Starting a business with a founding team of one is a fairly straightforward process; all you need is an idea, passion, and a small amount of cash to invest. Because it’s common for the founder to be the only investor, they also control the decision-making as the sole director and company secretary.
Things become a little more complicated when other investors are involved, however, because it then raises the question of who is looking after the investors’ interests as those in the business, the executive team, go about the day-to-day running of the startup. Therefore, as soon as the company takes investment from external parties it is imperative to start building a board of directors.
Why build a board?
In the last few years we’ve seen a trend towards lean startups and agile businesses, so appointing a board early on, one that probably outnumbers staff members, may seem like overkill. Having a board, however, is the best way to ensure your business meets fiduciary obligations and to establish that you have proper corporate governance in place. The sooner you begin building a board, the better.
The converse can be the case as well: while you need a board because you have external investors, it’s also true that you become more attractive to external investors because you have a board. Sophisticated and institutional investors will certainly insist on having a board in place before investing money in your company.
When I incorporated Juggle Street I was the only investor in the company, and I was the sole director and company secretary. Amr Elsayed then joined as CTO and co-founder, and it made sense to appoint him to the board. At this stage the company had two executive directors, but no outside investors.
We then opened our first round of external fund-raising. Although it was a typical ‘family, friends and fools’ round, my experience with previous startups told me it was the appropriate time to appoint an independent director to take care of the external investors’ interests.
Collect the whole skillset
There’s an art to creating the perfect mix of skills on a board. My advice would be to exercise self-awareness and look to bridge any skill or knowledge gaps you have as founders. It helps if the appointee has a particular interest in or experience with the industry your startup is in as it will be easier to bring them up to speed on issues that may affect your business’ specific sector.
There’s an art to creating the perfect mix of skills on a board. My advice would be to exercise self-awareness and look to bridge any skill or knowledge gaps you have as founders. It can help if the appointee has experience in your startup industry sector, but it’s more important they need to have an affinity (and hopefully passion) for your business and the problem it is solving. It’s also imperative you spend considerable time to get to know each other, it’s going to be a sprint not a marathon, and the CEO needs to build a good working relationship with the entire board.
For us, that person was Karen Phin. She was actually one of our first external investors, a very busy working mum of three she immediately bought into the Juggle Street mission. The timing was good, as she had recently started taking on board roles following her hugely successful merchant banking career. Karen had extensive experience in the finance sector, including a year-long stint on secondment to ASIC during the global financial crisis. Her skillset and experience were completely complementary to mine and Amr’s, and she was eminently qualified as a non-executive director (NED).
The next consideration I would highlight is to have a board of directors with a majority of NEDs, and I’d recommend the role of chair also be undertaken by \ a NED. Many CEOs make the mistake of appointing an executive director as chair, usually themself. I firmly believe an experienced board of independent directors and an independent chair can make clear, objective decisions that an executive cannot, especially in those initial stages when executives are fighting in the trenches. There’s no shame in trench warfare—it’s a common prerequisite with startups—but this makes it hard to see the wood for the trees, so you need people who are a little removed to guide your startup through its roller-coaster ride.
Since Juggle Street had two executive directors and only one NED, it was time to appoint two more NEDs to bring them into the majority. Through our networks I was introduced to Marina Go last year, and we were fortunate to secure Marina as Chair. Marina has more than 25 years of leadership experience in the media industry and plenty of experience on boards including Chair of the Wests Tigers Rugby League Club and NED of Energy Australia. Marina is a busy mother of two, and for many years she has championed women in the workplace and is passionate about changing the status quo so women can be mothers and have a successful career.
The appointment of Hugh Bickerstaff, Chief Investment Officer for Investible, a global early stage investment company, gave the board its NED majority. Hugh has three decades’ experience in growing technology companies and, as a father of four, was already a Juggle Street user before coming on board.
Another factor to consider is your board’s connections and both Marina and Hugh very extensive networks. Leveraging endorsement through board members gives investors confidence, which is the key to accelerating the growth of the company.
Having a vision for the future in terms of scaling globally means having a mature outlook, and an independent board can give startups the framework to ensure proper corporate governance, while keeping an eye on the big picture. Appoint one as soon as feasible and you’ll find it pays dividends, allowing you to do more, and sooner.
David James is the founder and CEO of Juggle Street.