Growth Equity - How do Board Seats Work?
Hi I'll be starting an analyst position at a growth equity firm. I am curious how Board Seats work in the investing world as I have seen on many investors' LinkedIn profiles that they were on the Board of XYZ company from 2015-Present, 2016-Present etc
What do people have to do while in those seats? Some people I've seen with possibly more than half a dozen board seats. Sounds like a lot of additional responsibility.
Do people get paid for taking on these other roles at the portcos?
Also, one of the directors at the company I had interned at over the summer had recently left the group - is he still able to remain there and maintain oversight of the portcos?
Apologies if any questions sound uninformed, I haven't began working yet but would greatly appreciate any additional knowledge about these positions!
All good questions. Typically, the lead investor in a funding round will take 1 board seat. Generally it goes to the general partner that's leading the deal. Sometimes multiple firms take board seats in the same round (if they are co-leading for example), and sometimes the lead will take multiple board seats, but those are rare situations. 90%+ of the time, it's 1 seat per round that goes to the lead investor.
Often, though, a junior investor will sit in on the board meeting to help out and take notes. These are board observers. When you see associates at VC firms list things like "Board" or "Board Observer" on LinkedIn, that's what they mean. An observer is supposed to be a formal title that's spelled out in legal docs, but often the company just lets associates from their VC investors to sit in. They don't have voting rights, they're just there to observe and learn.
It's a big deal to be a board director, since they have voting rights & fiduciary duties. Generally only full partners at VC firms (sometimes principals) are allowed to take board seats. If a partner leaves, the board seat will often go to someone else at that VC, since the seat belongs to the VC firm, not the individual, as the individual is merely representing their firm.
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