How to Run a Founder Board

Boards Start from Day 1

If you have a company, you have Board of Directors.

A common misconception that you’ll often hear is that companies get Boards until later financings. You’ll hear talk about ‘forming a board’ around your Series A financing, and even say that early stage companies ‘don’t have a board yet.’

This is, of course, technically wrong.

In almost every situation, upon incorporation you form a Board of Directors - with the Founders as Directors.

Look closely at your incorporation papers (hopefully completed with a lawyer). The order of operations is typically like this:

// How to Incorporate
1) You file the incorporation as the Incorporator;
2) as the Incorporator, you appoint yourself (and co-founders) 
as Members of the Board of Directors;
3) as as Board, you then appoint yourselves as Officers (ie CEO, CTO, etc.);
4) as a Board, you authorize the sale of shares in exchange
for $100 and your IP etc. (and you become a shareholder too)

So as a Founder you are a Board Member before you are CEO.

Founders should embrace their identity as the first Directors of the corporation and lean into the period we call the Founder Board.

How to Run a Founder Board

Running a Founder Board is not complex, but it does require knowing what to do and how to do it.

To cut to the chase, here are 5 essential todo’s during this period:

1. Meetings: Hold 2-4x meetings per year and keep formal minutes 
2. Corporate Records: Create a dedicated folder for corporate records 
3. Written Consents: Set up a fast process for Digital Consents
4. Corporate Counsel: Agree with counsel on what they will do
5. Board Spec: Define a short list of things you'll do as a Board

Here is a quick overview on each one:

Meetings

Hold 2-4x meetings per year and keep formal minutes

During the Founder Board period, you should meet formally as a Board (with an Agenda and minutes). At minimum, you should meeting 1x per year.

There are two reasons why:

1. Reduce Risk: having formal minutes reinforces corporate liability protection. If you don’t do this there is risk that a court could ‘pierce the corporate veil’ and find you personally liable for acts or debts of the corporation. Suffice it to say that holding meetings and recording minutes helps protect you on this.

2. Get Practice: Running your Board ‘as if it were bigger’ is a great way to get ready for adding outside directors. You don’t want to be doing your first formal meeting with your new investors around the table. Especially if you haven’t run a Board before, you should use this time to practice and ask the questions of your lawyer.

You should just schedule the meetings out a year in advance. Set a meeting agenda to cover the big topics: strategy, team, financials, governance. Run the meeting with your co-founders. Then record and store the minutes and store them in your corporate records.

Corporate Records

Create a dedicated folder for corporate records

Create a clear, dedicates place for your corporate records. Under Delaware law, they may be electronic - but must be readily printable onto paper. A Google Drive/Dropbox folder is fine - just make sure its seperate from everything else. Only put PDF / final copies in there.

Most Founder Board stage companies actually mess this up. The most common way is trusting / expecting your lawyer to do it. We love lawyers. But we’ve seen too many instances where even top firms lost years of meeting minutes.

The dirty secret is that many law firms are bad at file management. Often it’s left to each attorney - and when one leaves, sometimes those files are gone forever.

Re-doing meeting minutes or not having any is a huge pain and a total unforced error.

So do your company a favor: store your own corporate records.

Written Consents

Set up a fast process for Digital Consents

Digital written consents are a brilliant tool: you should use them for routine option grants, meeting minute approvals, and other routine business.

A digital consent is where a Board takes an action it would otherwise do in a meeting through the consent process (ie evidence of agreement by Directors). Under Delaware law, consents may be electronic so long as they’re stored together with the meeting minutes (ie in your corporate records folder).

A typical use case is option grants. Management teams are not authorized to grant themselves (or others) stock options - so Board action is required.

Technically, you might even be able to do a consent by email (provided you PDF’d the emails and kept them with the minutes - this does happen).

A heavy-weight solution is doing a DocuSign. Most law firms will do this for you; but in practice it can sometimes take weeks to go end-to-end.

The bottomline is that you want to agree with your team and lawyer on how you’ll do consents. That way, when you need to make an option grant, you can just press the button and it gets done.

* As always, check with your counsel to confirm the process in your jurisdiction.

Corporate Counsel

Agree with counsel on what they will do

Get a short, written summary of the things that your law firm will do relating to your board. This probably will be something like:

1) attend meetings at no additional charge,
2) keep and produce meeting minutes,
3) process electronic consents witin 3 days of request,
3) answer founder questions regarding questions of governance.

Many venture/tech law firms nowadays will provide fixed-fee services for startups in their first 1-2 years (e.g. $5k/yr for ‘all basic services’). You should of course get in writing what is included in those services.

The economics of fixe-fee means that your lawywer may not prioritize things like electronic consents or closely tracking meeting minutes. That’s where having a time base SLA can be helpful.

Board Spec

Define a short list of things you'll do as a Board

This should be super short; but helpful to answer the question ‘what do we do as a Board.’

Here’s an example:

// Board Operating System v0.1.0
[] Approve annual budget
[] Approve senior hires
[] Approve all option grants
[] Approve financing
[] Meet formally 2x per year
[] Approve + store all minutes/consents within 7 days

Next Steps

It may seem like a lot of stuff to keep track of - especially when you’re locked in the existential struggle for Product Market Fit, fundraising, and all the other struggles of early-stage founder life.

BOSWARE was built to help with this. We actually hate the idea that Founders need to read a post like this to know what to do.

So if you want to ignore this post and just get a system that puts it all “on rails” for you, come sign up today! FREE TRIAL