- Our CFO/COO Tanja van Dinteren gives her perspective on why she believes introducing corporate governance at an early stage can help startups navigate the challenges of growing a business and lay the foundations for long-term success.
Entrepreneurs are known to be dedicated to their ideas and go all out to make their companies successful, but establishing basic corporate governance structures isn’t always at the top of their agenda. It can be perceived as premature, an administrative burden, or taking focus away from what they’re trying to achieve.
However, building corporate governance is as essential for a startup as any large corporation. It indicates that the business is planning for the future and building the foundation to flourish financially and creatively. It also adds accountability and transparency, attracting partners, customers, and new employees.
Defining corporate governance
Corporate governance is the domain of the Board of Directors (BOD) and refers to the system of rules, practices, and processes by which a company is directed and controlled. It helps to balance the company’s many stakeholders (shareholders, employees, customers, suppliers, investors, and more) and is altogether different from the daily operational decisions and activities that are executed by its management.
A healthy corporate governance function requires a clear and formal separation of duties between the BOD and management. It also requires a healthy working relationship between the Board and myself – in the hybrid role of CFO/COO.
Transparency and accountability
Corporate governance maintains transparency and accountability. Informed decision-making is only possible with systems in place that provide accurate and reliable information, and a company’s willingness to share that information regarding its performance.
For example, as CFO/COO I ensure that our company follows best practices in financial reporting and internal controls. We maintain accurate and timely financial records, and we have implemented strict internal controls to ensure the integrity of our financial reporting. We also appoint an external auditor to ensure that our financial statements are accurate and comply with all relevant laws and regulations. We follow International Financial Reporting Standards (IFRS) – not because it makes sense for every startup, but because it makes sense for our trajectory.
In fast-moving startup cultures driven by deadlines, it can be hard to prioritise transparency, and communication between startups and their stakeholders can break down. The BOD overseeing accountability and transparent communication is key to building trust.
Building an effective Board of Directors
Like all businesses, it is important that the corporate governance structures of a startup are fit for purpose. These structures should reflect the business’s model, size, complexity, and risk profile. As the startup grows, the structures mature.
Our Series A funding came with greater attention to pulling together the elements of a functioning BOD. We follow a one-tier model, with executive directors and non-executive directors. Because a BOD that comes with an early-stage investment round is often determined by factors like capital allocation or representing the founding team, the challenge specific to startups is assembling a BOD that best addresses the technical, regulatory, and buyer issues of a specific market.
For example, Lars Topholm is our Chairperson and works as Head of Research at Carnegie Bank. We benefit from his extensive knowledge of the market and geopolitical trends. John Carolin, our Non-Executive Director, has a background working at BOC Linde, a leading global industrial gases and engineering company. He’s experienced in executive and non-executive roles and diligently focuses on corporate governance. Similarly, Johan Hueffer (Novo Holdings) and Rob Beudeker (DSM) help us benefit from institutional knowledge in both best practices and industrial biotech.
Our BOD comprises individuals with diverse backgrounds and expertise, and they provide valuable guidance and oversight to our management team. They also hold regular meetings to review our financial performance and decide on important business matters.
A strategic roadmap
Effective corporate governance requires collaboration between the BOD and management teams. To this end, our C-suite executives play a critical role. They develop strategic goals, provide the leadership to empower employees to achieve these goals, and help build the company’s brand among stakeholders. Where our BOD sets long-term goals and oversees the company, our executives create a roadmap providing a clear picture of how to achieve the goals. Business strategies most often fail because of poor execution – not because of bad ideas.
Deep Branch’s visionary ambition is to tackle the climate emergency by turning food-grade carbon dioxide into sustainable, high-value ingredients. That’s a big task. To tackle this, we have many milestones to hit on the way to this end goal, following a roadmap with essential steps. Having a C-suite in place to establish, monitor, and drive these smaller goals will help achieve success as the startup grows.
Not too fast
The motto “Move fast and break things” often used by startups underscores the approach of work and innovation with an emphasis on speed and experimentation. This motto insists it’s better to make mistakes and disrupt technologies along the way than to play it safe at a slow and steady pace. At Deep Branch, we want to strike a balance. We know the risk of sacrificing flexibility by implementing a corporate governance structure. In my hybrid role as CFO and COO, I see it as my job to protect this flexibility and preserve what makes us unique.
I do this by continually asking questions. I question every policy we have to ensure it adds to rather than limits our growth. Moreover, I surround myself with similarly passionate and critical people who are ready to ask me the same questions. This approach helps improve performance, build a stable and productive culture, and unlock new opportunities.
Reaping the rewards of corporate governance
Almost five years down the road, we have secured significant investments, formed new partnerships, and grown our team. In no small part due to the presence of corporate governance. So, if you’re a startup founder, consider prioritising corporate governance – leaving your company better equipped to navigate the challenges of growing a business and setting you up for long-term success.
