Start-Up Corner: The Evolution of the Board of Directors in Start‑Ups and Emerging Companies

Jim Ryan and Lovina Consunji authored the article “The Evolution of the Board of Directors in Start-Ups and Emerging Companies,” for The Journal of Robotics, Artificial Intelligence & Law. They explain how the role and structure of governance more specifically the board of directors determines the life of a typical start-up in turn effecting the evolution of an emerging company.

Start-ups of all sizes and companies all need to consider their governance. The most influential path of a company is rooted in their governance but more importantly in its board of directors. Specifically, when looking at start-ups there are two important aspects to consider when forming its board of directors, the first being the method of election of the board members and the second being the size and composition of the board. Whilst the method of election varies based on the company’s state of incorporation most start-ups start from a “default state” whereby they negotiate and raise equity financing. Furthermore, when looking at the size and composition of the board it largely depends on the stage of the company, yet this part of the formation is crucial as having a board that is too small can lack diversity yet too large can make it complicated for governance to occur. 

When looking at the makeup of the board in start-ups it is crucial to highlight how the evolution of the company and the board are interconnected in turn determining the trajectory of the company. Throughout the different stages that the company endures the board size and composition mirrors the shareholder base and the needs of the company. As a result, when forming the board, it in turn determines the success rate for the company making this a crucial step for start-ups. Considering this, it is vital for start-ups to work with experienced and knowledgeable legal counsel to determine the most appropriate and best fit for the company.

Read the full article.