How to spot a strong startup board

When you invest in a startup, you're investing in that company's leadership. That includes the board and advisers.

From an investor's perspective, it's a promising sign if a company—especially an early stage startup—is backed by recognizable advisers.

But there's one crucial element many people overlook when researching a company's board: diversity.

Traditionally, corporate boards (especially in tech) have been notoriously uniform. Fifteen years ago, women accounted for 15.7% of board seats in Fortune 500 companies. Now, it's grown to 25.5% (still far from the majority). With the rise in female board membership, we are also seeing more female CEOs. In just one year, the number of women serving as CEOs at Fortune 500 companies has jumped from 24 to 33 companies. That's a new record.

Companies aren't just making their boards diverse because it is the right thing to do; it's the smart thing to do. Multiple studies have shown that:

Employing women in leadership positions leads to an increase in profitability.
Companies with 3+ women on the board saw a median productivity 1.2% above those in their respective industries.
Companies with 3+ women on their boards saw even more financial benefits, including higher average dividend payout ratios and return on equity.
Companies with 3+ women on their boards had better performance attracting and retaining top talent.
Diverse boards have lower volatility, better performance and invest more in research and development.
The list goes on.

There are a lot of things to consider when investing in a company, but it's important to check if a founder has been able to attract a diverse group of advisers. This is just as relevant for startups—the earlier the company commits to diversity, the easier it will be for that company to leverage that expertise to grow in the long run.

As you consider your next investment on Republic, make sure to review the "Team" section of their deal page. This will include information about the company's founder(s), larger team, and board/advisers. See who the founder has selected to support them on their journey and consider the diverse perspectives and experience they will bring to the business.