Boarding school

Attracting non-executive directors to your start-up can make growth easier and less painful, says Simon Hombersley, of technology development group Lontra.

Rapid growth of a company can be a challenging process. The growing pains can be particularly acute with a technology start-up, where the firm needs to change the focus from technology development to customers, sales and commercial success.

Start-up managers need to be planning one or two stages ahead of the current position, while keeping a close focus on the day-to-day details. But it is hard to steer a ship from the engine room and the appointment of non-executive directors can bring valuable new perspectives. Lontra has recently attracted three non-executives to the board, as the company prepares to launch its compressor design.

Non-executives can bring a technical perspective. They should focus on the big picture, act as a sounding board on the programme, and provide a reality check on budgeting and outcomes.

We have appointed Peter Watson as non-executive chairman. He is the former chief executive of AEA Technology and managed technology development at British Rail and GKN, so he is an engineer and an experienced business leader. His personal interest is in finding ways that engineering skills can address environmental issues — an approach that sits well with Lontra.

Skills and guidance

Non-executives also enhance the commercial perspective, an area where some start-ups can be weak. Technological achievements do not inevitably lead to commercial success and the experience and contacts of non-executive director Colin Billiet are proving invaluable. As the former chief executive of Domnick Hunter, a major supplier to Lontra’s target compressor industry, he brings practical deal-making skills and guidance to the team.

There is also a management perspective. Appointing a non-executive board is rather like choosing your own boss. This may seem unappealing to someone who has enjoyed the freedom of starting his or her own company, but we all need to bounce ideas around and every manager can benefit from guidance and mentoring. To this end, Lontra has appointed Brian Long — an experienced manager who has worked in fast-growing start-ups — as non-executive director. He has also worked in challenging turnaround situations throughout the engineering and technology sectors.

The experience of non-executives, many of whom will have done what you are trying to do any number of times, is invaluable. They can also, crucially, provide the reassurance that investors need alongside a dynamic, young management team. All our non-executives have experience with management buy-outs, IPOs and working with major venture capital and other investors.

To attract directors to your company, start with a realistic assessment of what it needs, and then get networking. A conversation with former colleagues, potential customers, trade bodies, a competitor or a journalist can reveal potential candidates. It’s not about an ‘old boy network’ but candidates of a sufficient calibre in your sector will be visible and with time and effort you will identify them.

The use of a recruitment consultant could also be valuable and some can be flexible on charging arrangements. Lontra specifically sought a candidate to enhance understanding of the compressor industry and used an executive recruitment consultant to access an industry in which the founders had few contacts. Investors will also have a pool of good people and business angels may personally want to become involved alongside their investment.

You should be looking for more than just skills and experience. You will be building a team and how the directors relate to each other and, crucially, the manager is important. The sort of person who starts a company will typically be very strong-willed and determined and the board can be a useful balance to those personalities. The team needs to share an ethos and, in Lontra’s case, an environmental perspective. Together you are going to face difficult situations, so you need to like them personally and feel you can get on with them. The managers need to respect their directors and be willing to take guidance and leadership from them.

Devoting time

Engaging them is a challenge. This is not a recruitment process as such — you need to convince them that they should devote their time and reputation to your company. You are selling to them, not the other way round. The fees for non-executives in a start-up will not be high, so although they may make a fortune in the longer term through their options, in the short-term their motivation might be that they feel they can help, that the company interests them, that they trust you and that your company fits with their portfolio. It certainly won’t be for the money.

The building of a board represents another layer of decision making, which could be seen as a nuisance to a start-up founder. But this is part of growing into the next phase — becoming a stronger company. Paradoxically, managing a start-up is all about control, whereas growing a start-up is all about learning to let go. Non-executive directors can make that growth easier and less painful.

Simon Hombersley is Lontra’s business development director