When you are starting out as an entrepreneur or even if you are seasoned a good board of directors can be invaluable. When I first got started I invited several people whom I admired for both their accomplishments and it didn’t hurt they they were people who had done well financially. I didn’t ask them for money, just advice. Most of them eventually invested in the company.

Later when the company got more established we brought on venture capital and of course that demaded a board seat. I have to tell you finding the right vc firm with the right people is important. That board member can be a great asset to you and your board. There is a lot more value a good vc can add then just the money. I like to think of the board of directors as a team. I need them functioning on all levels and they need to work closely with the management team and the CEO to ensure success.

As I went along I started selecting board members for their specific areas of expertise. As our company grows we are looking to expand the board. We started out with 3 members on the board through development to market. As we move towards profitability we are expanding the board. Personally I like to limit the number of people in the company that are on the board. I think the CEO is sufficient. The company officers need to focus on being the managment team. They can be invited to the board meetings, but I don’t think it is good to have them on the board. Besides as you start to grow and you want to bring in expertise you could offend them by taking them off the board.

So my ideal board composition would be something like the following:

3-person board

CEO
Investor or potential investor
CEO of a complimentary company with great experience

In this kind of board you have to think about raising money and you want the broad experience of someone else who has seen it all.

5-person board

CEO
Investor or potential investor
Customer
Strategic Alliance Partner
CEO of a complimentary company with great experience

7-person board

CEO
Investor or potential investor
Customer
Strategic Alliance Partner
CEO of a complimentary company with great experience
Community leader
Other either Marketing expert or Financial expert

9-person board

CEO
Investor or potential investor
Customer
Strategic Alliance Partner
CEO of a complimentary company with great experienc
Community leader
Marketing or Financial Expert
Another CEO of a complimentary company
Customer

I think the board should be balance between insiders like the management team and investors and outside entities like customers, other CEO’s and community leaders to provide some sense of reality to the board.

Now sometimes because of raising capital you are left with a board heavy on investors. There may be nothing you can do about it. However, if you can get them to see that the having the perspective of customers and alliance partners on your board strengthens your decision making they might be willing to rely on other investors to fill the board seats and could still be invited in as observers. I will say though that if you have taking money and you have given them a board seat with it and there is nothing wrong with that don’t ever try to take that board seat away. That investor has to make that decision to step aside to allow another person on the board. They seldom will, but sometimes when you get to making good money and there are not many concerns with the company they are willing to do so to allow themselves time to work with their other portfolio companies.