Here at Foley, we’ve partnered with companies through times of prosperity and crisis. From the Dot-com bubble and the Great Recession to current volatility in crypto to health tech, we’ve observed a common thread — governance matters.
We recently hosted a panel on when startup founders should start strategizing around their next board member. And when should that be? Natasha Allen, a partner with Foley’s Silicon Valley office advises that business leaders should consider filling board seats created by a funding round. Companies that are scaling or pivoting their business model may also want to consider a board refresh. Additionally, the current directors may no longer be able to serve the core needs of an organization.
Below are highlights from our interactive panel, featuring moderators Alidad Vakili, Of Counsel with Foley, and Rita Scroggin, Founder, FirstBoard.io, and panelists Natasha Allen along with Ally Millar, Partner, PwC; Tina Knauss, Board Member, The Tech Interactive and QFE; and Bhawna Singh, Senior Vice President of Engineering, Okta.
The first boxes to check are competence and business fit. Tina Knauss, a former audit partner at PwC, advises founders to seek board members in industries where fiduciary responsibility is baked into one’s role. Startups can find plenty of board talent from accounting, audit, and consulting firms and adjacent industries.
Bhawna Singh, SVP Of Engineering at Okta, highlighted how basic cybersecurity knowledge is becoming a fundamental skill set for any board member. She recommends that at least 15 minutes of every board meeting include a cybersecurity overview detailing the organization’s progress in reaching its security goals. Otherwise, leaders may need to prepare for rapid changes in the threat landscape.
In addition to specialized knowledge, Ally Millar, a partner with PwC, noted that founders often overlook the importance of commerciality. Small, even-sized, or bloated boards are problematic – but so are tenured members who can no longer provide advice that addresses a company’s current economic conditions.
In many industries, board makeup is mission-critical. Innovations in health care, automotive, infrastructure, and defense have an added layer of potential human risks that a board well-versed can often forecast in the full scope of business — from fiduciary fundamentals to sales.
Where to start when selecting your first board members
After the excitement of a funding round, legal advisors play a crucial role in reminding funders not to leave board seats vacant for too long. During this phase, there may be tension between the founders’ interests and the investors who have come aboard. Foley suggests establishing a straightforward and well-communicated process for board selection from the get-go. Doing so will save you from potential compliance and regulatory hurdles down the road.