So, what is a board observer?
In general, the board observer is just that, an observer. Someone who listens to the discussion but doesn’t actively participate unless called on to join in.
Some investors negotiate a ‘board observer’ position as part of their investment so they can monitor the progress of the company.
Most board decisions are perfunctory, such as signing off on the 409A valuation, stock options plans, etc.
The board observer attends your board meetings but does not have voting rights.
They gain access to the board documents but don’t have a legal say in any of the decisions.
They may be asked to leave during discussions of a sensitive nature.
Angel investors, corporate VCs, and others will use this as a means of staying connected.
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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.