While boards are more often associated with corporate governance, when to comes to transitioning from startup to scale-up they can be an important lever for growth.
In more established businesses, boards are, as the as the Australian Institute of Company Directors (AICD) summarises: “responsible for the overall governance, management and strategic direction of the organisation and for delivering accountable corporate performance in accordance with the organisation’s goals and objectives.”
In the high pressure, high octane world of high growth ventures, boards can play a heightened role in supporting and mentoring founders who are building organisations from the ground up.
We worked with startup recruitment experts Think & Grow to do a deep dive into the relationships between startups and their boards. Based on in-depth interviews with 26 startup board members, and a survey of 76 Australian startups, today we release, The Startup Board Report.
Here are some of the key takeaways from our research:
Boards can help transform a startup’s growth prospects
Boards play a critical role in helping startups scale, by providing key experience, perspective and access to individual board member’s personal networks. A startup board with the right mentors brings in-depth business experience and a fresh perspective to founders as well as the board introducing standards and expectations early in the lifecycle of a company that can help it evolve as it rapidly grows.
We need more independent non-executive directors on startup boards
Only one in four Australian startups have an independent director on their board, but the large majority (92 percent) have directors who are also external investors, mainly representatives of venture capital firms. There are many benefits to having VC expertise on the board, but many of the board members we spoke to also noted the potential for conflict between investors and founders on startup boards. Many also spoke to how having a wide range of independent thought and deep industry experience on the board could be hugely useful for startup founders and CEOs.
There is a notable lack of diversity
Diversity was universally acknowledged as critical to the success or failure of startup boards. This is not just in relation to female representation (although 62 percent of startups have no female board members – a number which needs to change). Diversity of background, age, experience also need to be put into place. Only 19 percent of startups have board diversity targets – which shows it’s a large blind spot.
Australian startups need to up their board-appointment game
The board is one of the most important hires a startup founder makes, after all, they can often be appointing their own bosses. Yet close to one in four startups (24 percent) said they would not choose the same board again. This is no surprise given the fact that only 65 percent of startups have a formal process around appointing board members. There is a big opportunity for the Australian startup eco-system to put some strategy around who is going on the board and why.
Today’s board isn’t necessarily tomorrow’s board
One thing that came up time and time again, is that it is important for founders to plan ahead. Board building is cyclical. As startups rapidly evolve, the input and support founders need changes. The board you have post Series A, should not be the same at Series C, when, for example, international expansion is likely to be a key focus.
Your board is a critical component of your success. It’s worthwhile getting it right.