Startup boards and governance: the importance of a high-performing board, best practices, pitfalls, and pathways

Abdullah Mutawi

Partner and Head of Corporate, MENA

Dr Jay Bevington

Partner and CEO and Board of Directors Practice Lead in the Middle East & North Africa, Heidrick & Struggles

A well-composed and effective board of directors can be the difference between a startup that scales sustainably and one that is held back by ineffective governance. For founders of emerging technology companies, the board is often both a source of capital and a sounding board for strategy. For investors, it is the primary lever for ensuring stewardship of capital and long-term value creation. Yet, too often, startup boards are either neglected as administrative formalities or allowed to become dysfunctional, where competing interests erode trust and result in slow execution.

This article explores best practices for startup boards, highlights the common pitfalls of poor governance, and provides actionable frameworks for both founders and investors. It will provide practical lessons on what works, what doesn’t, and how leaders can recognise red and green flags early.

Why boards matter in startups

Unlike in mature companies where governance structures are codified and institutionalised, startups operate in dynamic, resource-constrained environments. The board must therefore be both a guardian of fiduciary responsibilities and an enabler of growth.

Done well, boards:

provide accountability and discipline for founders and executives
bring outside expertise, networks, and credibility
anticipate crises and help steer through them
balance investor oversight with genuine company stewardship.

Done poorly, boards become toxic, entrench conflicts of interest, paralyse decision-making, and distract founders from execution.

Heidrick & Struggles’ private capital board impact framework maps the full range of these outcomes, assessing a board’s impact on a continuum from negative (derailing) to positive (protecting and accelerating).

Accelerating

The board meaningfully contributes towards accelerating company growth and delivering positive shareholder returns through impactful governance and partnering effectively with management.

Protecting

The board's oversight of management is effective at minimising risks to the company and protecting shareholder returns.

Passive

The board is passive, offering little challenge or direction to management and simply ratifying what the board chair, the CEO, and/or wider management put before it, thereby offering no safeguards to company stagnation or even failure.

Derailing

The board consumes a lot of time and resources, distracting or preventing the CEO and wider management from doing valuable work. As a result, it is directly contributing to a heightened risk of company failure.

Common pitfalls in startup governance

A startup board is rarely defined by one big success or failure; it is defined by the small, repeated habits and structures that either build discipline or let dysfunction creep in. These habits determine whether a board ends up accelerating or derailing performance. Allowing the bad behaviours and structural issues listed below to develop in your board is likely to lead to a negative outcome.

Investor-dominated/Large boards

Composition is a common area for dysfunction. One recurring failure is boards composed almost entirely of investor representatives. While investors bring capital and discipline, an investor-heavy board often lacks the operational, sectoral, or governance expertise the company needs. The result is short-termism, with board members prioritising fund optics or exit timelines over sustainable growth.

The number of board seats is also important. A bloated board of nine or more people often slows decision-making to a crawl. In contrast, leaner boards of six to eight members tend to function better, provided every seat is mapped to a purpose or required area of expertise.

Warning signs:

No independents, or token independents who add little value.
Discussions dominated by valuation, optics, or control issues.
Little focus on long-term strategy or product-market fit.
A large number of seats.

A weak or absent chairperson

The chairperson's role is critical. A startup board without an effective chair risks descending into chaos. When the founder doubles as chair, or when the chair is passive, accountability and discipline disappear. Meetings drift, discipline erodes, and founders can find themselves managing the board rather than being supported by it while they simultaneously try to run the company in an unsustainable dynamic.

Consequences include:

Poorly run meetings without agendas or clear action points.
Board decisions deferred until crises force action.
A lack of readiness for critical events such as fundraising, litigation, or cyber security breaches.

Static boards in dynamic companies

Startups evolve rapidly. A board composition that made sense at seed stage may be dangerously inadequate by Series C. Failure to refresh skills, size, and structure leads to stagnation.

Healthy boards revisit their composition regularly, adding new skills as the company grows and forming committees as complexity increases. Stagnant boards remain frozen in time, and companies miss opportunities to bring in relevant expertise for scaling, international expansion, or regulatory navigation.

Founder-board dysfunction

Boards become governance hostages when founder dynamics are mismanaged. Either the founder controls and stifles the board, or conversely, the board micromanages and undermines the founder. Both extremes create mistrust and paralysis. The healthiest dynamic lies in the middle: a board that challenges but supports, and a founder who leads the company while accepting accountability to the board.

Lack of cadence, process, and preparation

Unstructured boards are ineffective boards. When meetings are irregular, materials are sent late, or participants arrive unprepared, the board devolves into reactive oversight rather than proactive guidance.

Meeting cadence and process show up in the details. They may sound procedural, but they are the foundations of trust and accountability.

Failure to enforce fiduciary duties

Fiduciary orientation should be non-negotiable. Board members owe their duty to the company, not to the fund or constituency they represent. Yet too often, investor board members act as agents of their fund rather than stewards of the business. This erodes trust and undermines governance integrity.

Best practices for startup boards

Design the board with intent

Startups should resist viewing board composition as a mechanical allocation of investor seats. Instead, founders should treat the board as a design challenge, where they need to identify blind spots in skills, experience, and networks, and recruit independent directors who fill these gaps. Most crucially, they need to balance investor influence with neutral, stage-relevant experts by mapping every board seat to a function, skill gap, or strategic need.

Appoint an independent chairperson early

Separating the roles of CEO and chairperson helps ensure accountability, neutrality, and strong facilitation. A capable chair enforces discipline, sets KPIs, manages agendas, and keeps meetings focused on value creation rather than politics.

Establish strong cadence and process

Effective boards run like high-performing teams. This means:

pre-scheduling meetings for the year
sharing agendas and pre-read materials well in advance
tracking action items and responsibilities
holding both executives and board members accountable for follow-through.

Commit to evolution

Board composition should be reviewed annually. As the company matures, boards should:

refresh membership proactively, not reactively
form subcommittees (audit, compensation, risk) as complexity increases
rotate out members who no longer add value.

Build trust in founder-board relationships

The most effective boards combine challenge with support. Founders should view the board not as a policing body but as a strategic resource. Likewise, boards must avoid slipping into either deference or antagonism. Mutual trust and respect are foundational.

Enforce fiduciary orientation

Every director should undergo orientation or training in fiduciary duties. Regular refreshers reinforce that decisions must serve the company’s interests above all else. Conflicts of interest must be disclosed, managed, and documented.

The evolutionary lens

The best boards evolve in sync with the company. At seed stage, the board may be small and informal. By growth stage, it should resemble a professionalised governance body with subcommittees, independent chairs, and tested crisis management.

Stages of evolution:

Seed/Early: Founder, lead investor, small group of advisers.
Series A/B: Add sectoral experts, start to formalise cadence.
Series C and beyond: Independent chair, formal committees, refresh cycles.
Pre-IPO: Full corporate governance standards, audit/comp committees, diverse perspectives.

Conclusion

Strong boards don’t happen by accident. They are designed, nurtured, and refreshed deliberately. For founders, the board is not a burden but a support system – if built well. For investors, the board is more than a monitoring mechanism; it is a fiduciary responsibility and a tool for value creation.

The line between high-performing and toxic boards is thin. The difference lies in composition, cadence, independence, and fiduciary discipline. Ultimately, the boards that succeed will be those that move decisively away from derailing tendencies and towards accelerating outcomes.

By applying these best practices and watching closely for the subtle signals of dysfunction, startups and their investors can turn governance into a competitive advantage, rather than a liability.