Are you wondering about the importance of board seats during fundraising?
Your company’s Board of Directors will have a huge impact on current and future fundraising goals. If your boardroom is functioning well, then this will be a great advantage. However, even if your boardroom is well-intentioned, it can still have a detrimental influence on fundraising outcomes when not managed correctly.
In this article, I’m going to outline why a startup’s boardroom, and who has a seat on it, is critical for successful fundraising.
How Do Board Seats Impact Fundraising?
In an ideal world, your boardroom functions to ensure the continued prosperity and development of your company. Those who have a seat on it should, in theory, only look to help secure the future of the business.
We’ll discuss the problems you’ll face fundraising when some board members have ulterior motives, but for now, let’s assume that all is well with your board of directors.
Fundraising is key to your success, especially in its early stages. To get a better understanding of how fundraising rounds you can see the video below where I explain this in detail.
When you are thinking about the importance of board seats during startup fundraising, keep in mind that your board of directors should help with this by:
- Identifying timescales for necessary fundraising and helping to set a healthy schedule between fundraising stages
- Leveraging existing business relationships to secure potential partners and pitch meetings
- Drawing up target lists for potential investors, whether angel investors or venture capitalists
- Helping create effective pitches for specific investors
- Creating an overall strategy for pursuing investment
- Negotiating with both existing and potential investors for the betterment of the company
- Setting realistic expectations for the executive director and other senior management
Developing a “culture of fundraising” within the boardroom brings the above points together, helping founders and management create a strategy with the best possible outcomes.
Board Seats as a Negotiating Tactic
If a venture capitalist or angel investor is going to provide a substantial amount of capital, they will often want representation on the board of directors. There are three reasons for this:
- To have eyes and ears in the boardroom so that they are privy to all salient decisions
- To have direct voting rights on company policy and direction
- To offer advice to the board and company management
A seat on the board can, therefore, be offered as a bargaining chip during fundraising, with some form of representation in the boardroom always preferential. This allows investors to protect their investment and shepherd a company in the direction they think best.
See How I Can Help You With Your Fundraising Efforts
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