For early-stage private companies, building a strong board, including identifying the right independent directors early in the process, is a strategic imperative. Having guided numerous organizations through this critical process, I’ve observed firsthand how the right board can dramatically influence an early-stage company’s trajectory. Delaying the formation of a complete board often leads to stagnation, while acting early sets the stage for sustainable success.
The Evolving Landscape of Private Boards
Historically, early-stage private company boards consisted primarily of investors, the CEO or the scientific founder. We’ve witnessed a welcome shift in recent years, with companies bringing in independent directors much earlier — sometimes even pre-Series A — to balance the board and incorporate crucial operating experience.
This trend recognizes that private boards function best when they include diverse perspectives beyond investment considerations. Independent directors with operational backgrounds provide CEOs with practical support that complements investor viewpoints, creating a more well-rounded governance structure.
Understanding Where the Gaps Are
Crafting a high-performing board starts with intentionality. Begin by assessing your current board’s skill sets, envisioning where the company aims to be in 12 to 24 months and identifying the capabilities needed to bridge that gap. A board matrix is a simple yet effective tool to pinpoint skill gaps quickly.
Some critical areas to consider in a board matrix include:
- Operational leadership background.
- Deal-making and capital fundraising experience.
- Therapeutic-specific knowledge (for life sciences companies).
- Strategic planning capabilities.
- Early-stage company building experience.
The Impact of Strategic Board Appointments
Recently, we appointed a chair for a pre-Series A company with a first-time CEO. It was critical to hire someone who had previously served as CEO of an early-stage company to act as a sounding board. Due to the time commitment, we sought someone no longer in a full-time operating role who had a strong track record of board service.
Cultural fit with the CEO was paramount. We needed someone who enjoyed mentoring and wouldn’t be tempted to replace the CEO. Following these requirements, we found an exceptional leader who helped the CEO raise their Series A funding, mapped out key hires and timelines, and effectively managed investor relationships.
Reaching Beyond the Current Network
Leaders and investors of early-stage private companies often turn to their professional networks for board recruitment. While these networks can be valuable, they frequently fall short in providing access to diverse perspectives and experiences.
A professional search process uncovers strong candidates who might otherwise go unnoticed, such as individuals who bring fresh viewpoints and challenge existing thought patterns — essential elements for robust board dynamics. This approach also supports building diversity across multiple dimensions, including professional backgrounds, industry expertise, thinking styles, problem-solving approaches, and gender and racial representation.
Understanding Private Board Compensation
Private board compensation can vary significantly, often requiring creative approaches, particularly for companies in fundraising mode. For pre-Series A and Series A companies, we typically observe compensation ranges that differ between chairs and independent directors. Chairs generally receive cash compensation between $30,000 and $50,000 annually, accompanied by equity grants ranging from 0.30% to 0.75%. Independent directors, by comparison, typically receive $20,000 to $30,000 in cash compensation with equity grants between 0.25% and 0.30%. In some cases, companies provide no cash compensation at all — only equity. We’ve also encountered arrangements where companies offer minimal cash initially with guaranteed increases following successful fundraising rounds. This flexibility is often necessary when seeking to attract directors with credibility and connections in the investment community who can help secure financing.
Timeline and Process Considerations
Adding independent directors to a private board takes time for several reasons:
- Prospective directors need to understand the science in detail since early-stage companies have yet to prove their technology.
- Many biotech ventures fail, making private board service riskier than public board service.
- Private boards often require more time commitment from members.
- Investors typically have wide-spanning networks with strong opinions about executives, making alignment on candidates time-consuming.
Companies often add or replace board members when facing inflection points such as fundraising rounds, advancing programs into clinical trials or preparing for commercialization.
Board Dynamics and Culture
As with any healthy executive leadership team, boards need balanced skills, diverse experiences and strong culture. The chair and CEO must navigate board evolution with transparency and respect, especially as additional investors join and take board seats.
The ideal board comprises members with complementary skill sets who are comfortable challenging ideas while respecting boundaries. Remember that the board’s role is “nose in, hands out” — they advise and guide but don’t operate the company.
One-on-one meetings are crucial during the selection process, but observing group dynamics is equally important. Consider hosting a board dinner with finalist candidates to assess interactions and cultural fit. For onboarding, ensure new members have access to the CEO and other board members and receive comprehensive briefings on the business, including financials, science and team structure.
The Emerging Private Board Director Profile
We’re seeing a fairly consistent profile emerging for independent directors in private life sciences companies. These individuals typically possess combined board and operating experience, along with a proven track record of fundraising from both U.S. and E.U. investors. They demonstrate strong strategic planning capabilities, particularly in prioritization and portfolio optimization, as well as valuable experience scaling early-stage companies. Successful candidates have often partnered effectively with CEOs and/or academic founders and bring substantial business development and partnership experience. Their knowledge of global regulatory frameworks is complemented by domain expertise in relevant scientific or medical areas. Most importantly, they maintain a strong reputation that attracts both talent and investors, while offering international experience and cross-cultural competence that helps companies navigate global markets.
Looking Ahead
As businesses face increasingly complex challenges, establishing a strong board early is more critical than ever. The right directors bring not just expertise and oversight but also serve as strategic partners helping companies navigate growth, challenges and opportunities.
Organizations that prioritize early board development, embrace diversity and adopt a systematic approach to board composition position themselves for stronger governance and better long-term outcomes. In today’s competitive landscape, this isn’t just good practice; it’s a strategic necessity.