#136 - Anu Hariharan on Managing a Board

**Craig Cannon** (0:00)
Hey, how's it going? This is Craig Cannon, and you're listening to Y Combinator's podcast. Today's episode is with Anu Hariharan. Anu is a partner at YC. Today's episode is about her recent post, How To Manage a Board. You can find it on the YC blog, and I'll link it up in the description. You can find Anu on Twitter at Anu Hariharan.
And a quick YC announcement. If you're interested in doing Startup School this year, signups are open at startupschool.org. The course just started, and the deadline to sign up is August 4th. Select companies who complete the course will also receive $15,000 in equity-free funding. You can sign up at startupschool.org, and I'll link it up in the description. All right, here we go.
Okay, Anu, welcome to the podcast.

**Anu Hariharan** (0:43)
Thank you, Craig. Thank you for having me.

**Craig Cannon** (0:45)
So this one is about board management. Your recent post, How To Manage a Board, did really well, and I think people have some extra questions, and also if they haven't read the posts yet, we can kind of break down some of the bigger ideas today.
So let's start off with, why did you write this post in general?

**Anu Hariharan** (1:02)
Yeah, so this has actually been one of the top three questions asked by pretty much every growth stage founder in the YC portfolio.
And this often comes up, especially when they are raising their series A and write off their series A, because it's the first time in the company's life that you are forming an official board with an outside director. And by the outside director, the definition is either an independent board member or an investor who typically let the series A joins the board.
And CEOs and founders tend to be very nervous about this board composition, because let's be honest, this is the first time you have a formal board that has the ability to decide the performance of senior management, including has the ability to fire the CEO, which often is why it provokes anxiety. And so the number one question we get asked is, I now have a board, what should I do?
How should I interact with this board member? And as my board expands, how should I run my board meetings? And it comes out of this anxiety. And so we thought collectively as the YC partnership, that it would be helpful to share best practices of YC companies that do this really well, so that the rest of the community can benefit.

**Craig Cannon** (2:24)
And so let's start with board composition. If you're a founder, let's say you have one co-founder, how would you think about creating a board?

**Anu Hariharan** (2:32)
Yeah, so that's a great question. So we've seen different approaches. There is no right or wrong approach. The most common approach is your board typically, before you raise a series A, tends to compose of both the founders, or if you have three co-founders, all three.
And sometimes seed investors take both seeds. But that's not something we've seen as common, especially among the YC portfolio. The first time an outside director gets added is usually the series A round. So at the time of the series A, if you have two co-founders, it's typically both the co-founders and the series A investor who left the round who joins the board.
As the company scales and continues to raise future rounds, you tend to add three to five outside board members over the course of the duration, so around three to five years. So typically the B or the C investor also gets a board seat. But as you start getting closer to going public, the board composition actually tends to change quite a bit.
And when the company goes public, and you can see this because Dropbox, Zoom, Pinterest, there are recent examples of companies that have gone public, you need to have seven to nine board seats. And at that time, you tend to add three to five independent board members.
Also because A, you're looking for industry input or specific operational areas where you're looking for feedback. And closer to IPO, you need to form compensation committee, audit committees, which require independent board members to participate. So the composition really changes as you go closer to IPO. But since the vast majority of companies are in the early to mid growth stage, what is really important for you to know is you may have a three to five people board of which you and your co-founders have a boat seat and typically two to four investors who join your board.

**Craig Cannon** (4:22)
And now it's not uncommon for folks to add someone they've worked with in the past. So at what point does that person get added?