In startup boards, I often find myself hammering or coaching on good governance practices. Far less on the tech business competences that I thought would define me in such environments. I gradually, came to the conclusion that it’s basically a few enterpreneurial practices, that is setting apart the winners from the losers.
Ah, yes startups. Those magical, caffeine-fueled places where ideas become empires, jeans are considered formal wear, and the CEO sometimes thinks they’re Steve Jobs reincarnated – minus the black turtleneck, plus a fondness for shouting. But if you’re serious about turning your scrappy startup into a legitimate scale-up (and not just a headline on TechCrunch Fail Fridays), then here’s a dirty little secret: good governance matters. A lot.
Yes, we know—governance sounds like contrary to the startup aura: “we are disruptors, we do everything better, we are geniuses.” Governance sounds like something involving powdered wigs and parliamentary debates. But in the startup world, sound enterpreneurial governance is what separates the future unicorns from the next spectacular implosion. It’s the internal operating system that keeps your company from being run like a self-destructing pirate ship.
Let’s start with transparency. No, not the kind where you wear glass office walls and open-plan seating like a badge of honor. We’re talking about clear, timely communication with your board, your investors, and yes, even the employees. Being forthcoming about key risks. When a CEO says, “Don’t worry, I’ve got everything under control,” and refuses to share metrics or financials, it’s usually followed by a surprise cash crunch, a round of layoffs, delays in new services, a fraud case, and an awkwardly upbeat LinkedIn post. Spoiler: if you’re hiding burn rates or fudging forecasts, you’re not leading a company – you’re hosting a slow-motion train wreck.
In a culture of transparency, a due diligence is welcome, audits are standard practice, and critical observations get their timely remedies.
At the same time, reporting transparently without clear KPIs, and minimum targets, will lead to random and unfocused decision making. Wasting precious resources and windows of opportunity. Accountability means that it is crystal clear to all key people at any time what targets are reached, which ones are missed, and which ones are the highest priorities to keep working on. What unique selling points (USPs) do we focus on? And, which ones are made obsolete by competitors? What are the key risks, and how do we mitigate them? So, drop all the discussions about other fashionable three letter acronyms like OKRs, or the balanced scorecard, etc, it is highly irrelevant. It really doesn’t matter how metrics are called or if they are hot or not.
In subscription-based business, like SaaSs, the Rule of 40 is a key metric with a clear inherent target value. It’s a metric, we tend to translate to other businesses as well, as it balances acceptable levels of losses with fast-growth. Together with a handful of other category-specific KPIs, we like to see them in a business dashboard that shows at one glance what goes well, and what not. A traffic light model (red, orange, green) is typically very insightful.
Targets are not just something on board level to stress C-level. They need translation to department and staff level. It should also lead to continuous evaluation, timely letting go of people that don’t meet their targets, and focusing bonuses on top performers. By doing this, you can prevent big layoffs, with all their business disruptions and demotivating effects. To the contrary, it builds a ruthlessly professional and future proof culture.
Speaking of power: divide it. When all decision-making rests with one charismatic founder, you don’t have a startup, you have a personality cult with a cap table. Smart scale-ups delegate real authority to operational leaders, install independent board members, and actually listen to them. Not just pretend to listen. Especially, in more top down cultures this still sounds radical.
So, checks and balances aren’t just for democracies. In startups, it means someone other than the founder should have the ability to say, “Hey, maybe don’t spend our Series A on just hiring a battery of new developers, but empower senior developers with great Coder AIs in stead”. Founders are visionaries, yes. But even visionaries need guardrails. A good board provides just that: guidance, oversight, and the occasional “please, don’t embarrass us” talk.
Nevertheless, just fixing checks and balances on board level is still not good enough. It’s far better if the checks and balances are deeply embedded in how the company and its executives operate. So, that investors never need to actually use their veto power on reserved matters. So that no showdowns are needed between founders and non-executive directors (NEDs) installed by VCs. This also requires from VC-appointed NEDs that they bring extensive enterpreneurial insights to the table. How to create a pragmatic system of checks and balances, without slowing down business innovation and the speed with which clients are helped. However, that deep enterpreneurial experience is often dearly lacking from the side of the typical financial VC. Which creates a breeding ground for board conflicts.
Now let’s address the elephant in the boardroom: behavior. Somewhere between the high-stress sprints, the 10x dreams, and the WeWork documentaries, startup culture got a pass on basic human decency. Whenever you notice this, make clear that ‘That ends now’. There’s no place for shouting in the boardroom. Or gaslighting. Or casually dropping the VP of People because they dared suggest a harassment policy. Bad behavior – a gorilla – increases the friction, makes it harder to get results, and makes it almost impossible to keep on timely innovating. The bar should be zero tolerance. Because if the leadership can’t model professionalism, how can the team be expected to build a sustainable company culture? It doesn’t matter who the gorilla is – a NED, a C-level executive, or a sales boss – it should be promptly addressed. Because a culture of fear smothers creativity.
‘No gorillas’ doesn’t mean that the company doesn’t strive for category dominance. To the contrary. It still should relentlessly focus on developing unique selling points, outcompeting others, and winning its market battles.
Finally, a word on open communication. The best leaders know how to listen. They build feedback loops, welcome dissent (not just sycophancy), and understand that “I disagree” is not an act of betrayal, but a gift. The moment your leadership team or NEDs stop pushing back is the moment your business stops innovating and growing—and starts coasting toward irrelevance.
So, to all the founders out there dreaming of IPOs and Icelandic offsites, here’s a humble suggestion: before you scale your product, scale your principles. Build a governance structure as resilient as your codebase, and you’ll be better equipped for everything the startup rollercoaster throws at you—minus the motion sickness.
And hey, maybe even keep the board’s volume below 85 decibels. For morale. And for focus.
Read further: Icecat
Founder and CEO of Icecat NV. Investor. Ph.D.
