Do you really need a “board of directors” when your company is 6-12 months old?

I had a few questions on “Board of directors” at a startup from Manish Taneja. This it a post on the first question – Do you really need a “Board of directors” when your company is 6-12 months old?

You always need a board of directors, even if its just one person. A board primarily is responsible to the shareholders and looks out for their interests.It also advises the management (mostly the CEO) on company direction.

A board of directors (BoD) is not the same as an advisory board. The BoD has a fiduciary responsibility, whereas the advisory board has none.

Obviously when you are single founder, you will be “the board”. Since you are the only shareholder. There are a few procedural (statutory?) items that need to be completed (annually or more frequently) which are performed by the board.

Now on to the larger question: When and how should you expand the Board to a larger set of people?

The simple answer is when you believe your company needs Operational discipline, Financial discipline and “Discipline in your strategy“.

That could happen in 3 months, 6 or even later.

The most important thing I have personally experienced with board meetings is the need for reporting & tracking your company’s key metrics. Hence the discipline that sets in.

The company’s key metrics may not be revenue, customers or any other metric in the first few months. It could be as simple as status of the product development effort, customer development status, etc.

What I have found is the simple act of having to report that on a frequent basis is a bias for action and progress.

This is the biggest advantage of having a board of directors (especially for those entrepreneurs who tend to be “loosey-goosey” about most things.

Initially it might be okay to add one more person to the BoD, who you trust, can bounce ideas off and someone who will give you honest feedback to help keep things on track.

Most institutional investors (VC’s and some advanced angels) will however request a board seat to protect their (as a shareholder’s) interests.

In the next set of posts, I will detail – how many board members should you have, how often should they meet, what are board committees, how to manage your board and other board questions. If you have a specific question about the board,, feel free to email me or leave a comment.

3 thoughts on “Do you really need a “board of directors” when your company is 6-12 months old?”

  1. Very relevant and useful topic for entrepreneurs. Look forward to the series. As per Indian company law you need a min of two directors to form a private limited.

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