Looking for Board members and Advisors should be based on the company’s business plan. Who can help your growth company? What is the best way for the best experts to be involved? Markko Vaarnas shares his thoughts on this important topic.
Making sure that a startup company has a clear vision, a carefully crafted company culture and a business model that has been thoroughly validated by customers should be the focal points of the company’s Board work. But that’s only the beginning. What else is relevant?
Startup companies start from scratch by definition, and there are countless unknowns surrounding them. Hence, it’s easy for both the entrepreneurs and the Board members to ‘get lost’ in the maze of opportunities, bottlenecks to growth, and the inevitable surprises.
I have listed out ten things below that in my experience should be at the center of focus for the Board of a startup business – and in particular for the Chairman of the Board.
1. Make sure that the company has a clearly communicated vision
Vision is everything. It’s the goal that makes all efforts meaningful. Also make sure that the management understands the importance of building a company culture that enables both fast growth and sustainable success on the long run.
2. Help the company management to engineer a winning business model and insist that it’s thoroughly validated by customers
Reiterate as many times as needed. Note! Business Model Lean Canvas may be a useful tool for illustrating the business model.
3. Help the company management to document the essentials of the business into a business plan
Documenting plans easily falls through the cracks when hunting for customers and living the hectic life of a startup entrepreneur, yet a carefully crafted business plan is the company’s roadmap towards its vision. In case there are financing needs, it’s feasible to do the documentation directly into the format of an investor deck. This also works as a checklist to make sure that all essential topics are covered.
4. Help the management to identify competence gaps and fill them
Help the management to identify competence gaps and fill them with resources necessary for implementing the plan (operative team, advisors, and consultants). Make sure that the right people are on the right seats, and that the new people are a cultural fit with the company.
5. Help the management to identify Key Performance Indicators (KPIs)
Help the management to identify the Key Performance Indicators (KPIs) relevant for the business. Initiate the regular tracking of the KPIs.
6. Help the management to define KPI Traction targets for a 3-6-month timeframe
Financial projections that reach beyond 12 months are pretty useless, and they only have relevance as a must-have item in the investor decks. Help the management to define KPI Traction targets for a 3-6-month timeframe and help them craft the related marketing and sales strategy with a strong focus on only a few carefully selected initiatives.
7. Help the management to define Must Win Battles
Help the management to define the Must Win Battles that the company needs to win in order to hit the necessary strategic milestones. Define the 3-6-month targets and action plans towards these MWBs. Also make sure that the MWBs are resourced adequately.
8. Encourage the team to constantly document best practices and processes
Encourage the team to constantly document best practices and processes and to improve them along the way. For most, the documentation work again seems like boring and of low priority yet based on real life experience this will significantly help the scalability and internationalization of the business once the time is right for that.
9. Encourage the team to tackle potential issues proactively
Encourage the team to tackle potential issues proactively and effectively as they are encountered. The longer there are issues left hanging, the more friction they will cause.
10. Keep a close eye on the cash balance and the burn rate
The most typical mistake in startup companies is premature scaling, i.e. scaling up the business before the company has truly reached a product/market fit. Scale up too early, and the costs will be increasing faster than the monthly revenue. Always remember that the only real crisis that can destroy the company is a cash crisis. The Board should make sure that the runway for the company is adequate even in a scenario where the revenue development is flat for the next 6 months.
11. Don't neglect corporate governance!
Ok, there is one bonus thing to the list of 10 things. Even though Corporate Governance may not be the most exciting of topics, it shouldn’t be neglected. Board Members and particularly the Chairman should help operative management in ensuring that the company fulfills all its legal obligations and operates under high quality corporate governance.
Markko Vaarnas is Managing Partner of Takeoff Partners and Chairman of the Board in the Boardman Grow network that focuses on developing board performance and entrepreneurship in Finnish growth companies. Markko has been working as an investor and advisor in over 20 B2B software and service businesses since January 2015.
Previously, Markko was co-founder and CEO in Global Intelligence Alliance Group (GIA) during 1999-2014, where he oversaw GIA’s growth from a Finnish startup into a global leader in Market Intelligence software and services with 15mEUR in revenue and offices in 10 countries. In 2014, Markko made an exit as GIA was acquired by M-Brain Group.