Private company board of directors composition

I wrote a few weeks ago about the CFO’s role in private company board meetings. Antecedent to the meetings is the actual forming of the board. Who is on it, and how can a CFO be a thought partner to the CEO on the board composition?

Every VC backed private company has a board of directors. This board is typically composed of founder(s), representatives from earlier stage investors, the CEO (if the CEO is not a founder) and, as a company matures, one or more independent board members. Later stage investors typically hold board observer status, meaning that they attend board meetings but do not have an official vote.

In the quest to raise money at the most favorable terms possible, founders often overlook the fact that their early investors are not only a source of capital, but they can also become a significant partner and influence in the company through their board directorship. Founders are usually good at figuring out the benefits that will accrue from their affiliation with a particular investor – benefits like access to partnership opportunities, domain specific expertise, sales leads, and operational support, as examples. All are important considerations and areas where value may be added by an investor. But the relationship with a specific investing partner who is being considered to serve on the company’s board is arguably more important than those other potential benefits.?

Do reference checks on the individual who would join your board. Dig in to learn what it would be like to work with that individual. I would want to gain perspective on questions like these. How do they handle conflict with founders and other board members? What type of personal support will they provide? How do they show up once the deal closes? Do they view their board membership as a vanity role or do they deeply care? Do they play well with others or are they all about ego? When things get tough, how do they act? Do they productively push founders??

?It’s also valuable to reach out to some who passed on taking that investor’s money; why did they pass? Do your research, have your eyes wide open, and listen for what is unsaid. People’s reputations typically precede them.?

By the time a CFO joins a company, it is likely that the investor board slots will already be filled, depending on the company’s stage, however there may be an opportunity to add one or two independent board members. Independent board members are often brought in to provide specific expertise, be that related to industry, company growth stage, or a functional area. The CFO can partner with the CEO to think ahead about how the company will evolve and where gaps might emerge, or already be present, on the team. And then help strategize on how to reach potential board members and find someone great to elevate the impact of the board.

Check out my past post here about the CFO’s role in a private company BOD meeting. I also love this interview with Ron Gill and Anrok 's Michelle Valentine about how to run a great BOD meeting.