3 Things No One Tells You About Your First Startup Board Role
How much should I get paid? What’s the time commitment? What’s equity got to do with it?
1. Early stage startup boards (usually) only compensate with equity
Early stage boards (series A or Angel/Friends & Family round) typically do not have extra cash to throw around at board members. At this stage, you’d be looking at one percent (1%) equity and no cash to serve on the board, likely for a 2 or 3 year term. By the time a company is ready to go public, a director who joined privately could expect to be holding 0.25% or so in equity.
2. Even well-funded startup boards typically only offer equity
Board members for more well-funded startups (series B/C) can expect between 0.25–0.75% equity, depending on how many more rounds of funding you expect them to go through. If you’re negotiating to join a well-funded startup’s board, 0.5–0.75% would not be a bad range to ask for — 0.5% if they only expect to raise one more round and higher if you think they’ll need to raise twice.
In both cases, this equity is typically vested over the term of the board service, or it could also vest monthly with no cliff.
3. The level of compensation you get as a board member on a tech startup board is usually tied to your level of engagement & fame
Time investment for board members can vary widely, especially in the pre-funded days of the company. You can break board member time commitment into three categories:
- Low Engagement — board members are very hands-off, available for infrequent emails or phone calls and (typically) attending quarterly board meetings in person or on the phone.
- Medium Engagement — board members are more involved and are expected to participate in networking, scheduled conference calls and meetings in addition to attending quarterly meetings in person.
- High Engagement — board members are the most involved in day-to-day decision making at the company and can expect to contribute “at least semi-monthly.”
According to StartupSmack, low-engagement board members can expect 0.2 to 0.4% equity. Medium-engagement members can get anywhere from 0.5% to 0.9%, while high-engagement members can climb up to 1.5%. Those numbers actually decrease as the company (and the board) grows and gains additional funding, though at that point the company can often begin paying out a combination of cash and equity.
Like most jobs, the identity of the board member (e.g. how famous/renowned the person is) can also impact the amount of compensation. In addition, companies should reimburse directors for any travel or other out-of-pocket expenses.
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