What is a board of directors and how does it work at a startup?

The board of directors is the legal governing body of a corporation. It has fiduciary duty to all shareholders and makes decisions on major strategic matters.

At a seed stage startup, the board might just be the founders themselves — 2 founders, no outside board members. After a Series A, a typical board is 5 people: 2 founders, 2 investors (the lead VC and sometimes a co-investor), and 1 independent director.

Board powers include: hiring and firing the CEO, approving major strategic decisions (acquisitions, new fundraises, equity issuances), reviewing financial performance, approving executive compensation.

Board seats vs. observer rights: VC investors negotiate for board seats or board observer rights. A board seat gives voting rights. An observer seat lets someone attend and speak at board meetings but not vote. Observers typically have fewer formal rights but still receive materials and have significant informal influence.

Board composition evolves with rounds: by Series B, you might have 7 members. By IPO, public company boards typically have 7-11 members with a majority of independent directors.

For founders: Your board is not your friend group, but they shouldn't be adversaries either. Build a board of people whose judgment you trust, who can help in a crisis, and who have strong networks. Board dynamics matter enormously when things go wrong.