In setting up the board for a startup, it’s important to set the compensation policy for the directors.

While some candidates will join the board for no monetary compensation, most people will require some compensation.

Here are some key points to consider when setting the policy:

– Tie the director’s compensation to an evaluation of performance
– Use equity to conserve cash
– Vest that equity over time
– Use option grants similar to employees which often have a 4-year vesting period
– Grants are often in the ½% to 1% range of total outstanding shares
– Consider market rates and keep the compensation within limits
– Set rules around expense reimbursement
– Write out the compensation so there’s no misunderstanding later
– Include what happens in change-of-control and other situations

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let’s go startup something today.

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Thank you for joining your host Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing.

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Disclaimer:
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.