s pretty common for a board to be entirely male, entirely white or a mix of white and Asian members, and entirely straight. Some of the bigger investment banks won’t take a company public if their board doesn’t have some diversity. There’s also a lot more scrutiny in a public company, and an obvious lack of board diversity can cause unwanted publicity. Add someone who has been through an IPO before. Someone who was a CEO or a CFO through this transition. Add directors who meet the SEC definition of independent. Public company boards must be majority independent. In addition, newly public companies typically have a year to add enough independent board members to cover the SEC requirements for the three required committees – audit (all independent), compensation (at least two independents), and nominations/governance (at least two independents). Directors can serve on multiple committees, but it can become a lot of meeting time. Add diverse directors. It’s pretty common for a board to be entirely male, entirely white or a mix of white and Asian members, and entirely straight. Some of the bigger investment banks won’t take a company public if their board doesn’t have some diversity. There’s also a lot more scrutiny in a public company, and an obvious lack of board diversity can cause unwanted publicity. How to position yourself for this board: Ironically, these are the easiest boards to get on (other than starting a company yourself and joining your own board, of course). These companies typically have to add several independents, and they are looking for complementary skills. If you are a CPA or otherwise considered financially sophisticated, you will likely be in demand for the audit committee, as these can be hard to staff. Similarly, if you’re a corporate lawyer or someone with significant compensation experience, you’ve got obvious skills for a board. How to position yourself for this board: How to position yourself for this board: What might be less obvious, though, is that often the investors are also trying to shore up weaknesses in the C suite before they step off the board, as most will at IPO. So, if the founders did not come from the industry the startup operates in, they may look for an experienced operator. Or if enterprise bus dev is an area where the CEO needs to play and needs help, someone in that arena might be a good choice. The best way to network for these types of board seats is to make sure the most senior people in your network know you’re looking for a board seat with an easy-to-remember one-sentence blurb of what you bring (referencing what these boards need). Once you’ve interviewed for one board seat, the magic phrasing is: “I’ve started interviewing for board seats. The people I’ve talked to have been interested in my [deep financial skills, legal background, operating experience at y company]. If you’re ever in a room where someone’s looking for a potential board member like me, would you mention my name?”. This is an easy yes for them, and you’ve primed them with an answer if they’re in that situation. The other way to find these seats is through the big executive recruiters. Note that they have specific board practices – if you’re not talking to a member of that practice, it’s not going to help you. This is definitely the second-best path for most of us – these folks are very good at placing retired CEOs on boards but aren’t likely to take a chance on someone with a profile that veers too far from that. And if you’re a retired CEO, you’re probably not reading this article. A final note on finding board seats There are a million and one board consultants, board lists, and board training programs out there. Most of them are utterly useless for getting on boards. Board members aren’t chosen because a paid program promotes them, and board training doesn’t strengthen your candidacy. These programs can be great for your personal learning and development, but you’ll get a board seat because of your network and your willingness to self-promote for the role. Good luck!