07/ 25/ 2006
Instead of hiring lots of senior-level managers, one business owner relied on a board of directors during the start-up phase
The Expert: Matthew Marolda
Founder and CEO, StratBridge
www.stratbridge.com
Cambridge, Mass.
When I started my company in 1999, venture capital funding was at its peak. It was a given that if you started a company, you needed VC backing to gather the resources, develop the product or service and grow revenue. With that capital, you also needed to immediately hire an experienced management team to help you get up and running—or so the logic went.
While these strategies might have worked for companies with no resources and little business experience, it didn't make sense to me. First, I would much rather raise revenue than capital. And, more importantly, the typical salaries, benefits and perks needed to hire experienced managers burns through seed-money coffers and hinders other critical operations, such as product development, sales and marketing. In other words, spending the resources to hire executive management is often the biggest challenge to launching a company.
However, I knew I needed experienced businesspeople to help me start and build a successful company. So I assembled a board of directors whose primary motivation wasn't financial compensation but the challenge of nurturing a company with a more hands-on approach than their previous board positions allowed.
When building a board of directors, the first step is to determine the expertise you need to complement your own strengths. I had a business background in financial analysis, but I knew I needed board members with experience in starting a technology company, developing and executing short- and long-term growth strategies and selling software.
Since assembling my board, StratBridge has grown 75 percent a year on average and has been profitable for 23 consecutive quarters. Our growth can be attributed to the board's flexibility in addressing different challenges and market conditions. Without the typical strings that come with VC funding, my business quickly capitalized on opportunities with the help of board members' experience in certain industries.
However, this model involves some risk. Without a management team that evolves with the company, you face a challenge when your business' growth forces you to integrate new senior-level managers. By then, the company's culture has already been established. Bringing new executives up to speed on your technology, product or service takes longer than if they'd started when the company was young.
Relying on a board of directors instead of an experienced management team is a quick way to ramp up your company, gain diverse expertise to start and grow it and lower your overhead. The four directors I now have on my board are the equivalent of two high-powered executives—at a much better price.
