Hot answers tagged board
10
(Disclaimer: helping companies create a board of advisors is part of what I do for a living.)
First of all, congratulations on recognizing the value of establishing a board of advisors -- many entrepreneurs give little thought to this incredibly valuable resource.
Next, allow me to respectfully demur as to some of the other comments by saying that an ideal ...
10
Peldi from Balsamiq Mockups built a nice board of advisors. He explained how he did it (even with the actual email template) and how it's working out for him in this interview with him.
To directly answer, usually they'll be in your network, because "advising" is a significant time investment and strangers are unlikely to want to do that.
Aiming high is ...
6
Three is the magic number. You want it to be small, since you want the fewest obstacles to making a decision, and you want it to be an odd number so that there are no ties. Right now, you'll want the board members to be "yes men" who will vote the way you ask them to. This makes meetings shorter and everything easier as you are starting out. Later, if you ...
5
A board of advisors is really useful if:
You trust the people on the board
You respect their opinions
You believe they can behave as an advisor and not take it personally if you ignore them.
In this interview, Peldi from Balsamiq Studios explains how he built his board and what exactly it did (and didn't) do for him.
5
Send them a monthly letter, including:
Your own summary, in plain English, of major things that the business has done. New products, features, hires, etc.
One or two (at most two) problems that you're working on, that you need their advice and help with
A P&L report for the previous month, comparing it to prior months
A current balance sheet
An ...
4
Why don't you try to negotiate with them... you keep 51% of the voting rights (since you are the major shareholder) and key decisions require 100% of the votes. If they say that the "100% of the votes requirement for key decisions" is good for you, then they should be happy with it too. The number of people in the board doesn't matter as long as it's written ...
4
What I think I'm seeing emerge here are two schools of thought. There's the "Jason/Balsamiq school," which favors a very informal advisory board comprised primarily of people you already know and admire. Then there's the "Scott/Warrick school," which favors a more formal organization, assembled from industry veterans with specific connections or skills ...
4
Depends on the motivation of the Advisor. Some join because they may be able to use what you're making down the road (these are the best kind, in my opinion), so early access and the ability to steer product development can be incentive for them to participate in a board of advisors.
However, your question touches on the broader topic of how potential ...
3
Best practices for a Board of Advisors depends on the stage your company is at. In general, you will want to bring your Advisors together at least twice a year and call them frequently for specific questions. Some of the specific things to consider include:
Startup Stage
Probably the most intensive for an advisory board since plans are in flux. Your ...
3
Guy Kawasaki's book "Reality Check" http://www.amazon.com/exec/obidos/ASIN/1591842239/guykawasakico-20 has excellent advice regarding dealing with boards.
Around the board meeting, some of his advice (that I would say applies to just dealing with your board members anytime):
Don't B.S. Most powerful words "we beat projections" and the second most powerful ...
3
First of all, if you have the right kind of lawyer who is familiar with this kind of funding, your lawyer should be advising you on this based on your exact situation.
It mostly comes down to your negotiation strength... how many other alternatives do you have? What is your best alternative if you can't reach a deal with these investors?
For example, in my ...
3
I would doubt that an angel investment would upset your majority status - esp. since you are a sole founder (and you haven't disclosed any other shareholder owners) .
Sounds like you are looking for an advisor, and not a board member.
You can add an advisor to your board, but your bylaws / articles of incorporation must define what their voting rights ...
2
There's a pretty simple litmus test I use for advisory board members: would I be worse off without their advice?
That may sound ridiculously simple, but really ask yourself if your advisors are going to help you come up with solutions to the really big startup problems, like overcoming extreme technical hurdles, finding investors and helping to mentor you ...
2
Having once been CEO of a small public company, my very abbreviated answers are as follows:
VCs leave? It depends. In many cases yes particularly if the fund that they used to invest in your company is nearing its life end.
Ownership to stock holders? The company doesn't give ownership in an IPO. Ownership is determined by the amount of stock purchased ...
2
In general, it's best to have an odd number of directors. That way, any deadlocks can be broken.
In terms of total number, 5-7 is what I am used to seeing. Three is fine to start out with but as you build the company, you want to have a diverse set of people that can help you out and three is just not enough.
The more board members you have, the harder it ...
2
In the words of Michael Corleone
"Senator? You can have my answer now, if you like. My final offer is this: nothing. Not even the fee for the gaming license, which I would appreciate if you would put up personally. "
Give them nothing. They want equity just to make an introduction? That is ridiculous.
What do you mean by "heavyweights"?
If they ...
2
It's respectful to be a single founder. I think you're thinking in the right direction. This is an article from Fred Wilson on the purpose of boards:
Board or No Board?
Fred, the VC (genuine through and through) advocates for a company where the board of directors have final say (not entrepreneur), from there commenters (most highly respected as ...
2
Well if this person is as good as you say, then it may be worthwhile as a make or break for your company. I would offer them a 2 stage deal, something like:
Buy In Over Time. 10% "buy in" say 1% per 2 months they are actively advising for up to 1.5 years.
Additional Equity Milestone. If they hit specific targets you establish then they get an additional 3% ...
2
Make a point to document and get into legal contracts if necessary as much as possible up front. There should be provisions to reevaluate everything in the future.
Decide how responsibilities are divided
Evaulate if everyone is meeting expectations of time, expertise and performance.
Come up with a tie-breaker system. Maybe those with expertise in that ...
2
If the 5th seat goes to one side or the other then you're basically agreeing up front who wins the vote if there's a tie. That's true whether the 5th seat actually goes in some way to one of the other 4 people (someone gets more than 1.0 votes) or whether it goes to a good friend of one of the 4 people already on the board. You might try to get both sides ...
2
Your level of control will be determined by the mechanisms you use in your contract.
For example, you could issue your investor with Preference shares:
preferred stock: stock whose holders are guaranteed priority in the payment of dividends but whose holders have no voting rights.
It's Mechanisms like these that will help you strike a balance with your ...
1
I would set up a board of advisors. This means you could bring him (and others who could make a strategic contribution) on board and develop those relationships. When you are looking for funding you could offer the investment opportunity to your board of advisors and they could choose to become investors (and perhaps formal directors) at that stage.
...
1
Sounds like a new relationship. I would recommend developing and cultivating that relationship -- providing that it is one that both you and he would like to continue before formalizing it into a board position.
The Board represents shareholders.
If he is not a shareholder-- then he will be representing you equity interest in the company. Before you give ...
1
It could also be very useful depending on who was on your board. It's certainly not necessary. There are millions of small businesses out there that are family run or simply run by the founders of the company without any outside advice. My personal opinion is that no one will understand your small business in the same way that you do (so that could either ...
1
Do you want them on your Board? Will they add value above and beyond an introduction to investors that brings investment capital in?
If the answer to both questions is 'yes' then equity could be exactly the right tool. And the question's a prompt to you thinking about the bigger question of what your startup will look like when it's a team. What equity do ...
1
As an angel investor, I've seen both ends of the spectrum.
I have startups that send me relatively regular updates (though not quite to the level of detail that Joel suggested) and others that I don't hear from at all other than major updates (like a new financing) or when there's some signature required.
I personally lean towards solving for what is ...
1
At least in Denmark, there is one essential difference. If you are an attorney and sit in the board of directors of a company that does something obviously illegal, you could be charged as a private person, because you did not act on this when you should have. This will, however, not be the case if you were a part of the Board of Advisors as they are not ...
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