7 questions founders should ask when choosing their first investor board member

I’m a VC and a common question I get from early stage founders is how to set up a board. Should it include all of the founders? How large should it be at each round? And in particular: Who should be the first investor to join? Choosing the right first investor board member is crucial for the long-term success of your startup.

In the frothy zero-interest-rate days of 2020/2021, startup capital flowed freely. Many early-stage companies raised seed through series A rounds, often opting for party rounds with no meaningful lead investor, while sometimes altogether avoiding adding an investor board member. This approach may have some merits, though as markets shift and things get rocky, here’s my advice for founders: It’s more important than ever to have someone on your cap table (and your board) who is deeply committed to your company over the long term.

At Defy.vc, we’re usually a startup’s first investor board member. As repeat founders and operators ourselves with deep venture experience, we’ve seen the importance of this role from both sides of the VC table. I can empathize with the questions founders often ask, and the concerns that underlie them: “Am I giving up control?” “Will we work together effectively?” “Will this potential board member help my company?”

It’s true that without a productive working relationship, the dynamic between founder and board can be challenging. However, it’s also true that the right first outside board member can provide immense value, from emotional support and strategic guidance, to future capital raising, hiring, selling, and so much more.

As you work to find the right investor board member for this next critical stage of your startup’s journey, here are eight key questions to consider:

Is the pitching / investment process a one-way or a two-way street?

When pitching, the founder is obviously trying to get the VC to a “yes”—a next meeting, the partnership meeting, a term sheet, and so on. The investor is also trying to figure out if they can get to a “yes”—asking themselves A) if they believe in the vision, B) is this the right team for the opportunity, and C) am I compelled by the metrics. The best experiences I’ve had on both sides of the table have been when each side is genuinely trying to get to know the other person, on a deeper, less transactional level.

Given the long-term commitment that both sides are considering, it rightfully should feel like a two-way interview process, or even better, a relationship-building experience. While everyone wants to be efficient with their time, an unwillingness from either the founder or the investor to spend real time together, in-person, getting to know the other party as a whole person is usually a yellow flag. The pitch/investment process should be a two-way street with the investor sharing who they are and how they work as opposed to just the founder doing so, and when you find this mutual dynamic it can make the entrepreneurial journey that much more collaborative and meaningful.

The ‘ups’ are easy, how do they handle the ‘downs’?

It’s easy to be a cheerleader from the sidelines when all the charts are up and to the right. But how does the board member react when the going gets tough? As a former founder and operator in board meetings where things aren’t going to plan—that’s an inevitable part of the startup journey. Direct and sometimes hard pushes are critically important to getting back on track, but there’s a line between constructive pushes, and unconstructive ones.

Additionally, I view a core part of my role as a board member to be the founder’s trusted confidant. It’s incredibly stressful and lonely as a founder/CEO and you should be able to call your lead investor when times are tough for both support and guidance, and not be afraid to do so or feel you have to be entirely polished. As you get deeper in your process of getting to know a potential lead investor, you should ask them if they can tell you about a startup that didn’t work out and how they helped to navigate that situation. A “two-way street” investor will be happy to talk you through it while providing privacy for the company/founder they’re talking about. If you end up getting to a term sheet, I would follow up, asking the investor for an intro to one of the founders whose companies ultimately didn’t work.

Can we try before we buy? Create a cadence of interactions

Before finalizing any decision, create opportunities for regular interactions with your potential board member or investor. Schedule a whiteboard session, brainstorming meeting, and even unstructured conversations to discuss real-time problems and opportunities with the business. These interactions will help you gauge their working style, compatibility with your team, and their ability to contribute effectively. This “try before you buy” approach can help to ensure that you make a well-informed decision both ways.

Can you communicate effectively and work through disagreements?

Some amount of disagreement is inevitable in any meaningful relationship. When channeled effectively, disagreements are an important part of strengthening a working relationship and building a stronger business. It’s essential to understand how a potential board member handles disagreements. While you’re getting to know your prospective future investor, consider introducing a “forced” conflict scenario to observe their reaction and conflict resolution skills. Related to number three above, this can be during a working session where you introduce a topic where you may not see eye to eye as it relates to your business or strategy. Do they remain calm and rational while seeking to understand your point of view, or do they become defensive and combative? Their approach to conflict can significantly impact the dynamics of your board and your company’s decision-making process, so work in advance to test and understand it.

Will this person ‘do the work’ without grabbing the wheel?

An investor board member should be more than just a figurehead. Optimally you should identify the specific gaps or critical needs within your company that this potential board member or investor can help address. Evaluate if you are looking for industry expertise, strategic connections, financial acumen, or operational experience with GTM or other areas. The right VC should bring valuable skills and insights that complement your team and help drive your business forward.

Beyond just having the right background, you need to assess whether they are willing to roll up their sleeves and contribute actively to your company’s success. Consider if you feel comfortable asking them for help, and better yet, if they will proactively offer their assistance while also knowing how to not get in your way. Look for signs of their commitment and willingness to get involved during the evaluation process, and ask other founders that work with the prospective new board member how they have helped their respective companies. Importantly, you should be confident that your investor can provide all of this help without being overbearing.

As a founder/operator turned VC myself, I’m self-aware enough to know that some of us have to fight the urge to “grab the wheel.” An investor shouldn’t try to solve things directly for a company, but rather provide advice while letting the founder implement their own solution, and/or offering to help take on parts of the founder’s solution.

Not all cash is the same color green—where is the money coming from?

All venture investors offer capital, but not all of that capital is the same. Understanding the source of an investor’s funds is critical. In the end, a startup’s success or failure impacts the ultimate providers of capital beyond the venture investor themselves: their LPs (Limited Partners who are the investors in a fund).

So in considering different investors, at times it is worthwhile to consider the source of a fund’s capital. Does the money come from ethical sources, and does it align with your company’s values and mission? We’re fortunate at Defy.vc to have impactful institutional LPs that do a tremendous amount of good in the world. From scholarships to charitable giving to children’s hospitals, and more, Defy.vc’s capital comes from and goes back to causes that make the world a better place. As you get deep in the process with a prospective investor, seek to understand their LP base and whether the money is coming from mission-aligned sources. If you can do well for the world when you do well, and you like the investor, that’s a win-win-win.

Are we aligned on the vision and goals?

This could easily be number one on this list, but it’s critical before you enter a formal partnership to ensure that you and your prospective future board members are aligned on the most important items. You should ensure that the prospective investor board member shares and supports your long-term vision and strategic goals. The “how” you get there will shift and change, but being aligned on the problem you are dead-set on solving and what it will look like when you eventually get there is an important exercise.

We like to talk about this before investment, but we also do a kick-off session after an investment to align on goals between now and the next round or major milestone. This can help to improve alignment, and also get everyone on the same page in terms of the key areas where the new board member can help the company.

Conclusion

The right board member will bring invaluable skills, share your vision, and stand by you through thick and thin. Remember, this isn’t just about capital; it’s about finding a partner who’s as invested in your success as you are. By asking these critical questions and thoughtfully evaluating your fit with potential first investor board members, you can set the foundation for a productive long-term relationship and your company’s future success. Don’t settle for anything less than a strong fit. Your future self will thank you.