1. Board Composition across different funding stages
# of Board members
# of Board observers*
# of Independent Board Member
- 2 founders - 1 Angel or VC pre-seed investor
- 1 VC pre-seed investor
- 2 founders - 1 VC seed investor
- 1 VC seed investor
- 2 founders - 2 VC investors (Seed + Series A)
- 1 VC investors (Seed + Series A)
- sometimes up to 1 Independent
- 2 founders - 2 VC investors (Series A+ Series B)
- 1 VC investors (Series A + Series b)
- 1 Independent†
Series C and later stages
- 2 founders - 3 VC investors (Series A+ Series B & Series C)
- 3 VC investors (Series A, Series B + Series C)
- 1-2 Independents†
*The role of board observers should be demarcated with clear responsibilities and expectations. In practice, board observers often behave like board members if there is no clear guidance. Clear guidance ensures that all parties are aligned and lessens the likelihood for conflict further down the road.
†In the later stages of a company’s development, having the right independent board members in place can ensure the proper balance between the founders and investors. Thus finding the right people for these independent roles is a crucial decision for the successful composition of a board.
2. Board Positions and responsibilities
A good board finds a balance between controlling governance guidelines — laid out in your articles of association/shareholder agreement/rules of procedure — and on helping to make the right strategic decisions. To make the most out of your board meeting, it is essential to understand the different roles.
- Typically, founders are the initial members of the Board. Their influence may decrease as the company secures more funding.
- Angel investors or venture capitalists may join the Board to ensure alignment between the company and its financial backers, with their representation often increasing as the company raises more capital. We at b2venture believe there should always be a balance between entrepreneurs and investors with the independents playing a key role in keeping these interests aligned.
- The chairperson, appointed by the Board majority, leads meetings and validates decisions and records.
- Board observers can attend meetings but lack voting rights and the privilege to participate in discussions, primarily intended to keep shareholders informed.
- These advisors have no prior relationship with the company and are compensated for their counsel, bound by confidentiality and non-compete clauses.
- Advisors are not typically official Board members but offer valuable guidance in areas such as product development, marketing, finance, and legal matters.
- 🔮 Vision Setting: Ensure the company remains true to the foundational vision and mission laid out by the entrepreneurs running the company.
- 🧮 Strategic Direction: Act as a sparring partner and provide a range different perspectives on the company's strategy
- 👥 Resource Allocation: Ensure that resources are directed towards areas of highest impact
- 📱Networking & Introductions: Use personal networks for introductions to potential investors, hires, partners, or clients
- 📝 Mentorship & Guidance: Act as mentors to founders, offering advice on business challenges, team dynamics, and personal growth
- ⚖️ Governance & Compliance: Ensure that the company complies with legal & regulatory standards
- 💰 Financial Oversight: Review and approve budgets & monitor financial performance
- 👩🏻💻 Hiring & Compensation: Support efforts in hiring key executive roles
- 🛑 Risk Management: Identify potential risks in operations, strategy, or financials
3. Selecting the right board members
In terms of how to pick the right board members - for an early-stage company - the #1 attribute you need is trust. And the only way you build trust is with time. However, in the following, we suggest applying our skill framework to get a better understanding of your Board’s capabilities. Generally, the skills of Board members should complement each other, meaning that diverse backgrounds and competencies contribute to discussions in Board meetings.