All Money Is Not Created Equal

Chapter 17Getting the Most from Your Board

Your board can be a tremendous asset to you as you build your company. Its size, composition, and influence will evolve with your company. At any stage, board members, especially those who become members because of their investment in your company, can help you make smart choices about money: how to source it, best use it, and preserve it. That's why it's critical that you make smart choices about who joins your board.

First you need to understand what a board looks like and how it functions.

Structure

At the early stages, your board is probably going to be one or two people from your company (likely the first founders), one or two investors, and one independent director that you and the investors find mutually acceptable. Independent directors are usually industry experts who can add value around product development, go-to-market plans, and strategic partnerships or potential exits.

Five is the most common number of board members for an early-stage company. As you go into subsequent investment rounds, one of the board members from your company is probably going to have to exit the board to make room for another investor. At that point, the board will likely be one person from the company (usually the CEO), three investor representatives, and one mutually acceptable independent director.

Not all investors look to sit on boards, especially with the influx of new sources of money flowing into Silicon Valley, but I would advise you ...