Why 75% of Tech Start-ups Fail (and How To Be The 25%) – Part 2: The Importance of Influence

Last time around, we looked broadly at the importance of a board in the early stages of a start-up. In this blog post, we’re going to take a closer look at how you maintain control of your board. Easier said than done.

A common early funding path for start-ups involves raising money from initial seed-round investors. These investors are almost certainly going to want a seat on the board. Logical enough, given that they are investing for a reason and they want to ensure that your idea remains on track to profitability. This process is likely to repeat with each major new lead investor.

But you as the founder need to ensure that you remain in control and for this reason, it’s worthwhile considering how each investor and potential new board member fits with your philosophy and vision as a whole. An investor coming from a high-speed growth mentality may find themselves at loggerheads with a board member who prefers a more holistic, patient approach. And whilst opposites can sometimes attract they can also lead to schisms that detract from the success of the company.

One of the key mistakes that founders find themselves making is that they lose their board seat as a founder or as CEO. There may be many reasons for this – as the company grows, the founding CEO may find themselves in a different role – so it’s worth creating a separate founding board member role that still applies if you move on from the CEO position. The most famous parable here is the story of Steve Jobs being fired from Apple in 1985. Of course, he returned in 1997 to take the company to ever-greater heights, testament to his persistence, drive, and creativity, having learned from his earlier mistakes. But many founders might not get a chance to learn from those mistakes.

You can make sure that the early board makeup is successful by giving an early seat to an ‘independent’, usually an experienced advisor – someone not from the investor-side and not from the founder-side. In a hypothetical board-of-three, this gives a balance of power – assuring the investor with the presence of credibility and nous.

Finally, make sure that these early-days board meetings are kept small and infrequent. 1 to 2 hours max, at monthly intervals and without outside members works well and is far more beneficial than long, frequent meetings that drag on. We shall invoke Jeff Bezos’ famous ‘Two Pizza Rule’; it simply states that no meeting should contain more people than can be fed with two pizzas (the pizza itself is optional). Whilst this may become more difficult to constitute in a board meeting at a large multinational or when your company becomes established, it is an excellent rule of thumb in the early days.

Next time around, we’re going to look at how to build your board – who to hire and when to hire them.