- Source link: https://feld.com/archives/2005/01/term-sheet-board-of-directors.html
- TL;DR: VCs have an interest in having control over a company in order to protect their investment and comply with federal tax regulations. Outside board members are usually compensated with stock options.
- How helpful?: 3/5
- Topic Tags: Board of directors, governance
- Relevant questions addressed:
- How is the board of directors selected?
- How are Board members compensated
- Summary bullet points
- VCs care about control over the companies they invest in -> one key way they do this is through BoD elections
- Protect their investments
- Comply with federal tax statutes
- VCs often want to add “board observer” instead of/in addition to official member of the board
- Often, investors want a board seat for then-serving CEO of company
- If CEO is same as one of the key founders, they would take up two seats in this case
- Usually don’t receive any cash compensation for serving on a BoD of a private company
- Outside Board members usually compensated with stock options