By Omoruyi Edoigiawerie, Esq
One crucial decision that often determines the trajectory of a start-up is the formation of its board of directors. A well-structured board can provide valuable guidance, expertise, and strategic direction essential for the success of the venture. However, setting up a board for a start-up requires careful consideration.
Whether you’re a first-time entrepreneur or a seasoned business owner, embarking on a new venture, assembling the right board to guide your start-up is crucial for enduring success.
Having a board as a start-up is not merely a formality but a deliberate move that can provide invaluable guidance, expertise, and network to help navigate the challenges and capitalize on the opportunities that come.
While the board’s role first and most important role is governance, in regulated industries where start-ups often operate, compliance is also key, and it is not uncommon to see the board nudge the management towards optimal compliance and that is why shaping a board that aligns with the company’s vision, values, and goals cannot be sidestepped.
*Practical tips for setting up the board for start-up
1. Define the board’s purpose and goals
This is the first step before assembling a board, it is essential to clearly define its purpose and the specific goals it aims to achieve. Consider what areas of expertise and experience would be most beneficial for the start-up at its current stage of development. Whether it is to find industry experts who can provide strategic insights, professionals who can advise on funding and financial management, or technical specialists who can offer product development guidance, defining these objectives will help the company identify the right individuals to invite onto its board.
2. Seek diverse mind sets
Diversity on a board brings a wealth of different perspectives, ideas, and experiences to the table. It is very important to look for individuals from various backgrounds, industries, and skill sets who can offer unique insights and as much as possible help the company challenge conventional thinking. Diversity can also foster innovation, creativity, and better decision-making, ultimately benefiting the start-up’s growth and success.
3. Start small and scale gradually
In the early stages of a start-up, it’s advisable to start with a small board composed of a few key members who can provide valuable guidance and support I often advice start-up founders to start with experienced persons within their circle, they could be family and friends who over the years have garnered experience in their fields of endeavour, this is what I have coined as “board strapping”. As the company grows and evolves, it can gradually expand its board to include additional members with diverse expertise and skills. Founders must avoid creating a large board at the onset as it can lead to inefficiency and difficulty in decision-making.
4. Identify key skill sets needed
Assess the specific skill sets and expertise required to address the challenges and opportunities facing the start-up. It is important to consider areas such as finance, marketing, operations, legal, technology, and industry knowledge. Aim to recruit individuals who not only possess these skills but also have a track record of success and a willingness to actively contribute to the board’s work.
5. Establish clear roles and responsibilities
Clearly define the roles and responsibilities of each board member to ensure alignment and accountability. Assign specific tasks, such as leading committees, providing mentorship to the management team, or representing the company externally. By clarifying expectations upfront, the company can avoid ambiguity and ensure that everyone understands their contributions to the board’s overall effectiveness. Board dynamics are very important and cannot be ignored. Setting the right tone at the beginning and building a culture over time is critical.
6. Prioritise commitment and engagement
Select board members who are committed to actively participating in board meetings, discussions, and initiatives. Look for individuals who are willing to dedicate the time and effort necessary to fulfil their responsibilities effectively. Encourage open communication and collaboration among board members to foster a culture of engagement and teamwork. Start-up founders must see the board as another team they get to work with for the success of their start-up. While the board has a strong oversight role and may even be able to remove management, where there is the need to, the board members also make up the key support team and they will work to build the start-up.
7. Cultivate trust and transparency
Foster a culture of trust, transparency, and mutual respect within the boardroom. Encourage open dialogue, constructive feedback, and healthy debate on key issues and decisions. Establish clear communication channels to keep board members informed about the company’s progress, challenges, and opportunities. Transparency builds confidence and strengthens relationships among board members, management, and stakeholders.
8. Provide ongoing education and development
Invest in the ongoing education and development of the board members to enhance their effectiveness and value to the start-up. Offer opportunities for training, workshops, seminars, and networking events to expand their knowledge, skills, and professional networks. Encourage continuous learning and adaptation to stay abreast of industry trends, emerging technologies, and best practices.
9. Regularly evaluate board performance
Conduct periodic evaluations of the board’s performance, effectiveness, and dynamics to identify areas for improvement and refinement. Solicit feedback from board members, management, and external advisors to assess the board’s impact on the start-up’s strategic direction and overall success. Use these insights to adjust, realign priorities, and optimise board composition and functioning.
*Start-ups adapting and evolving- things to note
I often encourage start-up founders to recognize that the composition and needs of their board may change as the start-up grows and matures, so it is imperative to be flexible and adaptive in adjusting the board’s structure, membership, and processes to reflect the evolving needs and priorities of the company. They must therefore embrace innovation, experimentation, and continuous improvement to ensure that the board remains a valuable asset in guiding the start-up towards sustainable success.
After all is said and done, Boards play an important role in start-ups from the formation stages to exit. To make the most of a start-up board requires a thoughtful approach- one that can make or mar the start-up.
Omoruyi Edoigiawerie is the Founder and Lead Partner at Edoigiawerie & Company LP, a full-service law firm offering bespoke legal services with a focus on start-ups, established businesses, and upscale private clients in Nigeria. The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. His firm can be reached by email at hello@uyilaw.com
