Startup Boards are often underleveraged by Business Angels

By Brigitte Baumann EBAN President Emeritus who is also the Founder of efino and GoBeyond

Startup Boards are an often underleveraged asset for Business Angels – find out how to fix that.

For the first decade of being a business angel I did not pay much attention to the board of a startup, instead focusing solely on the team. I thought I could add the most value as an angel working directly with the entrepreneur. I also did not pay much attention when asked to elect or reelect board members in one of my invested companies. I have since realized that I was wrong and that a well functioning board can be a key asset to a startup. As angels we should use and leverage startup boards, whether we are members of them  or not.


Here are some of the strategies I have adopted that may be useful to you as an angel investor:

1.     Due Diligence: Before I invest in a company, I now get to know the board as well as the team; I ask to meet at least the board chair. I find out what type of board they are – are they hands off and do only what is minimally required or are they very active? Do they operate as a real team or are they a group of individuals? I assess whether their type of governance fits not just the startup’s current stage of development, but also the next set of company milestones. If the startup doesn’t have a board yet, I assess how ready the founders are to share key decisions. One way to find out is to see if they have an advisory board and how well it is functioning.

2.     Post Investment:

  • Once I have invested in the company and if I/we can nominate someone to a board seat, I don’t automatically select the person who has been the lead in the due diligence. Rather, I think about the needs of the board from the perspective of skills, personality and board experience. I encourage the board to suggest, meet and provide feedback about candidates. I have seen time and time again that an effective board is not about having A players but having an A TEAM. Therefore, ensuring that the board nominees fit in well with the board is key.

  • I make sure that I take full advantage of my role as a shareholder. I dismissed this at first because I and the angel syndicates I invest with hold relatively small shares, but I have learned that there are a number of things we can do as shareholders even when small on the cap table. For example, I study the candidates and vote for board members. I attend the annual shareholder meeting and the shareholder updates. I study the information sent and ask questions, especially when it comes to important shareholder decisions. If I want to help the startup, I first approach the board chair rather than going directly to the entrepreneur (if she or he is not the chair) because I have come to see how disruptive it can be. I try to establish clear rules of communication, so as not to destabilize the structure of the company. As angels, our contributions matter, we just have to make sure we are channeling them properly, so they have the greatest impact and get the attention they deserve.

  • If I believe I can contribute to the board and I or the people I endorse are not nominated or elected the first time around, I keep an eye on the next round of elections. There is always another chance:  If you introduce yourself to the other people who can nominate potential board members and show them you have the necessary skills, they might nominate you in the next round.

3.     Board Member: Once I am a board member, here are some guidelines I follow:

  • Communicate regularly with the shareholders and facilitate meetings between them and the CEO.

  • Know the law of the country where the startup is located (compliance, key decisions you need to make) and read all the relevant company docs which refer to the board’s role and responsibilities starting with the shareholder agreement.

  • Contribute while on the board, and do so with the best interest of the company in mind, not just yours as an investor or that of those who nominated you to the position.

  • Be street smart as well as book smart. Think broadly and interconnectedly. Be thorough and pragmatic at the same time. Figure out the company’s leverage points and focus on them. Know how to do back of the envelope assessments when you cannot get a lot of data. Be decisive. A start up needs to be agile and so does its board.

These actions are easier said than done and I still catch myself returning to my old habits from time to time. But when I stick to them I know that I am helping the startup achieve great results because a good board can contribute significantly to the company’s success. Three major things that helped me evolve on my journey were to 1. attend a Startup Board Academy program 2. be part of a community of startup board members to share experiences and 3. serve on startup boards. As EBAN members we have the opportunity to lead the way in this important movement of going from good to great startup governance.

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