This document provides advice on building a world-class board of directors for an entrepreneurial company. It discusses the importance of having independent directors to provide expertise, supervision, guidance, reality checks, and connections. The document recommends recruiting directors based on the skills and experience needed by the company. It also discusses finding directors through personal networks, investor connections, and other boards. The document emphasizes compensating directors primarily with equity and establishing clear processes for board meetings and communication.

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Building a World-Class
Board
Advice for the Entrepreneur
Richard M. Lucash
128icg
October 9, 2009

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Background
 B. Sc. MIT, Physics
 J.D., Cornell Law School
 Founder, “boutique” law firm focused on tech companies
 Partner in national firm
 Founder, LaunchPad angel group
 Now: Consultant, Advisor, Director

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What’s a Board?
Board of Directors
Legal entity
Power; responsibility
Fiduciary duty; liability
Board of Advisors
Not “legal”
Sense of responsibility
No legal power
No liability (yet . . .)

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Why a Board?
 Legal requirement to have one
 May be the founders/shareholders
 Some investors will be added
 “Outside” directors

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Why You Want Independent Directors
No one knows everything or everyone they need to
 Expertise
 Supervision
 Guidance
 Reality Checks
 Rolodex

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Recruiting
Determine what the company needs
Skills
Experience in related field(s)
Marketing
Customer side
Company side
Connections
Variety of all
3 – 5 year time horizon

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Recruiting
Personal Interview
Not family members
Not the company’s lawyer, accountant
Not multiple founders

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Investors as Directors
One or more may be mandatory
Quality should be a factor in selecting investors

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“Independent” Director
Often a requirement of investment deal
Pay attention to the selection
Could be the tie-breaking vote on your job!

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Finding Outside Directors
Your network
Networking groups: 128icg
Investors’ rolodexes
Other Directors’ rolodexes
Advisors’ networks – use your attorneys,
accountants etc.

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Other Requirements
Available
Mentor orientation
Will work for equity
Will move aside when company evolves

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Compensation
Equity Equity Equity
Vest 2 – 4 years
Restricted Stock or “Reverse Vesting” options

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Compensation
10% of company after last pre-venture round
1.5 – 2.5% per director
2x that for active outside chairman

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Working with the Board
Managing Upwards
Be the chairman
Regular meeting schedule
Advance draft agenda; request
comments
Advance info packet

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Working with the Board
Regular communication between
meetings
Email
In person
Form Committees – e.g. compensation
Honesty; Full Disclosure
Periodic Evaluation and Board/Member
self-evaluation

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Discussion
[See MHT July 25-31 p. 14 for article]

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Richard M. Lucash
Lawrence Associates
396 Washington Street
Wellesley, MA 02481
Phone: 781-237-9044
E-mail: rlucash@lawrenceassociates.com