A board of directors is the governing body elected by shareholders to oversee company management, set strategic direction, and make major decisions including hiring and firing the CEO, approving budgets, authorizing fundraising, and approving a sale of the company. Board composition is one of the most consequential negotiation points in venture financing because it determines who controls these critical decisions.
The board has legal authority over the company. Board composition determines who controls major decisions: raising money, selling the company, hiring/firing executives, and approving budgets.
At seed stage, the board is usually just the founders. Each priced round typically adds an investor board seat. Board control is one of the most consequential negotiation points.
Seed: 1-2 founders. No formal board or a 3-person board (2 founders + 1 independent or investor observer).
Series A: 5-person board. 2 founders, 2 investors, 1 independent. Founders maintain control through the independent seat.
Series B+: boards grow to 5-7 members. Investor seats may equal or exceed founder seats. Independent directors become important swing votes.
Governance: approving annual budgets, equity grants, executive compensation.
Strategic oversight: reviewing performance, advising on strategy, opening doors.
Fiduciary duty: acting in the best interest of the company (all shareholders, not just the investors they represent).
Protective provisions: certain actions (raising capital, selling the company, changing the charter) require board or investor approval.
Giving up board control too early. Once investors control the board, they can fire the CEO (you).
Not choosing independent directors carefully. They are often the swing vote on contentious decisions.
Treating the board as a formality instead of using it for advice, accountability, and connections.
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