Board of Directors Dynamics
The Board of Directors represents the shareholders and has the ultimate legal authority to fire the CEO, approve budgets, and sell the company. Board composition is heavily negotiated in the term sheet.
Typical Board Evolution
| Stage | Typical Size | Composition |
|---|---|---|
| Pre-Seed | 1 to 2 | Founders only |
| Seed / Series A | 3 | 2 Founders, 1 Lead Investor |
| Series B | 5 | 2 Founders, 2 Investors, 1 Independent |
| Late Stage | 7 | Varied (more independents) |
The Independent Board Member
A 5-person board with 2 founders and 2 investors leaves the 5th seat to an "Independent" (usually an industry veteran agreed upon by both sides). This person becomes the swing vote. Choose them carefully.
Board Observers
Investors who write smaller checks may ask for an "Observer" seat. They can attend meetings and receive materials but have no voting power. Limit observers, as large board meetings become unwieldy.