Why 75% of Tech Start-ups Fail (and How To Be In The 25%) Part One: The Importance of a Board


It is the nature of starting a business that you might fail. Every founder knows that the chance exists – but fear of failure is not why you became an entrepreneur is it?

Yet it remains that three-quarters of tech start-ups fail. Learning from these mistakes is often part and parcel of being a tech entrepreneur but it doesn’t have to be. You can learn from others who have already been down this path. I like the expression “advisors wear the scars so you don’t have to!”. And being on the board of 35 tech, digital and talent companies, I’ve seen first-hand what distinguishes success from sinking. And one of the primary problems lies at the very top – in the makeup of the board.

The primary reason for this is simply that many founders are inexperienced in the day-to-day running of a board. And when that’s combined with the need to make the right picks on the board over the years, it can compound into a messy, ego-led board that works in counterpoint to what the company needs to thrive.

So how do you avoid this problem? You certainly don’t need to jump the gun on hiring a board – not all board positions are needed from day one, and it’s more sensible to build the board over time, until you have a tight-knit, efficient team working together rather than at odds. Initially, you can save money by hiring board members on a part-time or consultancy basis – which can save you tens, if not, hundreds of thousands of pounds, crucial in those early days for a bootstrapping start-up.

The key to building the board is ensuring that the major business decisions are made early on by smart and experienced people. Your growth strategy, the raising of funds, the positioning of senior management, these can all be defined by excellent decisions in the dawning days of a company board.

As a young tech start-up, you can make changes that will reverberate for years down the line – and equally, you can change your mind on these decisions just as quickly. A lot easier to do when you have five people as opposed to 500. But as you and your company grow, those early-day decisions will suddenly have the weight of foundations – defining the core values of company culture and attitude.

Remember that your board is not forever. The makeup of your board can change as the requirements of your start-up change – especially as it grows out of being a start-up. Laying down these expectations early on will also help with any new appointments down the line, by contextualising targets for board members without demotivating them.

And finally, a tip based on simple numbers: a lot of companies choose to have an odd number on the board of directors. Just like the US Supreme Court, this reduces the risk of 50/50 votes leading to irrevocable splits. Just remember to keep the balance on your side!

Join me next time for Part 2 of 4 in this series when we’ll take a further look at how to develop your board.

For more board advice that delivers results, click here: https://mynonexec.com/