The terms sheet sets out the board composition.
For an early stage company, the board is comprised of three (3) individuals with one (1) representative being the CEO of the Company, one (1) representative being the Lead Investors or his designee (the Series A Director), and one (1) representative being an individual mutually agreed upon by the Lead Investor and the CEO of the Company.
For a growth stage company, the board typically consists of 5 persons, 2 chosen by the company, 2 chosen by the investors and a fifth person from the industry who provides domain knowledge.
For some investors, there’s also a board observer member named by the preferred share investor who attends the board meetings. The board observer can ask limited questions but does not have a vote in any board decisions.
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Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.