Looking Beyond the IPO: Building your Board

Alex Zakupowsky, March 2, 2017

The IPO is not the end of the road for a company, but rather the beginning. To prepare for life after the IPO, you need to start creating your future public board of directors at least a year beforehand. Ideally, this means a board with six independent board members and one or two inside directors (usually the Founder(s) and/or the CEO).

Here is how to think about roles to be added for your newly public board:

  • Audit Chairman: The first outside director should be the Audit Chairman, who has historically been added when the company is $20M to $50M in revenue. I heard one Audit Chair give advice this way: “Audit Committees find things; save yourself grief and have this done early…” Great audit chairs are both financial experts and treasured board mentors.

  • Comp Committee: Next comes staffing the compensation committee. In private companies, many executives have one-off compensation agreements with no commonality amongst them. I see stock option grants all over the map for different executives. The job of the compensation committee will be to create policy around compensation with a defensible analytic grounding–don’t forget, after an IPO, key executive compensation will be public information. Warning: this is a very difficult board job and finding the right directors is critically important.

  • Nom & Gov: The final piece which must be added before an IPO is the Nominating & Governance committee. This is an extremely important job because the toughest decisions a board will make are around whether they have the right people in place. The fact is companies usually do not build well-rounded boards and executive teams soon enough. Replacing a CEO or fellow board member is extremely tough but if you want to build a successful, impactful, and scalable public company, you need the right players on your team.

An IPO is the wedding, a big party surrounded by friends and family congratulating you. It is a great experience and like a wedding, took a lot of hard work, commitment, and sometimes negotiation to get there. There are a lot of pot holes on the road to an IPO; make sure you are ready and it will be a great experience.

At Lonergan Partners, Alex recruits world class executives for companies in the networking, Saas, cloud and IoT sectors.