Board member

Many startups add an independent director around Series A or B, when the board grows to five seats with founders, investors and one or more independent members, or when the company needs specific expertise such as financial oversight before a larger raise or an eventual IPO. An independent can also balance a board where investors and founders disagree. Term sheets often specify who appoints the independent, so the decision is partly negotiated in the financing.

Start with the expertise the board lacks, such as go-to-market at scale, finance and audit, or a regulated industry. Ask your investors, lawyers and other founders for candidates, and look at executives who recently did the job you are about to do. Talk to several people and check how they behave in hard board conversations. Some search firms and director networks specialize in startup boards, especially for later-stage companies.

At private startups, independent directors are usually paid in equity, commonly stock options or restricted stock vesting over two to four years. Grants often range from a fraction of a percent to about one percent at earlier stages, with smaller percentages at later stages. Some later-stage companies add a cash retainer. Directors' and officers' insurance should be in place before anyone joins the board.

An independent director votes on major decisions like any board member, but brings a neutral view that is not tied to one investor or the founders. In practice they coach the CEO, bring expertise the board lacks, help resolve disagreements between investors and management, and often chair committees such as audit or compensation as the company grows. The best ones are available between meetings and focus on the company's long-term health.