The board of directors provides strategic guidance to the CEO and has a fiduciary duty to investors. Board members can include management, investors, and external individuals, independent individuals.
What this video covers
What is a board? A board of directors is ultimately that group of individuals that are sitting at the top helping with the strategy and the CEO, who is reporting to the board with any aspects that have to do with the execution of the business. They are ultimately providing that strategy and handling that strategy to the CEO and the management team so that they get to execute.
The board has a fiduciary duty to the investors, and they have the responsibility to always look for the best in the business, and they can ultimately fire the CEO. So they have that level of power. Again, the board is supercritical and very critical, especially when it comes to the strategy of the business.
Who makes the board? Ultimately, you’re going to have people that are from management, investors that have also invested in the business, and then outsiders that perhaps you’re bringing in.
So, when fundraising, a critical piece is going to be the board. People that are ultimately leading a round of financing, which is putting a price tag so that everyone else can come and invest; those are going to demand that they get a board seat so that they can continue to oversee and monitor how that investment is performing over time.
What to fear and expect from the board. Ultimately, those members that are part of the board are going to have a lot of power, and there are definitely things that you should expect from them like essentially being able to bring them some of the critical issues, the strategic issues that you’re facing on the execution side so that they can help at a strategic level in order to find some of the answers. Maybe even opening doors that can essentially bring those solutions to the problems that you’re facing.
Yes, they can actually kick you out of the business. They can even block a potential round of financing or your company getting acquired for millions or billions. So that’s why you want people on your board as members that are ultimately aligned with your vision and your mission and that you really get along with.
When it comes down to what you want from your board members, you’re definitely going to want them to have operational background expertise, meaning that in the past, they have actually executed a business or they’ve had experience with your own segment, so that they know some of those critical issues that you’re ultimately facing.
Another thing that you want is that they have a great network. That network can actually be applied in different things. It could be a network of talent; mainly, they have access to people that you can potentially recruit over the course of time. It could be a great network when it comes to distribution. Maybe they can just lift up the phone and help in securing some of those great partnerships that are going to help with scaling things much faster and quicker on the distribution side. They could also have a network that it comes down to investments. Maybe they can just lift up the phone and make that introduction to an institutional investor or any kind of investor that could put an investment in your business.
Another type of thing that they could bring to the table is experience or perhaps contacts around potential acquisitions. Maybe they know people that they can actually call or maybe facilitate an introduction to that can ultimately be interested in acquiring your business. Those are ultimately some of the best board members, and you definitely want to make sure that you’re taping on their networks.
