Tuesday 11 May 2010

Board of Directors Who's Who

Let's tackle the who's who in the BoD world. Composition will typically reflect the ownership. There are no fixed rules though. At first the board would include all of the founders. For example if a new startup gets founding and two founders own 60% of the company after the investment, the composition of the board might look like:
- CEO (founder)
- founder
- investor

BoD can have even more members, if desired. Trouble with having more than 3 members in the beginning is that typically new investors that join the company in the next rounds will want to have board seat and soon you'll end up with more board members that startup can efficiently handle.

Quite often you have two additional participants at the BoD that are important as well:
- observers
- unofficial observers

Observers are members that have the right to participate at the BoD meeting but have no voting rights. The unofficial ones are the ones who participate there because you allow them to. Typically that might be an associate that helps one of the VCs that's on your Board or a senior partner from one of your investors that would like to stay in touch from time to tome.

I'm a great fan of having all those people at the board meeting as long as they have something to say. At Zemanta we had 5 board members, but routinely ended up having a board meeting with at 10 or 11 participants. And I think we had much better board meetings that we would have if we would formally stick to the rules of who's who at the board. 
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