As a start up or scaleup it’s important to have a good understanding of the dynamic of working with the board of directors and investors, especially as the CFO or financial director of a company.

Therefore this article explores how CFOs can navigate board interactions, support investor relations, and add value through financial leadership during critical moments such as fundraising and business scaling. Starting with a quick overview on the makeup of the board,

Board members

The makeup of a board for a startup or scaleup is different from that of a large corporate or a listed entity. In general, the founder and the CEO (often but not always the same person) are on the board, and they are often the only executives, unless there is a full-time CFO within the business.

If there is, the CFO is often also part of the board. The board would also include the lead investor or investors, depending on how many fundraisers there have been and how big the individual investors are.

Non-executive directors and advisers can also form part of the board. At this early stage, they are unpaid.

If an investor has invested heavily into the business, they may also want to have a board seat, which will be part of their condition of their investment. They may want voting rights, to be privy to confidential information and to have their opinion heard on the direction of the company.

These requests may not come to fruition for each investor – they will be negotiated on throughout. During the funding round, the existing board and founders may restrict the number of the board members as it can become too difficult.

Especially if you are trying to drive a business that’s nimble and fast growing, the more members you have on the board, the harder it is to find consensus and answer everyone’s questions.

The board can also have what is known as a silent observer. This is somebody who can attend and watch but doesn’t contribute to a board meeting. An example is when board access is negotiated during a fundraise. Either the investor decides they want to be a silent observer and comes to an agreement with the board, or they wanted to get a board seat but have compromised by becoming a silent observer.

The board can have a company secretary, who could be the business’s general counsel. Often, though, in the early stages one of the other board members or a finance team member would take on the role of secretary, especially if there’s no in-house counsel.

If there is more than one entity within the company group, the main board would be for the parent entity and would often have between five to seven members.

The board works for the shareholders and stakeholders and will make decisions based on this responsibility. Board members will be interested in overseeing the business strategy, the management of the busi- ness, and the accuracy of the financial statements.

The topics the board will be interested in are:

1. Strategy
2. People
3. Reputation
4. Finance
5. Compliance

1. Strategy

The board will be looking at strategy from both macro and micro perspectives, and they are also interested in competitors, USP, the product range and what’s happening with the customers. The real details are talked about outside of the boardroom, so the board will be looking at topics from a high level.

2. People

The board will consider if the right people are in the most senior positions as well as throughout the rest of the company. They will be considering whether the right culture is being met, and if the people being employed by the company are going to be able to implement strategy.

3. Reputation

As the board sees things at a high level, they can challenge any actions if they believe they may harm the reputation or brand of the business.

4. Finance

The board will look at the monthly or quarterly financial statements, cashflow, and the different decisions around cash. For example, if you decide to take on venture debt or start a new fundraise, those usually must be approved by the board. The annual budget and any potential audit will also need to be reported to the board. As the company grows, there may be a separate audit committee.

5. Compliance

This covers regulations, risks and compliance, with a focus also on legislation and on ensuring the business adheres to the relevant laws. Compliance is particularly important for financial services. Often, as a company gets larger, you will have a separate regulatory and governance board that feeds into the main board.

Your role in relation to the board

How much interaction you have with the board is at the discretion of the CEO. Some may want you to get heavily involved in their investor relations, either wanting your help or for you to own those relationships.

At early-stage startups, it’s more likely that the CEO would want to own those relationships, though, largely because members of the board are advisers and help the CEO on how to grow the business.

However, when you bring on larger venture capitalists (VCs) at the later stages, the CEO often wants you to support those with investor relationships.

When there is a fundraise, the founders need to be careful in who to choose as investors and potential board members. They need people who will add value to the board, to discussions and to the direction of the business. Sometimes it’s a worthwhile exercise to work out what gaps in knowledge the board has and seek to fill those gaps with any additions. Often the chairman will do this alongside the founder, but the CFO may also be asked for input.

With early-stage businesses, the leaders within the business prepare the board pack or any materials needed by the CEO. The board pack is then presented at the board meeting, either by the CEO alone or with help from the business leaders.

Most large investors will require summarised financial statements as well. All these requirements will be clarified in the shareholder agreement.

Whenever there is a fundraise, always ask for the signed shareholder agreement so you can see what is required by the finance function. Items to look out for when reviewing the shareholder agreement include:

• Financial reporting: Including specifying reports, how often they should be sent, and sometimes even relevant deadlines
• Annual audits: Which month these need to be completed and the time frame
• Insurance policies: The most common being directors’ and officers’ (D&O) insurance (how big they want the liability to cover themselves as members of the board), and key man insurance policies
• Annual budget reviews: Which also often have a deadline, such as thirty days before year end
• Any restrictions or suspensive conditions: Such as limiting trading activities of the founder(s) or other key shareholders

From supporting investor relations to ensuring financial and regulatory accountability, a CFO’s role is integral to building trust with the board and investors, as well as enabling informed decision-making at the highest level.

Proactively engaging with board dynamics and anticipating investor needs not only strengthens your effectiveness but also contributes to the long-term sustainability and growth of the business.

Alysha Randall is the author of “Financial Leadership Fundamentals” and the Founder & CEO of Fast Growth Consulting Ltd, where she conducts courses to train new and aspirational FDs and CFOs.