A Board of Directors is not an advisory board

An advisory board has no decision making authority for the organization; a Board of Directors does have such authority. That's the key difference between the two bodies. 

As a result of this difference, each body should be managed (and thought of) very differently from the perspective of the startup entrepreneur. You go to advisors when you need advice or help. Your Board can do that too, but it's really there to govern the company.

It's confusing because early on the Board is usually just the founders and so governance and management are one and the same and with the same people. Also, when startups first get going, many get "advisors" on board. These relationships come in all shapes in sizes, from regular formal advisory meetings with equity grants to a little more than name dropping.

This post isn't about advisory boards per se so I'll only say that most of them seem like a waste of time. What's not a waste of time is getting experienced people involved in your business. So personally I'd focus any advisory board effort there, i.e. finding the most useful people you can get and actually getting them involved, e.g. for equity (or a small investment). 

The point is though, you don't have to listen to your advisors at all. They have no authority to make decisions on behalf of your company.

When startups take bigger investment and get investor or independent board members, I've seen a few times now that there is a status quo mindset to treat them like the other advisors, but perhaps with more formal meetings. I completely understand this tendency because that's what the founders are used to, but nevertheless it is a mistake.

The exact purpose of the Board is defined in corporate documents, but it usually consists of selecting executives, setting company objectives & strategy, deciding material financial matters, etc. That is, it has the authority to govern the organization and really should be doing that governance.

Now it may be the case (especially after an angel round) that the founders still "control" the board in the sense that if anything ever came to a vote, which it hardly ever does, then they would win. That is, they aren't in danger of getting fired. 

However, even if that is the case, founders should still be setting strategic direction from the Board, and not simply reporting their chosen direction to the Board. It's a subtle, but very important distinction.

In addition, particular Board members (as a result of investment) may have protective provisions that give them veto power over certain things. Yet even if they don't have these powers, you should still run those kinds of decisions through the board, e.g. financing, acquisition, key hires, etc., and not at the board.

So how do you interact and communicate effectively with your Board? Now that I'm on some Boards, I've been collecting good advice to share with entrepreneurs from people way more experienced than myself. Here's the best stuff I've found so far.


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