The alchemy of board composition

When selecting an investor, it’s tempting to focus solely on the prestige of their firm or the amount they’re willing to invest. These factors do matter - a high-profile investor can boost visibility and bring valuable experience through their industry exposure.

Many founders also forget another hugely important factor in choosing an investor: whether or not this investor, and the team supporting them, will be a good addition to your board. Considering many VC investments come with a board seat, and how much of an asset a well-balanced, strong board can be to a growing business, this should not be overlooked. 

Furthermore, you cannot consider individuals in isolation. How will an investor contribute to the overall makeup of the board and to the decision-making process? Creating a board, after all, does require a bit of alchemy to create excellence.

There will always be an element of risk in assessing potential board members, given you can only fully assess someone once you’ve worked with them. There are, however, telltale signs and clues that you should be on the lookout for, and small things you can do to evaluate them. 

For Hristo Borisov, Founder and CEO at Payhawk, a deeper level of due diligence has always been important when assembling his board: “I spend a lot of time speaking to other founders and investors who have shared board rooms with potential investors. My goal is to understand how active and supportive they have been, and how they handle difficult situations.”

Understanding the skills needed on your board is the first step in assembling a group of advisors that can truly drive your company forward, but we would like to unpack what these essential skills are in more detail and how they contribute to a high-functioning board.

At Bek, we've accumulated extensive experience across a wide spectrum of board contexts - from guiding early-stage startups through their first board meetings to steering high-growth companies toward billion-dollar valuations. From fire sales to IPOs, emerging financing to raising substantial funds, we’ve had the opportunity to observe founders and their boards navigate both successes and setbacks, providing us with valuable insights into what makes a board truly effective, across various stages and sectors.

At each stage of growth, there will be specific expertise that founders need to leverage. When we spoke to Emre Tinaztepe, Founder and CEO at Binalyze, he described the iterative process of building his board. "It is all about the right skills & experience to help us grow our business, focusing on filling key gaps in expertise at each stage. Early on, we needed strong fundraising and strategic guidance. As we scaled, I prioritized experience in growth, operations, and now in sales for future rounds."

Having the right experience is crucial - but there is another layer of skills and behaviors that are arguably as essential to facilitate deep discussion and good decision making. At Bek, we know members do not advise in a vacuum — a good board should be more than the sum of the individual strengths of its members.

Based on our experience attending dozens of boards, of companies of varying scale, with different dynamics, founders need to focus as much on making sure their board has a balance of the following strengths to ensure it can effectively support founders:

These skills could be distributed among individual board members or shared across the board. Just as founders play different roles within a company, board members often take on distinct roles that complement each other. Understanding these dynamics is crucial for assembling a board that's greater than the sum of its parts. For more insights into the evolving roles of founders, please see our piece on this here.

We believe that a board able to supply all of these skills will be capable of supporting you in navigating a range of challenges, as well as capable of providing advice and accountability from  diverse perspectives. Notably, they will also help you avoid mistakes by generating healthy debate and helping you identify risks and avoid wrong decisions.

When bringing on board members, it's essential to have realistic expectations. They are not day-to-day operators but strategic advisors who provide guidance, challenge assumptions, and assist with major decisions. While you can expect them to be hands-on during critical moments such as key financing rounds or crises, their day-to-day involvement is typically limited. To enable informed decision-making, continuous information sharing is crucial, as board members need context to provide valuable insights. Often, their most thoughtful reflections come after they've had time to process information, rather than during board meetings.

It's important to recognize that board members' effectiveness will likely improve over time as they gain a deeper understanding of your business. By focusing on building relationships that leverage their strategic insights and network for long-term value creation, you can avoid common pitfalls such as over-reliance on board members for operational matters or frustration at a perceived lack of immediate input. This approach helps maximize the benefits of having experienced board members while maintaining realistic expectations about their roles and contributions.

These are individuals who attend board meetings but do not have voting power. They could be a junior member of the investment team of one of your board members, and support their firm's representative on the board with even more research and decision-making firepower, again contributing to even better discussions and contributions from that board member. This is something we often do at Bek, which also ensures our more junior investment team members are getting direct board experience early in their careers. It can also be a partner, who brings experience and skills to your board even if they do not ultimately get a vote. 

Well-run firms understand that sending board observers is a win-win for both sides. While founders might initially find having more people in the boardroom overwhelming, these observers often bring valuable insights and can build strong relationships outside of meetings as well.  Founders can leverage their investors as extensions of their team, tapping into additional resources and expertise that complement internal capabilities. For investors, it's an opportunity to give their junior members exposure and build board experience, creating a mutually beneficial dynamic that enhances both the board's effectiveness and the founder’s support network. 

When building a board with a balanced skill set over time, it is important to remember the key role that observers, as well as full board members, can bring in achieving this balance.

Assembling all the necessary board skills at the seed stage may not be feasible, but it's a goal to work towards as your company grows. We recommend mapping out your ideal board at the earliest stage and continuously tracking the skills and perspectives that both new board members and observers bring. This 'board skills map' can be tailored to your specific needs, helping you identify and fill expertise gaps as your company evolves. It might also help shape your attitudes and views toward new investors going forward, ensuring you're building the right team for long-term success.

For more detailed guidance on how to get the most out of your board meetings, including managing board dynamics and maximizing contributions from all members, see our pieces on board dynamics and effective meetings.