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An external board member – someone who is neither part of the founding team or the VC cap table – can be a great asset. However, founders often wait too late to start the hiring process and value the wrong things.
Here’s how to do it right:
1/15
Here’s how to do it right:
1/15
Build alignment – over yearsDon’t rush this process. Build rapport over time. Start building these relationships now. Your VCs have a list of loyal candidates at the ready – If they drive the process, it’s unlikely the new BOD member will be truly independent.
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Start them as advisorsIf possible, the best way to start one of these relationships is as an advisor. The role is very similar, you’ll get a sense of how you work together.
3/15
Do you need an operator or an oracle?There are two main types of independent BOD member:
a) A industry luminary, perhaps the former CEO of a company in your area.
b) A senior exec from another space that helps shore up a function, e.g., an IPO- experienced CFO.
4/15
There is no "right" answer.
Highly operational or product-oriented teams often need a bit of strategic vision, a role an outside director can fulfill. If your board is all financial types, an industry guru might be the right addition.
Just be honest about what you need.
5/15
Highly operational or product-oriented teams often need a bit of strategic vision, a role an outside director can fulfill. If your board is all financial types, an industry guru might be the right addition.
Just be honest about what you need.
5/15
DiversityThis is a prime opportunity to add new POVs, backgrounds, and experience types to your leadership team. Don’t default to picking someone who is exactly like you, just 15 years older. Board diversity can improve your ability to attract more diverse candidates.
6/15
Name recognitionIf you’re lucky, you’ll have a shot at recruiting someone “famous,” with serious name cred. Someone your parents might even recognize. This can feel immensely gratifying, but don’t let fame cloud your judgment.
Competence > celebrity.
7/15
What can they offer? Does the person have a deep exec contact list to help in hiring?
Do they have the ability to help you navigate regulated industry contracting processes?
Know what you need – and what you’re getting.
8/15
Our portfolio has benefited from well known executives, military generals and university professors. You’re going to pay this person a lot – it’s not out-of-bounds to ask for a concrete value-add. We’ve seen some major contacts made via these well placed board members.
9/15
9/15
Find someone who can fill a roleWhen a company is scaling like crazy or is in a strategic jam, it’s good to have a seasoned hand who can step in. E.g., having a former Walmart CFO on your board is a godsend when you need to spin up the function, fast.
10/15
They can help manage the investors One of the unsung benefits of outside BOD members is they can help you manage difficult investors. Their gravitas and fresh perspective can often cut through years of resentment between management and VCs.
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Make sure they’re availableMake sure the person is responsive. If they’re slow in answering emails or returning phone calls, that’s a sure sign they’ll also ask to call into future, post-COVID meetings. Out of sight, out of mind.
12/15
There are lots of ways to find prospective BOD members. Does your VC have a portfolio co that recently went public? Ask for the intro? Is there a CEO of a partner company that could be a fit? If all else fails or you feel behind the ball, you can propose a retained search.
13/15
13/15
Outside directors can be a secret weapon for founders - a sounding board, source of contacts, and all-around advocate for the company.
Start looking – now!
By the time there is agreement you need an external director, it’s too late!
14/15
Start looking – now!
By the time there is agreement you need an external director, it’s too late!
14/15
In summary:
Start the search on your own
Start the search years before you need to hire
Don’t let your investors bigfoot the process
Know what you’re looking for
And congratulations! This is a *significant* milestone - well done!
15/15
Start the search on your own Start the search years before you need to hire Don’t let your investors bigfoot the process Know what you’re looking forAnd congratulations! This is a *significant* milestone - well done!
15/15
