4/15/2021

3 Ways to Find the Best Board Members for Your Startup’s Vision

People often say CEO is the loneliest job. But it’s particularly isolating in the early stages of your company, when everyone on your team (if you’re lucky enough to have support) is busy wearing multiple hats. As a SaaS startup founder, you and your team typically do not have the luxury of taking a step back from day-to-day responsibilities to consider the big picture.

That’s where board members can play a vital role.

Your board members are invested in your business—but have the benefit of distance from its daily fires. The best boards are able to not only help define your company’s trajectory, but also bring your vision to life. With the right makeup of strategic minds and complementary skill-sets, a board of directors can dramatically transform your business for the better.

Our investment team at Elsewhere takes a bit of an untraditional approach to boards: When it comes to board leadership, we like to say, “Founder is in the driver’s seat, operating advisors sit shotgun, and investors take the backseat.” After collectively observing thousands of board meetings, we’ve found that building a board based on operational expertise drives more value than one filled with prestigious backgrounds and investors.

Here are a few of our tips on how you, as a founder, can build a strategic board of directors based on your startup’s goals—and why it matters.

Define your vision

Where do you want your B2B SaaS company to be in two to five years? Before you build your board of directors, you want to have a solid idea of what you would like your board to help you achieve in the near- to mid-term future.

Come up with a short list of initiatives that support these goals—maybe it’s building a sales team or morphing a feature-rich solution into a product portfolio. Then, do a skill gap analysis: What forms of experience and expertise do you need on board (literally) to pursue those initiatives?

Surprisingly, the majority of startup boards aren’t built based on relevant expertise. Before fundraising, boards are often composed of co-founders and the most successful friends/family of the founders. After funding, additional room is made for full-time investors. And usually, those investors are sitting on five to twelve or more boards at a time. (For context, that means they may be going to nearly 50 board meetings a year.)

Even when venture capital firms bring in independent board members, they’re often tapping people from their network who have prestigious backgrounds, but not necessarily aligned skill sets for your company. The former CEO of a phenomenal blue-chip brand might impress you as a founder, but is running a multi-billion dollar public company helpful experience when your startup has 20 customers?

Defining your goals will make it much easier to identify the kind of experts who will help you achieve them. Try not to think too far ahead: While you might IPO one day, right now, you probably need to focus on defining customer success or refining your go-to-market strategy.

Build a collective skill set

Once you have a vision where you want to go, focus your energy on finding the right people to bring to the table. I recommend early-stage companies start with three board members, so you have the flexibility to grow your collective skill set as your company’s priorities evolve.

For example, when Elsewhere first invested in one of our early-stage SaaS portfolio companies, they had a healthy software and services business and a 50-person team. At this point, we were able to be helpful by bringing on a brilliant product leader from our network of more than 150 Operating Advisors for their board of directors to help marry the product and go-to-market strategy. With a clear product market fit and a strong sense of their customer, they continued to grow while productizing those services and shifting towards the software model.

We like to say operating Advisors sit shotgun because we prioritize hyper-relevant operational experience on the board over the long-term investor perspective on the board. Going back to our driving analogy, as the founder, think carefully about who you’re bringing on your entrepreneurial road trip: Does your board have a diversity of skill sets? Is there a balanced mix of investors and independent board members?

Ask your network for experienced experts in the problems you’re facing. And if a VC firm wants a few board seats as part of their investment deal, make sure to outline your goals and ask them who they think will be a good fit—and why.

Speak openly about board longevity

As you begin to reach your near- to mid-term goals, you’ll want to start the process of evaluating new goals and new skills gaps. That’s why it’s valuable to have honest conversations with your members about their role and longevity on the board of directors from the start: What are their various areas of expertise? How long are they interested in committing to the board? At what milestones should you reassess the composition of the board together?

Two years after we invested in the portfolio company I mentioned above, the team had grown to nearly 200 employees, quadrupled revenue and shifted heavily towards software revenue. Thanks to an impactful product and a growing customer base, their operations were becoming much more complex. We decided to add to their board a seasoned Chief Operating Officer who had successfully led an organization with similar characteristics to an IPO.

The decision to step down from a board or take on an additional member takes humility and, I would argue, a true commitment to the company’s success: It means someone recognizes that each seat at the table should be filled by someone with hyper-relevant experience for the company’s stage. From my experience, boards don’t rotate seats enough, which often leads to a misalignment of goals from different investors / individuals and mismatched skill sets and growth opportunities. As a result, board meetings risk becoming perfunctory as performance readouts—with the same commentary of “bigger, faster, more” in the familiar areas—rather than strategic planning opportunities.

A board member rotating out doesn’t mean they disappear from your startup’s orbit entirely. And adding to the board does not diminish the potential impact of existing members. In fact, if you have the conversation about longevity early, you’re much more likely to ensure a balanced board and maintain healthy relationships with mentors for years to come.

Expertise is greater than prestige

A board of directors can accelerate or hamper your business. All too often, boards are defined by prestige and proximity, rather than expertise. While there’s certainly room for investors at the table—and they have valuable pattern recognition and insights to offer—make sure to save a seat(s) for advisors with highly aligned expertise for your company’s current and next stage.

With the right combination of experience on your board, you’ll create a culture defined by passion and strategic risk-taking: each member should know what it feels like to be in your shoes, and be eager to help you step towards the future.