--- title: "Startup boards explained and tips to manage your board" id: "413716" type: "post" slug: "startup-board-explained" published_at: "2023-08-17T11:19:04+00:00" modified_at: "2023-08-17T11:19:04+00:00" url: "https://seedlegals.com/us/resources/startup-board-explained/" markdown_url: "https://seedlegals.com/us/resources/startup-board-explained.md" excerpt: "The founder's guide to creating and managing a startup board. Responsibilities, what to pay and how to ace the admin." taxonomy_category: - "Uncategorized @us" - "Startup Guides" --- 6 min read Expert reviewed This article has been fact-checked by a SeedLegals subject matter expert. [Meet our experts](https://seedlegals.com/us/authors-and-experts/) and learn more about our review process and quality assurance in our [editorial policy](https://seedlegals.com/us/editorial-policy/) . # Startup boards explained and tips to manage your board Published: Aug 17, 2023 Contents [What is a startup’s board of directors?](#what-is-a-startups-board-of-directors) [Who should be on a startup’s board of directors?](#who-should-be-on-a-startups-board-of-directors) [Do all founders get a seat on the board of directors?](#do-all-founders-get-a-seat-on-the-board-of-directors) [Should investors be on your startup’s board of directors?](#should-investors-be-on-your-startups-board-of-directors) [What are the board’s responsibilities?](#what-are-the-boards-responsibilities) [How much should startup board members be paid?](#how-much-should-startup-board-members-be-paid) [How do you run a startup’s board meetings?](#how-do-you-run-a-startups-board-meetings) [What are some top tips for effective board management?](#what-are-some-top-tips-for-effective-board-management) [Got any questions? We’ll get them answered](#got-any-questions-well-get-them-answered) [WriterIdin SabahipourCopywriter](https://seedlegals.com/us/resources/author/idin-sabahipour/) Having a strong board of directors on your side can help you as a startup founder. Your board can open doors to new connections and help make company decisions to guide you towards success. In this article, we’ll explain how to set up a startup board, understand its responsibilities and what to pay your board members (if anything at all). ## **What is a startup’s board of directors?** A startup’s board of directors is a group of people who help guide the company’s direction and make key decisions. They oversee corporate governance and support the founders in growing the business. A board of directors ideally has a diverse set of skills, expertise and industry knowledge relevant to the startup. Every company must have at least one director – when you set up a company, you decide who your director(s) will be. If you’re just a solo founder at the moment, don’t worry – a board can consist of just one director. You can then add to your startup’s board as your company grows. There are two types of directors you can have on your board: executive and non-executive. Executive directors are those that are employed by the company, so they’re typically more involved in the company’s daily operations and decision-making. Non-executive directors aren’t employed by the company – they’re usually more removed from the company, so they can offer independent guidance and strategic oversight. Startup boards have to agree on some major company decisions. To reach an agreement, the board of directors can get together and decide on something by majority vote (called a board meeting). Or they can provide written consent without a meeting if they agree on something unanimously. You can also give some board duties to a specific director or a group of directors. For example, financial tasks are often handled by the chief financial officer (CFO). If a director is given the power to do something – like sign supply contracts – the board of directors doesn’t need to meet or give consent every time the company needs a new contract. The director with the authority can go ahead and make decisions within their assigned role. ## **Who should be on a startup’s board of directors?** > Aim to have people on the board who are truly invested in the success of the company and who will complement the knowledge and experience of the founders. For example, if the founders are mostly technical experts, you should aim to have other directors who can help with financial expertise, business growth, partnerships and sales. > > Remember, the board is about governing the company, not getting advice, and it should be founder-led rather than investor-led. Investors sometimes want a different outcome than the founders, so remain in control of your own company and ensure that you have more of a say in who’s on the board than your investors. > > [Anthony Rose](https://seedlegals.com/resources/author/anthony/) > Co-founder & CEO, > > [SeedLegals](https://seedlegals.com/us/) ## **Do all founders get a seat on the board of directors?** At SeedLegals, we recommend that if there are just two or three founders, you all have a seat on the board. Why? Well, because founders are more invested in the running and success of the company than outsiders and usually have more stock than anyone else. When founders are made board directors, they have the ability to shape the company and they’re in the best position to do so because they’re immersed in the day-to-day of the company. But, if there are four or more founders, not everyone needs to be part of the board. At that stage, we recommend those founders with the largest stockholding should have a board seat. > In general, if your company has one to three founders you should all have a seat on the board to remain in control, particularly in the early stages. You can revisit it around the Series B stage, when perhaps your lead investor has more equity than some of the founders. > > [Anthony Rose](https://www.linkedin.com/in/anrose/) > Co-Founder & CEO, > > [SeedLegals](https://seedlegals.com/us/) ## **Should investors be on your startup’s board of directors?** When you raise startup funding from VC investors, the lead investor from your funding round will usually ask for a seat on the board. Investors generally ask for a board seat so that they can have a say in company decisions and the strategic direction of the company. Think carefully when selecting investor directors and consider things like how much value they’ll add, the stage of your company, and the way the board’s set up. ## **What are the board’s responsibilities?