Should venture investors take board seats?

Matt Mochary · published Mar 9, 2020

Board seats are the death of every great investor, so investors should not sell founders a lifetime board commitment

Board meetings consume enormous time (half to full day plus travel, four-plus per year each); at 10-20 boards, 40-50% of your time goes to board meetings, another 20-30% to internal partnership meetings, leaving no time to find and make new investments

Scope: applies to investors who commit to sit on boards indefinitely

24:00 20VC: Matt Mochary, Coach To Silicon Valley's Leading VCs & Founders on How To Deal with Imposter Syndrome and Self-Doubt, How To Manage Fear and Anger & Why Board Seats Are The Death of Investors

Matt Mochary · published Mar 9, 2020 · hedged

Investors should not take board seats

Scope: Matt explicitly says 'I'm not saying I'm right, it's a thought in my head'

25:36 20VC: Matt Mochary, Coach To Silicon Valley's Leading VCs & Founders on How To Deal with Imposter Syndrome and Self-Doubt, How To Manage Fear and Anger & Why Board Seats Are The Death of Investors

Harry Stebbings · published Oct 25, 2024

It is not possible for an investor to spend all their time playing offense

Board seats and portfolios accumulate, and team members bring culture, morale and promotion obligations

49:54 20VC: The Truth About Multi-Stage Firms; Why Portfolio Services are for VCs not Founders | Why Politics is Rife & Decision-Making is Broken in Large VCs | Why Reserves are Bad for Founders & How Boutique Firms Will Win with Mark Goldberg @ Chemistry

Harry Stebbings · published Oct 27, 2023

A fund small enough that it can only write $500K-$1M checks makes the investor a burden to include in rounds, even for friends

Round leaders don't want to accommodate tiny allocations

20:03 20VC: The Three Types of Seed Round Today, Why Seed Has Never Been More Competitive, Why Pricing Has Never Been Higher, Why Boards at Pre-Seed Can Be Helpful & How Too Much Cash Too Soon Can Harm Companies with Ed Sim, Founder @ Boldstart

Harry Stebbings · published Jan 4, 2024

Being deeply involved and on the board is what enables an investor to concentrate capital across rounds; at arm's length you just get told of a round by email and can't shape it

With companies where he is on the board he can shape rounds with founders and deploy far more money

60:52 20VC: Predictions for 2024: What Happens to Early Stage VC Funding, Do a Load of Venture Funds Die, What do LPs Do in 2024, Does Figma Kill the M&A Market, Will IPOs Comeback & What Does a Trump Administration do for Startups with Jason Lemkin @ SaaStr

Jason Lemkin · published Jan 4, 2024

Large funds are good at tracking and winning breakout deals even without board seats, so board involvement isn't required to concentrate capital

Two of his investments crossed from very good to breakout in the last fourteen months and big funds that never attended a board meeting swarmed them, each raising eight figures in about a week

61:11 Large funds track and win breakout deals without board seats so board presence isnt required

Wesley Chan · published Aug 22, 2022

An investor should take a board seat only if the founder wants them on the board

It has to be what the founder wants, not what the investor wants; Canva initially declined to give him a seat and later invited him when they trusted him

25:23 Board seat only if the founder wants them on the board

Mike Lazerow · published Aug 2, 2021

Founders naturally assign more weight to investors who hold board seats than to those who don't, so having a non-board partner in the firm is valuable because founders will raise issues with them they won't bring to the board member

It's natural human behaviour to weight board investors more heavily; Kass takes no board seats and so becomes the person founders go to on hiring, structure and process

31:55 Non board partners receive more candid founder disclosure since founders weight board members more heavily

Sarah Tavel · published May 6, 2024

A firm should flex on round size and price to win a founder it wants, but essentially never on taking a board seat, because board partnership is the product

The board relationship is what Benchmark actually sells, so breaking the model there guts the offering, whereas round dynamics are just the game on the field

47:28 Flex on price and terms but never on taking a board seat since that is the core product

Paul Graham · published Aug 2010

The reason VCs don't do smaller series A rounds is board seats: the arithmetic of board membership caps a partner at about two series A deals per year.

If a startup runs 6 years and a partner can bear 12 boards at once, a fund can do 2 series A deals per partner per year.

source Board seat capacity arithmetic caps vcs at about two series a deals per partner per year

Paul Graham · published Aug 2010

VCs should take fewer board seats, because the help that matters can be given without board membership and VCs have never actually tested whether board power improves returns.

You don't have to be on the board to help a startup; unless they've tried not taking board seats and found returns lower, they aren't bracketing the problem.

source Vcs should take fewer board seats since help doesnt require a seat and benefit is unproven

Paul Graham · published Aug 2010 · hedged

By streamlining selection and taking fewer board seats, VC funds could do two to three times as many series A rounds with no loss of quality.

source Streamlining selection and fewer board seats could let funds triple series a volume

Paul Graham · published Aug 2010

Taking board seats for shorter periods is another way for investors to sit on fewer boards at once.

source Time limited board tenures let investors sit on fewer boards simultaneously