What’s the right board size and structure?

Who should read this?

Startup and growth-stage founders and CEOs.

Why does it matter?

Effective board governance is a necessary element in building shareholder value.

Board size and structure: What you need to know

For a startup that is pre-revenue or just entering the market with its first commercial product, a board of three usually works just fine.
That board might best be structured with a seat each for:

  • The CEO
  • A significant investor (venture capitalist)
  • An independent director

What makes an ideal director?

We could cover an entire post that looks at what makes an ideal director. For now, I’ll just suggest that the qualities you should seek include:

  • Commitment
  • Availability to work hand-in-hand frequently (this speaks to geographic proximity)
  • Previous startup governance experience (as versus experience with large corporate and public company governance)
  • Knowledge of your vertical

This should also be someone with whom you have a good rapport and mutual respect and trust.

As you scale, increase the board size

After initial commercialization and as your company starts to scale, I recommend increasing the board size to five. Ideally, you’ll recruit two additional independent directors so you have a solid and well-weighted board that is majority-controlled by independents.

It does not serve a company to have a board dominated by management or investors. Independent directors provide for objectivity, independent of any bias or vested interests.

Additional resources

By Gregory Phipps