By Omoruyi Edoigiawerie, Esq
Nigeria has a thriving start-up ecosystem with a growing number of innovative and disruptive startups emerging every year. However, for these startups to succeed, they need a strong and effective board of directors.
More than once, I have been asked to help provide a system for the effective creation and operations of boards for startups, and each time I get this request, I always ponder to ask the intentions of the founders who seek to create the board for their startups; whether they seek to do so just to thick the boxes, or to create the necessary oversight and corporate structure necessary for building a sustainable start-up.
A start-up board plays a crucial role in guiding the company’s strategy, providing support, and ensuring that the start-up is on track to achieve its goals.
Building an effective board for a start-up is crucial to its success. I have always opined that a well-functioning board not only provides guidance, support, and connection that Startups need at the early stage, but they are equally just as essential to a company’s growth and development.
As a starter, it is important to approach this conversation-starting from understanding the essence of a board from a simpleminded angle – which is that it is a group of individuals elected to represent the interests of the broader shareholder base of any legally established business entity with the mandate to ensure corporate governance.
On the other hand corporate governance refers to the rules, processes, and procedures designed to guide the way corporate establishments make decisions and operate.
However, creating a strong board requires careful consideration of certain key factors. When building an effective start-up board, it is therefore important to choose board members with relevant industry experience and expertise, individuals who can provide valuable insights into the challenges the start-up is likely to face.
*Assembling the board
However, creating a strong board requires careful consideration of some key factors. Here are some salient points to note when seeking to identify and build an effective start-up board:
1. Diversity
Diversity is essential for any effective start-up board. A diverse board brings together individuals with different backgrounds, experiences, and perspectives, which can help the start-up navigate a range of challenges and opportunities. Diversity can also bring new ideas and fresh perspectives to the table, helping to fuel innovation and creativity.
In a clime like ours, diversity on start-up boards is especially important given the complex cultural, social, and economic landscape. Startups need board members who understand the nuances of doing business in Nigeria and who can bring a range of perspectives to the table. This includes individuals from different regions, ethnicities, and genders, as well as those with expertise in areas such as finance, marketing, and technology.
2. Expertise
Expertise is another critical factor for building an effective start-up board. Board members should have a range of skills and expertise that are relevant to the start-up’s business model and industry. This includes individuals who have experience in areas such as fundraising, marketing, operations, regulatory compliance, and legal services. Expertise in certain areas is particularly important. For example, startups in the fintech industry may require board members with experience in finance and banking. Similarly, startups in the agribusiness sector may need board members who understand agriculture, logistics, and the supply chain that permeates the industry.
3. Commitment
Board members must be committed to the start-up’s success. This means that they should be willing to invest time, energy, and resources into the start-up, and should be willing to go the extra mile to help the start-up achieve its goals. This is important given the challenges that startups face in our country. Startups need board members who are willing to roll up their sleeves and help the start-up navigate the complex regulatory environment, access funding, and build partnerships.
4. Accountability
Accountability is critical for any effective start-up board. Board members must be accountable to the start-up’s stakeholders, including investors, employees, and customers. This means that they should be transparent about the start-up’s performance, and should be willing to take responsibility for any missteps or failures. Startups need board members who are committed to upholding ethical standards and who are willing to be transparent about the start-up’s financial and operational performance.
5. Independence
Independence is essential for an effective start-up board. Board members should be independent of the start-up’s management team and should be able to provide unbiased advice and guidance. This means that they should not have any conflicts of interest and should be able to act in the best interests of the start-up and its stakeholders. The importance of having board members who are independent, objective, and who can challenge the start-up’s management team when necessary, cannot be overemphasised.
*Ensuring sustainable board operations
After identifying members of the board, it is essential to put in place measures to ensure the smooth and impactful running of the Board. Some key measures that should drive the operations of the board include:
a. The establishment of clear roles and responsibilities: Each board member should understand their specific role and responsibilities, as well as the company’s goals and objectives. This will help ensure that everyone is working towards the same outcomes.
b. A defined board process: It’s important to establish clear processes for decision-making, communication, and conflict resolution. This will help ensure that everyone is on the same page and that the board operates smoothly.
c. Set expectations for board meetings: Board meetings should be well-organized and focused on key issues. This requires setting clear expectations for what will be discussed and providing board members with relevant materials in advance.
d. Open communication: Board members should be able to communicate openly and honestly with each other and with company leadership. This includes providing constructive feedback and raising concerns as needed.
e. Compensation: Board members typically receive compensation for their time and expertise. It’s important to consider what level of compensation is appropriate and affordable for the company and to be transparent about how this compensation is determined.
By taking these factors into account, founders can build a start-up board that provides valuable guidance and support to the company as it navigates the challenges of launching and growing a new venture.
A strong and diverse board can provide startups with the guidance, support, and resources they need to navigate the challenges and opportunities of the Nigerian market. By prioritizing diversity, expertise, commitment, accountability, and independence, startups can build boards that are equipped to help them achieve their goals and succeed in the competitive Nigerian start-up ecosystem.
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 startups, 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
