What You Probably Don’t Know About Building Your Board. Expert Advice for Startups

A strong board member can help steer a startup through challenges, provide strategic guidance and safeguard the company’s long-term viability. But finding a good fit isn’t always easy.

According to Startup Snapshot research “Inside the Boardroom”, more than one-third of startup founders reported having a difficult director on their board. The CEOs reported that these directors are constantly requiring detailed updates, fueling heated debates and making their opinions heard through vetoes.

To avoid potentially costly relationship problems, we turned to Mannie Gill who has more than 20 years of experience conducting board and C-level searches across the U.S. and Europe. In the following interview, he discusses how to select the best board members and how the recruitment process can be used to help a startup succeed.

What factors should a startup consider when recruiting new directors for their board?

First, you do an audit in terms of what are the gaps or what are the challenges that you’re looking to solve by adding additional board members. You can look at what’s currently missing on the board of directors.

Typically, you’re looking at functional expertise that may be missing. For example, you may be looking for individuals with more go-to-market experience, with product tech experience or with general commercial experience. Also, you may be looking in terms of gaps in geographical experience. For instance, if you have a European company that’s looking to launch into the U.S. or vice versa. Lastly, you may just be looking for certain expertise around general management capabilities.

It also varies greatly by the stage of the company. If you have a young founder, for example, this is their first startup, their first CEO role, you’re trying to augment their experience with individuals who have been there and seen it previously. This way they can help coach and mentor the young founder as they’re trying to progress on that journey.

One of the things that we’ve noticed is for founders as they’re on this journey, you want to find somebody who can empathize with them and, at the same time challenge them. You don’t need a situation where it’s too cozy between founder management and the board of directors. This is because the board is there to look after the shareholders’ interests.

But I do think you need somebody who has enough empathy with a founder to understand what they’re going through. To help coach or mentor and help stop them from making mistakes. I mean, everyone’s going to make new mistakes, but a board member can help prevent founders from making obvious mistakes. It helps to coach them through that.

Can you describe the evolution of board needs for tech startups?

In the early days, it’s about helping coach and mentor a young founder. As the organization starts to grow, you start looking at very specific situations. So for example, if you’ve grown in the European market and want to attack the U.S. market, you need to find a board member or members that can help to launch in the US, or into Asia or Africa. In the early days, it’s less about scale, but as the organization starts to grow, it’s much more about how to add some real robustness and infrastructure. This enables companies to keep growing.

What are the character traits of effective board members?

Being a good board member is a skill and an art in itself. What I can point to is when a board member is not effective. It’s when an individual isn’t quite ready to let go of the reins of being an executive and become a board member. Sometimes these individuals go onto the boards of companies, and instead of being hands-off and taking much more of a macro perspective, they tend to want to still operate the business. From my experience, that can lead to a number of challenges and it can definitely lead to some clashes with the management team, in particular the CEO.

So one of the traits of a good board member is an individual who understands what their role is at that point in time. They are no longer executive managers, they are no longer running the business. And I think that is critical.

How can founders use the initial recruitment stages to avoid future challenges with board members?

I think transparency is very important, expectation setting is very important, and getting the cultural fit right for that individual to settle into the board is also very critical.

You need to make sure that you have been transparent with the incoming board member in terms of what the cultural fit looks like and who the existing board members are. You also want the new member to understand where the company is on its trajectory. Because what you don’t want is to have painted a rosy picture that an organization is growing and then the board member settles in and discovers that it’s a turnaround situation.

If you have an experienced chairman, the chairman should be able to handle the onboarding and the expectation setting. But in any case, the entire board of directors and the investors and shareholders have a role to play to make sure that we’re setting everybody up for success.

As executive search professionals, we also have a duty of care during the onboarding process. A lot of people think that our duty stops at the point that we’ve appointed somebody, where actually I think it continues. It’s important to help with the onboarding process, sit down with the founder or CEO, and help the executives understand what to expect from a board member and vice versa.

How should startups build a future-relevant board of directors?

Adding somebody who really can sort of peer into the future and see how tech innovation is going to impact your particular company is absolutely critical. I think you cannot be looking at the rearview mirror all the time. You’ve really got to be looking into the future and anticipating what challenges are going to be.

I’ll give you an example, retailers 20 years ago were looking at other retailers to benchmark innovation. I think retailers for the last five years have been looking at tech companies to see where their future challenges are going to come from. Now it’s no longer other retailers that you’re competing against, it’s going to be larger eCommerce companies like Amazon or Google.

So having somebody sitting on the board of directors who really can anticipate the future because they have the expertise and experience is going to be critical. We’re seeing the entire world being transformed by software – the tip of that spear is AI. And nobody really knows how AI is going to impact every single industry at which particular point in time. But having a tech expert, sort of a CTO or a product individual, whose job is to start anticipating the future – having that type of individual sitting on the board is going to be critical for every organization going forward. This is regardless of industry and regardless of vertical. You need somebody who’s constantly scanning the market, constantly scanning innovation, routinely scanning competition, which has a knock-on effect, I think, for the organization from a skills perspective.

You constantly need to be upgrading, and up-skilling your workforce to make sure that you’re staying ahead of the game and not falling behind. Once you start falling behind, it really is a vertical decline for the organization. It’s incredibly challenging to catch up.

Can you give us an example of when a good board of directors has helped a startup be successful?

Probably one of my most successful partnerships and relationships has been with a company called Criteo. It was a very exciting business when they received funding back in 2005. At the time it was a small French business and we helped that organization in three phases.

In phase one Criteo was expanding outside of France into other major European countries. Phase two was helping upskill the management team and build the board pre-IPO. And then phase three was post-IPO, again, upskilling the management team plus the board, a new CEO, and a new CRO. I would say that the board of directors we helped to build pre-IPO was one of the best in class at that point in time. We got the cultural fit just right between them and the founder, who helped to scale that business from zero to roughly two billion in revenue. It led to a public IPO in NASDAQ. It’s one of those things where the universe comes together and every individual you add has a multiplier effect on that for that particular company. And during that period in time, the organization was scaling into the US, then Asia, and Australia.

The board of directors contributed heavily towards the success of Criteo while the company was scaling. We got the balance right between a youthful management team and a highly experienced board with people who had been directors previously so they brought all that knowledge from their background. The alignment in terms of what the management team was looking for, and what the board members were able to contribute, was a great fit.