** A board of directors is responsible for governing the company, making decisions and guiding the company’s strategic direction. They must act in the best interests of all the company’s stakeholders (its stockholders, employees, investors, customers, suppliers, community, etc) and uphold high standards of corporate responsibility. **Their responsibilities are:** - representing stakeholder interests - setting the long-term goals - aligning company actions with its mission - creating growth opportunities and mitigating risks - advising and holding management accountable - deciding executive salaries and stock options - appointing the executive team - safeguarding company assets and ensuring compliance - fostering transparency and accountability Overall, the startup board is responsible for guiding the company towards sustainable growth and success while upholding the principles of good corporate governance and ethical business practices. ## **How much should startup board members be paid?** It’s not always a given that board members should receive cash payments. Some may do the job voluntarily, particularly if they share the company’s values. But paying startup board members could be important in attracting experienced people who can provide valuable guidance. Startups can offer equity or cash. Early-stage companies often rely on equity, while later-stage startups may introduce cash payments. Here’s a general breakdown of our thoughts plus some figures from [the Corporate Governance Institue:](https://www.thecorporategovernanceinstitute.com/insights/guides/how-much-do-startup-board-members-get-paid/) - **Equity:** Early on, board members are often compensated with equity, which ties their financial reward to the company’s success. It can be tough to know how much equity to offer, though. To figure this out, start with your company’s valuation. For instance, if your most recent valuation was $10 million and you value a board member’s time at $20,000 a year, that’s 0.2% in equity. This approach keeps things clear and avoids guessing percentages. Also, make sure any equity offered to directors vests over time, which means they remain committed. - **Per-meeting fees:** Once cash payments begin, board members may receive $1,500 to $3,000 per meeting, plus travel and accommodation reimbursement​. - **Retainer fees:** Sometimes, annual retainers of $5,000 to $10,000 are offered to directors to encourage long-term commitment​. ## **How do you run a startup’s board meetings?** There’s no minimum number of board meetings prescribed by law – directors should meet often enough to make sure that they are meeting their obligations and duties. It’s common for startups to meet at least once a year to run an annual review of the company’s progress against high-level targets. ## **What are some top tips for effective board management?** So what does good look like when it comes to building a brilliant startup board of directors? Here are our top tips 👇 ### **Define clear roles and responsibilities** Establish clear roles and responsibilities for each board member. This includes setting the board’s purpose, outlining individual duties, and establishing expectations for participation and contribution. ### **Share risk and reward** Make risky decisions together and share responsibility for them. Govern the company well and share in its success. > Imagine your company is planning a risky new expansion into a new product or territory that’s going to cost a fair fraction of the company’s cash reserves. If it doesn’t work out, the company could go bankrupt or face serious regulatory issues. That’s going to affect all stakeholders in the company negatively. That’s why big decisions need to be made collectively. > > [Anthony Rose](https://www.linkedin.com/in/anrose/) > Co-founder & CEO, > > [SeedLegals](https://seedlegals.com/us/) ### Encourage open communication Create an environment where directors feel comfortable expressing their opinions, discussing challenges and offering constructive feedback. ### **Set strategic objectives** Work collaboratively to define the company’s strategic objectives and long-term vision. Regularly revisit and update these goals to align with market trends and the company’s performance. ### **Conduct board training** Invest in board training and development to make sure directors are well-informed about the industry, market dynamics, and regulatory changes. Continuous education helps them make informed decisions and remain effective in their roles. ### **Promote diversity and inclusion** Strive for a diverse board that includes directors from different backgrounds, experiences and expertise. A diverse board enhances creativity, better decision-making and a broader understanding of stakeholders’ perspectives. ### **Assess performance** Regularly conduct board evaluations to assess individual and collective performance. Use the findings to identify areas of improvement and tailor development plans for the board as a whole. Encourage agile decision-making by swiftly responding to opportunities and challenges. Avoid lengthy bureaucratic processes that could limit the company’s ability to adapt to changing market conditions. ### **Focus on long-term value** Avoid short-term thinking and focus on creating sustainable long-term value for the company and its stakeholders. Make decisions that align with the company’s overall mission and strategic goals. ### **Use software to boost efficiency** You can use board management software that helps you stay organized and save time. These can allow you to: - set and share your board meeting agenda - record your discussion and document board minutes - add outcomes to agenda items (recording what’s approved or not) - sign board minutes digitally - add and remove directors - change the details of directors … so it could be useful to your business! ## **Got any questions? We’ll get them answered** [Book a free call with our team](https://seedlegals.com/us/talk-to-us/) to find out how we can help with your fundraise. Want to try SeedLegals for free first? [Start your 7-day free trial](https://app.seedlegals.com/signup) . Start your 7-day free trial Cap table management, SAFEs, looking to do a priced round? Dive in and discover everything SeedLegals has to offer [Start free](https://app.seedlegals.com/signup) ## Related posts [6 min readHow to spot the right moment to flip from LLC to C corpNot sure whether to flip from LLC to C corp? Learn the key triggers,the risks of moving too early or late, and how to ge... Idin Sabahipour](https://seedlegals.com/us/resources/how-to-spot-the-right-moment-to-flip-from-llc-to-c-corp/) [1 min readHow Travel Spoken is reshaping travel planning with AIEni Maj, co-founder of Travel Spoken, shares how the platform is turning travel content into bookable trips using AI – a... Anthony Rose](https://seedlegals.com/us/resources/how-travel-spoken-is-reshaping-travel-planning-with-ai/) [9 min readHow to Incorporate a Startup: Step-by-Step Guide to Form a Delaware C-CorpLearn how to incorporate your startup in the USA with our step-by-step expert guide. Avoid common mistakes and get ready... Anthony Rose](https://seedlegals.com/us/resources/how-to-incorporate-a-startup-usa/)