Start Building an Independent Board Early
Surprising, few companies in the Indian start up space are thinking about adding Independent Directors to the boards early on. The popular perception is that when a company is thinking of going public, that is the time to bring on Independent directors.
My suggestion is to start building an Independent Board early in the company lifecycle. While there is no magic milestone on when this should be done, generally good to start thinking of an Independent Director when the company is early in its commercialisation journey. Having this conversation with your VCs early on is helpful.
At an early stage, an Independent Director is more a thought partner to the entrepreneur, someone who can guide him or her on how to think about commercialising a product, building an organisation, making customer introductions, and broadly bringing a fresh perspective and balance to the investors. What is important is that the Independent Director truly can dedicate time when needed and has bought into the company vision and team and is not doing this to build the resume. For example, in one of our start ups, we helped bring on an Independent Director who has been a CMO of a large enterprise software company. He brought a different perspective on the product, positioning and price given his experience which was valuable. In another instance, a portfolio company brought on a CFO of a Telecom Company. He was very valuable in helping define the strategy and brought a different thinking to the table coming from a hyper competitive industry like Telecom .In another case, we helped bring on a Media veteran to help with customer introductions and refining the product pitch, etc.
As the company grows and is thinking of going public, Independent Board Members with more specific skills to be able to lead the Audit, Nomination Committees, etc.
In my experience a good board composition at an early stage is 5-7 Members. 1-3 VCs, 1-2 Founders/Management and 1-2 Independent Directors. Anything less than 3 members or over 9 members can cause the board to be ineffective.
My suggestion is to start building an Independent Board early in the company lifecycle. While there is no magic milestone on when this should be done, generally good to start thinking of an Independent Director when the company is early in its commercialisation journey. Having this conversation with your VCs early on is helpful.
At an early stage, an Independent Director is more a thought partner to the entrepreneur, someone who can guide him or her on how to think about commercialising a product, building an organisation, making customer introductions, and broadly bringing a fresh perspective and balance to the investors. What is important is that the Independent Director truly can dedicate time when needed and has bought into the company vision and team and is not doing this to build the resume. For example, in one of our start ups, we helped bring on an Independent Director who has been a CMO of a large enterprise software company. He brought a different perspective on the product, positioning and price given his experience which was valuable. In another instance, a portfolio company brought on a CFO of a Telecom Company. He was very valuable in helping define the strategy and brought a different thinking to the table coming from a hyper competitive industry like Telecom .In another case, we helped bring on a Media veteran to help with customer introductions and refining the product pitch, etc.
As the company grows and is thinking of going public, Independent Board Members with more specific skills to be able to lead the Audit, Nomination Committees, etc.
In my experience a good board composition at an early stage is 5-7 Members. 1-3 VCs, 1-2 Founders/Management and 1-2 Independent Directors. Anything less than 3 members or over 9 members can cause the board to be ineffective.
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