Love to be your own boss, but investors in his company loved, too?
Taking the capital risk, or even only a few thousand dollars of MOM and dad - often comes with strings attached. Be ready for investors to seek a seat on the Board of Directors : even if you don't have yet!
Julia Stamberger, co-founder & President, go to Picnic, talked to me about taking a round of capital - and a new Board of Directors, in its incipient Chicago food service business. (If you haven't yet, go to Picnic sells paintings of aperitif carriers). (You've probably eaten his food on his last trip through the airport or ' Hare!)
Julia was fortunate to attract investors several between angels and VCs. But all of them wanted to board seats... Despite the fact that the company did not have even a Board!
Does it really want?
Asking for a seat in the Council might be code for something else.
Investors often say what they want the right to control the use of their money. They want financial information, and who want to be consulted about changes in the business plan. What can not want to risk and liability associated with seats of the Board (which will give all good reasons to look at the company insurance policies).
Should it do so?
I strongly say yes! The experience and the supervision of a Board is invaluable. If investors angels, in particular, is likely that you will get great advice on a number of issues that otherwise might trip up.
But hold on. There is a difference between a boss and a member of the Board of the. The control that you give to an investor should not imply decisions every day. If you need to seek approval of investors for each decision - as if buy clips! -You are headed in dangerous for investors and entrepreneurs territory.
Consider alternatives
If the granting of a headquarters of the Board does not meet the situation (or his temper), suggest that the condition of "Observer" Board. This avoids responsibility while retaining "insider view of the investor" of operations and financial results.
Or avoid the Board all experience writing in simple contractual relationships with investors. It is possible to take money from investors and use it for "project finance" or create a small "joint venture" between you and the investor. These solutions could give an investor some control over only one piece of the company and I leave you free to be your own boss.
To go to Picnic, Julia him two seats of the Board to its investors. And he is happy that it did. You have a Board to report each quarter has kept its focus on results. "Financial reporting seeking [is] not established by any other part of your business," said. "It's great to have the discipline [to inform a room]." "Prioritize the things that are essential for your business".
Devilish details
Investors make the organizations Board better because their goals are so closely alighned with theirs. As a bonus, often are offset only by the gains on their investments instead of wages or fees. This type of detail is important. Be sure to negotiate all aspects of their participation, rights of voting rights when the meetings will be held. You have clear expectations from the outset will save you many future headaches.
Flexibility and efficiency are also concerns about a Board of Directors. The most effective plates mix investors, founders and pure strangers. Three, five or seven total members helps to avoid stagnant decisions. A small, balanced Council provides the agility and skill set necessary to contribute to a growing company.
I think that almost any business can benefit from a Board. They take careful planning and a little work, but also you can direct it towards a growth fast. So when an investor requests a board seat, smile and welcome aboard!
Dedicated to their benefits,
David Worrell
PS: I am the owner of a business as you. I am also a fundraising and maven social networks! If you're looking to raise money for your business, visit my Web site where readers of AllBusiness.com have a special page and exclusive access to free resources to finance the company. If you like what you write, leave a comment below or contact me.
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