3 - I Almost Made The Common Mistakes in Governance and How I Sidestepped Them

Have you watched "The Founder"? The movie narrates the origin story of McDonald's and serves as a striking example of how even the most successful businesses can be vulnerable to governance missteps. It illustrates the pitfalls of not having a robust structure in place—how the McDonald brothers, despite their revolutionary business model, got sidelined in the empire they built. As a tech founder, the lesson is clear: meticulous governance and strategic planning are not just best practices; they're vital shields against the vagaries of launching the Black Rise business, ensuring I remain at the helm of your venture's journey.

I chose to write this article after having a deep conversation with Ethel Tambudzai who guided me and educated me on common pitfalls while arming me with strategies to avoid them, complete with real-world examples that illustrate the power of proactive governance.

Expanding the Strategic Role of Holding Companies

Mistake: Founders often view holding companies as mere formalities rather than strategic entities that can drive business growth.

Example: Consider how Alphabet Inc. restructured Google and its other entities under a single holding company to streamline operations and provide clearer financial transparency.

Solution: I needed to recognise that a holding company can offer me significant benefits, such as risk mitigation, intellectual property protection, and financial management across subsidiaries. By ensuring that the holding company's structure aligns with long-term goals, I can maintain control over the strategic direction of their ventures and prepare for scalable growth.

Deepening Board Roles and Responsibilities

Mistake: Founders sometimes fill their boards with yes-men or overlook the importance of board diversity and expertise.

Example: Companies like Apple have long recognised the value of a diverse board, bringing in experts from various fields to guide their strategic direction.

Solution: It's crucial to appoint board members who can challenge ideas, offer diverse perspectives, and add value based on their expertise. This includes considering paid roles such as Board Secretary for governance, unpaid roles like Treasurer for financial oversight, and NEDs to represent shareholder interests. I'm so excited to be able to reveal who sits on the board of Black Rise.

Refining Investment Strategies and Funding Stages

Mistake: Startups often mismanage equity distribution during funding rounds, diluting founder shares excessively or setting unrealistic valuations.

Example: Facebook's early funding rounds are a testament to strategic equity management, with Mark Zuckerberg maintaining control through carefully structured investments.

Solution: Adopt a strategic approach to equity and investment that protects the founder's interests while attracting investors. This involves setting clear, attainable metrics linked to performance, using convertible notes or SAFE (Simple Agreement for Future Equity) agreements during early stages to manage dilution, and establishing clear terms for performance-related investments.

Additional Considerations for Founders

Mistake: Founders neglect the importance of creating a scalable business model and robust operational procedures that can withstand rapid growth.

Example: Instagram's acquisition by Facebook showcased the importance of having scalable operations, which allowed it to grow exponentially without compromising service quality.

Solution: Ensure your business model and operational infrastructure are designed to scale. This means investing in technology that can handle increased demand, establishing flexible procedures that can adapt to change, and planning for resource allocation that matches growth projections.

Mistake: Lack of preparedness for due diligence can derail investment opportunities.

Example: Successful startups like SpaceX have shown the importance of thorough due diligence, ensuring all company information is transparent and meticulously documented.

Solution: Maintain a comprehensive and up-to-date data room that can facilitate the due diligence process. This includes financial records, legal documents, business plans, and intellectual property details. Being due diligence-ready can significantly increase the chances of successful investment rounds.

My journey of entrepreneurship is fraught with potential missteps, but with the right strategies in place, I can navigate towards success. I understood the strategic role of holding companies, the critical responsibilities of a diverse board, and the nuances of investment strategies that are foundational to building the BLACK RISE venture that stands the test of time. I learned from the examples set by industry giants and adopting a mindset of continuous improvement, I will leverage governance as a catapult to unprecedented heights of innovation and market presence.