5 Ways the Best Board Members Will Add Value to Your Startup…

When most entrepreneurs raise venture capital funding, they’re focused on getting the best valuation and deal terms for their company. And that makes sense: Reducing the cost of capital is urgently important for growing a business efficiently and preserving as much founder equity as possible.

Related: Getting the Most From Your Startup’s Board of Directors

But you might also want to pay attention to the other side of the aisle: Because while you, as the business owner, need to understand any investment you accept, in terms of efficiency and equity, it’s equally important that you understand it from a lead investor’s perspective.

This need is particularly acute if the investment is tied to the creation of an outside board seat, which typically occurs in institutional funding rounds.

According to a variety of studies including one by MSCI/GMI Ratings, a well-constructed board, over time, leads to increased shareholder value. And this positive effect undoubtedly spills over into private companies, since these boards arguably have even more influence given their smaller average size.

So, in setting up your own board of directors, think what expectations you, the entrepreneur, should have. Below are five meaningful ways in which the “right” board directors can positively impact your business’s value.

Discipline

There are many operating goals that startups pursue at any given point: These may be related to product development, marketing and sales, operations or finance. The result is that management gets distracted with the day-to-day vagaries of running the business. This is where a productive board can help: It not only helps the executive team prioritize goals but also serves a role in ensuring that there is follow-through.

Also for a productive board: Agendas flagging the most important topics are established and tracked during, and in the time between, board meetings.

Related: 5 Best Practices When Bringing on and Working With Advisors

In this context, it would be reasonable to assume that the agenda for, say, Uber, focused on different priorities at different times of the company’s growth: These might have included geographic expansion, inside and outside the United States; regulatory strategies; and, more recently, company culture and how best to deal with change in its executive ranks.

Access to capital

Established investors, whether they’re funds or individuals, tend to have existing relationships with counterparts they have previously invested with. This network allows them to access relationships that represent additional funds and facilitate “syndicating” a deal.

For an entrepreneur, this can not only help accelerate the closing of a current round, but also make it easier to tap into dollars in future rounds. It is common for angels and seed funds to work with a short list of trusted co-investors. When I was a board director at SeatGeek, the company relied heavily on its network investors, including Founder Collective, to set itself up for subsequent round of financings, attracting such investors as Accel Partners and Technology Crossover Ventures.

Strategy

While startups have certain things under their control, external market forces can impact the initial assumptions being made about these startups’ industry or business. New technologies, changes in customer behavior, regulatory changes and competitive pressures are among the meteors that can strike at any time.

That’s why a healthy board contributes by providing a channel for entrepreneurs to brainstorm strategic issues, such as a discussion on business lines, business models, pricing and funding strategies. Of course, the expectation should be that the board provides a conversational framework rather than outright makes company decisions. An extreme example of this is the proverbial “pivot.”

Many folks do not know that YouTube started out as a video dating site or that Twitter early on was a podcasting network. In most cases, these 90-degree turns are done with investor input.

Business development

A company can never have enough relevant customers or commercial partners, especially in the early days as it’s getting its sea legs. Funds in particular can open doors to prospects that help drive revenue. Many times, these contacts are at the highest levels of an organization, which helps draw immediate attention and establishes credibility to begin a serious dialogue.

The more investments an investor has made, and the bigger his or her portfolio is around a particular industry, the wider this person’s commercial Rolodex is likely to be. A particular benefit here can be a corporate venture fund that supplements the investment with access, for the startup, to its customer base or internal organization.

It’s not unusual, in fact, for funds like Comcast Ventures or Time Warner Investments to become customers of, or partners to, startups in which they invest.

Access to talent

In the end, startup success is a direct function of the people inside a company who execute an ambitious vision. Not surprisingly, finding and retaining high-performing personnel across all functional departments is difficult and can be a limiting factor. Board members understand this and can be valuable sources of leads to help fill particular roles, especially at the executive level.

Being able to recruit a qualified candidate endorsed by an investor can reduce your interview cycles and snag talent that might otherwise be unattainable. In fact, VC funds like FirstRound Capital and FF Ventures have recruiters on staff to help their portfolio companies identify candidates, to fill their open slots across multiple departments, including sales, marketing, technology and operations.

Related: 3 Ways VCs Can Add Value to Your Startup Beyond the Cash

The message here? When scouting for lead investors, consider more than just the economics of that deal . Take into account the potential board impact to come after the transaction. That’s when the real fun begins.