Governance in startups: why and how BAs should get involved
Startup governance is a central topic for investors, often underestimated but crucial to maximize the chances of success of a project. For business angels, getting involved in governance is not limited to participating in general meetings or sitting on the board of directors. This represents a strategic lever to support growth, minimize risks and create value over the long term. Startups today must put in place mechanisms adapted to their stage of development to effectively manage their strategy and manage risks. This key role calls for the active involvement of business angels in the various governance bodies.
Why is governance crucial in a startup ?
Guiding the growth strategy
Startup founders are often absorbed in day-to-day operations. Effective governance provides strategic vision, taking a step back to assess priorities and align the company's objectives with its available resources. It helps lay the foundations for strategic thinking by guiding founders through major decisions: raising funds, diversifying or entering new markets. The Board of Directors, for example, plays a key role in setting strategic deadlines while remaining flexible in the face of unforeseen events.
Manage risk
Startups operate in uncertain environments where financial, operational, or regulatory risks are pervasive. Having clear processes in place, such as regular audits or strategic reviews, can detect and resolve these issues early. Investors, through their expertise and network, can help anticipate these challenges and develop tailored solutions.
Preparing the startup for a fundraising or exit
Potential BAs or buyers often evaluate the governance of a startup to judge its maturity and potential. A strong structure, with active committees and control mechanisms, can increase valuation and speed up negotiations.
How can business angels get involved effectively ?
Actively participate in governance bodies
Sitting on the board of directors or strategic committee of a startup is an opportunity for BAs to contribute directly to major decisions. They can bring sector expertise, challenge founders on their assumptions and validate key orientations. For example, when discussing the pivot of a business model, investors' experience is often valuable. However, these are conditions to be addressed when drafting the shareholders' agreement. The IFA (French Institute of Directors) recommends a balance in the composition of the Board (3 to 4 members at the start, 5 to 8 at maturity) to guarantee a constructive diversity of points of view without burdening the debates.
Structure decision-making processes
Governance helps clarify the strategic vision, helping founders set priorities and align their resources. Bodies such as the Strategic Committee (or Advisory Board), specific to startups, play a key role in providing an external perspective and strategic advice without getting involved in the day-to-day management. Investors can introduce monitoring tools such as performance indicators (KPIs), financial dashboards, or regular reporting schedules (be careful not to harass the entrepreneur either). This makes it possible to professionalize the management while avoiding an excessive administrative burden for the founders.
Supporting in critical moments
Crises are an integral part of the entrepreneurial journey. Whether it's a cash flow crunch, an internal reorganization, or a communication crisis, investors can play a key role in helping founders navigate these challenging times. Their hindsight and their network then become valuable assets.
Leveraging their expertise and network
The expertise of BAs, often acquired over decades in specific sectors, allows them to intervene in a targeted manner. A BA who has worked in the cybersecurity industry will be able to advise a startup on the certification of its solutions or on the standards to be achieved to penetrate international markets. This ability to quickly identify strategic and operational issues offers a significant advantage to startups, especially during critical stages such as the development of new products or the entry into new markets. Their network is also a major asset. Business angels often open doors to strategic ecosystems by connecting startups with business partners, potential customers, or other investors. A BA can introduce a startup specializing in renewable energy to large companies looking to integrate innovative solutions to reduce their carbon footprint. This type of connection is not limited to business opportunities: it can also include relationships with technical experts, mentors, or government agencies. In governance, this dual strength — expertise and network — is also expressed through their role on strategic committees or boards of directors. In other words, a BA sitting on an Advisory Board can provide an informed view of industry trends while facilitating access to strategic resources, such as specialized consultants or business lawyers. This helps to strengthen the startup's ability to tackle complex challenges, while professionalizing its governance framework.
Pitfalls to avoid for business angels
Micromanage the founding team
While their involvement is essential, investors should avoid interfering in the day-to-day management of the startup. Their role is above all to guide, advise and control, without interfering in operational execution.
Neglecting the legal and contractual aspects
Governance is also based on solid legal foundations. Shareholders' agreements must be clear on points such as voting rights, liquidity clauses or exit mechanisms. BAs must ensure that these elements are well framed from the beginning.
Imposing processes that are too cumbersome
Startups, by nature, need flexibility. Governance that is too rigid or bureaucratic can hinder their agility. The goal is to find a balance between control and autonomy.
Governance in startups is not just a formality, but a central pillar of their long-term success. For BAs, being actively involved in them is an opportunity to amplify their impact and maximize their returns on investment. By investing in bodies such as the Advisory Board or the Executive Committee, business angels bring valuable expertise and help structure the foundations of sustainable growth. By bringing their expertise, network and strategic perspective, they help to structure a framework conducive to growth, while protecting their interests and those of other stakeholders.
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The different governance bodies in startups :
Advisory BoardThis
advisory body often brings together BAs, venture capitalists, and sometimes external experts. Its role is to guide major strategic decisions without interfering with day-to-day management.
Executive
CommitteeComposed of operational managers (CTO, CFO, CEO), it is in charge of major strategic decisions. The BAs bring their perspective to guide the medium and long-term orientations.
CODIR (Management Committee)
This body, which brings together the company's key managers, allows strategic and operational projects to be debated. The BAs participate to ensure alignment between the founders' vision and the expectations of investors.
Management Committee
Broader and more operational, it deals with issues such as the management of OKRs or managerial issues. The BAs play an indirect but strategic role in structuring the discussions.
