oh, governance. let that elephant inside the room and talk about it.

How startups should play governance and 4 balances to keep in mind

What a tedious topic… Right. It may not be exciting, but it will keep your startup exciting in the eyes of your investors.

Startups need governance.

Imagine governance as a tidy, well-organized pantry. If you don’t keep it tidy and organized, its contents will start falling on your head next time you step inside and look for something. Or you won’t find that jar of zaatar at all. What are you going to tell the labneh? You better avoid such emergencies.

No matter how small your firm is, there’s no way you won’t benefit from having good governance. Think of better decision-making, good brand name and reputation, more high-quality talent, funding opportunities and lower risks for investors.

Don’t wait for a Pre-Series A, start today. Because when a bigger round comes and your paperwork is not in shape, an agreement missing here, a signature missing there, your investors may back off from the deal… It’s too late to lament that messy pantry at that point.

You may think that right now your resources are scarce and your team doesn’t have the time and experience to implement good governance practices. But putting systems and controls in place while the structure is small is definitely a better approach than doing so at later, when the structure and team have grown.

As per Luc Sterckx (INSEAD alumnus), governance plays a role in creating balance within a startup:

1/ A balance between the short-term tasks and long-term goals. Don’t allow urgent “fires” that need to be put out cost you the long-term vision and strategy of your startup. Having governance in place will help you.
2/ A balance between founders/managers and external shareholders. Governance shouldn’t hinder the founders’/team’s growth, creativity and freedom.
3/ A financial balance that allows for future stability. Long-term projects should always be financed by long-term capital (equity and/or long-term loans) rather than short-term solutions.
4/ A fine balance between entrepreneurial spirit and atmosphere and control instruments like budgets and reports. Sterckx mentions the idea of “creativity with a purpose”. That’s creativity that aligns with meaningful goals and outcomes.

Governance doesn’t kill creativity. It won’t kill your mission. On the contrary.

So where should you begin?

You have most probably already begun. See the list below.

I believe there are at least 10 things that founders need to always keep in check:

1/ Leadership transparency because it leads to trust
2/ Clear division of roles and responsibilities
3/ Statutory and regulatory compliance
4/ Risk management processes
5/ A solid board of directors, periodical meetings
6/ Ethical guidelines and a comprehensive code of conduct
7/ Well-documented accounting policies and their consistent application
8/ A regularly reviewed and updated budget
9/ A clean data room, updated cap table and regular reporting
10/ A will to continuously improve – governance is a process

And, lastly, who plays a role in startup governance? Everyone who’s incentivized to growth the startup value and securing a great exit. As investors, we should ensure that every startup in our portfolio is as balanced on the inside as possible. If we fail to assist founders and their teams in achieving that balance, it can cost us all dearly one day.

Good literature to get you started:

– Corporate Governance 101 for Startups by Riyad Abou Jaoudeh (link)
– Corporate Governance for Startups: Avoiding Pitfalls and Building Resilience (link)
– Start-Up Governance Playbook by IVCA and Deloitte (link)
– Corporate Governance for Early-Stage Innovative Companies (link)
– A startup governance journey (link)

P.S. I got inspired to talk about governance thanks to “Governance for every phase” panel at last month’s Step Dubai.

$26 million for Klaim and 1,300,000 claims accelerated globally

TruKKer ranked #5 in Logistics Power 25

200+ corporate partners (Money Fellows^^)

Milaf Cola goes international thanks to Zid

Merit’s Julie Barbier-Leblan in a conversation with NYSE

Repzo took part in a training program for pharmacy grads

Competency-based logistics curricula with Khazenly’s input

• HR Systems & Reporting Manager at Hala (Riyadh)
• Financial Internal Audit Manager at Hala (Riyadh)
• Manager, Revenue Performance & Process Optimization at Zid (Riyadh)
• Tax Manager at TruKKer (Dubai)
• Senior Analyst Corporate Finance at TruKKer (Dubai)
• Financial Controller at Zid (Riyadh)
• Platform Infrastructure Engineer at Money Fellows (Cairo)
• Sales (Lead Generation) at Hulexo (KSA)
• Junior Client Relations at The Luxury Closet (Dubai)
• Customer Happiness Specialist at Gameball (remote)

See you in April and Eid Mubarak in advance,

Hasan