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Best Practices for Angel |
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Good Boards in Angel Investor Backed Companies
Good boards are more important than good CEOs.
There are many reasons why this is true, but one is that the board has the responsibility for hiring and firing the CEO.
Based on experience, it seems that if the investors make a lot of money, its probably due to an outstanding CEO. But if they investors lose all of their money, it's much more likely the board's fault.
Today, at the beginning of the 21st century, in this new post-Enron world, corporate governance has never been more important.
This is probably the single biggest change faced by early-stage companies -- probably all companies. The composition of the board and selectio of directors may be the single biggest controllable success factor for most companies.
Being a director today requires a very substantial time commitment.
It's also much harder to recruit good directors today.
These factors mean that companies are having to significantly increase compensation for directors.
This page shows a current example of a board compensation plan for a mid stage company.
A prerequisite to funding
A good quality, engaged board is a prerequisite to completing an angel financing.
A startup's first board is usually just the founders. This works well for the friends and family round.
Today, most angel investors expect a high quality, independent, engaged board to be in place by the time they complete their investment. Recruiting this first 'real board' is always a challenge. It can often take three to six months of concerted effort just to recruit one good director.
It's essential for all young companies to start working early on building an outstanding board.
