Robert Ochtel’s Blog

An Experienced Approach to Venture Funding

Entrepreneurs, Take Your Time to Choose the Right Directors for Your Start-up Company

Choosing the individuals to serve as members of the board of directors for your start-up company is a very important task and one that should not be taken lightly.  Like, key members of your executive staff, the individuals that will serve on the board of directors of your start-up company must have the appropriate backgrounds, understand your start-up company’s technology, product or service offering, and have a strong reputation for helping to develop and steer successful companies.  Anything less is not acceptable. Therefore, be careful to choose the right individuals to serve on the board of directors for your start-up company, it will help you to attract capital and serve your start-up company well both short and long terms.

Don’t Choose Your Friends as Directors

Entrepreneurs, like any individual, tend to choose friends and other professional associates to serve as members of the board directors for their start-up companies. This is not really a good choice, as friends or even professional associates may not have the appropriate amount of experience or the skill set to help steer your start-up company through the trials and tribulations that will come your way. In addition, in some cases, personal friendships or professional relationship histories may get in the way of objective assessments and prudent business decisions. Therefore, in understanding the importance of board level positions, as well as the legal implications, it is more important to choose the “right” individuals to serve as members of the board of directors of your start-up company, as opposed to “known” friends of other individuals that may not be able to provide the necessary insight and direction that is critical to facilitating the success of your start-up company in the market.  So, take your time, as an entrepreneur, to choose the appropriate board members for your start-up company.  Remember, friends and other professional colleagues do not necessarily make the appropriate board members.  You need to choose individuals, for your board of directors, with the same prudence that you would when choosing the next member of your start-up company’s executive team.  Using this type of insight will serve your start-up company well.

Look for Individuals that Understand Your Space

Individuals that are to serve members of the board of directors for your start-up company need to necessarily understand the “space” or industry you are in.  This is necessary for them to offer any valuable insight to what is going on within the industry and the overall trends of the market. This is a key aspect to choosing members for your board of directors. If any of the individual members of your board of directors do not understand your start-up company’s technology, product or service offering and/or the space you are participating in, they will be much less likely to be able to provide you with the necessary insight and direction necessary to guide your start-up company to success in the market.  In addition, they will not really understand what is being discussed during board meetings, and most likely will end up being a distraction during these same meetings. Consequently, these same individuals will not be able to properly digest the important issues being discussed and triangulate this same information into conclusions that will add value to your start-up company’s direction.  Remember, successful start-up companies often need to change direction or pivot quickly in order to react to what is going on in the market or compensate for past decisions that took this same start-up company in the wrong direction.  Therefore, when choosing team members for your board of directors, choose members that have the appropriate amount of experience in your space, this will allow these same members to provide valuable insight to the necessary decisions that need to be made to steer your start-up company in the right direction.

Stellar Reputations will Attract Money

One of the things that you need to consider when choosing individuals to be members of your board of directors is to find individuals with “stellar” reputations.  This can be individuals that:

  • Have a strong history of choosing and working with successful start-up companies,
  • Have developed an extraordinary reputation as a technology and/or business specialist within the industry that your start-up company is focusing on, or,
  • Have invested in number of successful start-up companies and has a reputation for choosing winners. 

Remember all people want to be associated with individuals that are perceived as successful or winners within their industry.  In addition, choosing board members with “stellar” reputations will allow you to attract money.  As, good deals with great board members, get the attention of investors and as such these same start-up companies have a much easier time attracting investment monies.  So, take the time to identify and approach individuals with stellar reputations to serve as board members of your start-up company. This will necessarily make your start-up company attractive to potential investors.

As an entrepreneur, you need to take the necessary time to choose the right individuals to serve as members or your board of directors.  To do this properly you should stay away from friends, look for individuals have an understanding of your targeted space, and choose individuals that have stellar reputations.  Using these items as criteria when choosing potential directors for your start-up company will provide you with the necessary insight to select individuals that will have the necessary background, experience and insight to help successfully facilitate your start-up company through any trial and tribulations that come your way.

This information was taken from Robert’s new book: “Business Planning, Business Plans and Venture Funding – A Definitive Reference Guide for Start-up Companies”.  Available at www.amazon.com.  For more information on the book go to www.carlsbadpublishing.com.

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February 1, 2010 - Posted by | Venture Capital | , , , , , , ,

1 Comment »

  1. This has been very helpful

    Comment by b4kbattary | February 4, 2010 | Reply


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