Strategy · Board of directors

What are some examples of successful seed stage board structures?

Shingai Samudzi

November 4th, 2014

I would like to restructure the board of my seed stage startup in a way that allows our founding team to retain as much control as possible as we go through our first round of fundraising.

What are some examples of good  board setups that enable this?

Geoff Lamdin Left Field Solutions, LLC

November 4th, 2014

Your question prompts more questions!  What is the current legal form of your company? LLC? Sub-Chapter S? Chapter C?  How many Board members do you currently have?  Are they founders?  How much ownership does each have?  How long has your company been operating?  Are you pre or post revenue?

As you will detect, there is no one size fits all!  Generally, each Board member has one vote.  Board members are generally elected by the owners of the company (shareholders, unit holders...).  

What are the catalysts and purposes to substituting or expanding the Board - investment? business growth?  Who are the Board candidates and how are they connected to the you and the company?

Once you answer these questions, you will understand the possible future Board composition options better.  
A few general guidelines - keep the Board small -3 or 5 is a good number until you have significant revenue and investment.  Board responsibilities are series  - are the candidates understanding and up to the challenges ahead? If investors - would observer rights be acceptable?

And, I shouldn't have to say this... many early stage companies run into trouble or fail because their founders do not know when to tsp back from management to become good owners and guardians of their company.  Ask yourself if this is you.  If yes, take steps accordingly.  If no, good.  Either way build a strong, strategic board tapping into the resources and capabilities new members willbrign to the success of your company.

Michael Brill Technology startup exec focused on AI-driven products

November 4th, 2014

Having that external director early on forces a discipline that you wouldn't otherwise have if it's just the founding gang. Keep two founders + external director. If you hate him/her, vote them out. If they're doing a great job then you've got extra de facto control when you bring on investor directors. 

Jacob Kojfman Experienced technology and corporate lawyer, focusing on SAAS

November 4th, 2014

Structuring the board is also different than the founders' ability to retain control.  In a number of organizations, board members don't have shares or even options (but this is quite rare).  One option is to make sure that you don't issue more equity to your directors than the founders hold.  Another is to use multiple class voting shares (see Google).

Diego Oppenheimer Founder , CEO at Algorithmia, @doppenhe

November 4th, 2014

founders should outnumber investors always (at seed , series A stage). It is also a bit weird to have more board members than employees.

Chris Carruth VP/Director. Strategy | Business Development | Operations | Product | Solutions

November 4th, 2014

Voting rights are what count, regardless of number of bodies. Although most founders, rightfully, want to retain control for as long as possible, be cautious of structuring so much control that experience is outweighed by fear of loss of control. Founders class stock can have super voting rights that other classes don't - but it is a two edged sword believe me.

IMHO having at last one very experienced sr. board member, who may participate either due to just interest or provided some minor equity, on a vested basis, is critical. Even if the founding team know the industry an unbiased, experienced, nothing personally gained viewpoint, is priceless.