March 30, 2022
Venture Capital: Board Seats? Who Needs ‘Em!
The most recent issue of Evan Epstein’s Board Governance Newsletter discusses the decision of some VCs to eschew seeking board seats in connection with their investments. Here’s an excerpt:
One of the distinctive features of Tiger Global’s startup investment strategy is to be an unobtrusive capital partner. This laissez-faire attitude includes not taking board seats and rarely getting involved in a company’s operations. This has also allowed them to speed up their investment process, striking deals in a matter of days rather than weeks or months. In 2021, Tiger Global invested in 335 companies, almost a deal per day, an unprecedented number for a venture investor. But the NY-based firm did not invent this hands-off or “passive investment” approach. In 2009, Yuri Milner from DST invested $200 million in Facebook at a $10 billion valuation (plus an option to purchase extra common stock from employees at a $6.5 billion valuation) without taking a board seat, somewhat unprecedented at the time.
“You do not need to have a board seat to be influential” Yuri Milner told Jason Calcanis, as recounted in the All-In Podcast.
See below another take from Ron Conway, the founder and co-managing partner of SV Angels, telling Mark Suster from Upfront Ventures why he doesn’t take board seats:
“Board meetings take a ton of time and it’s the duty of the board to manage the CEO. SV Angels also said early-on that our mantra was to be advocates for founders, so if we were sitting on a board that was making a decision to fire the CEO or get into a big argument, we didn’t want to be part of the conversation. That conversation is necessary, boards are necessary, but that’s not SV Angels role. Our role is just to be advocates for founders, help them at inflection points, and build a great company.”
The newsletter goes on to discuss FT.com’s recent article noting that “VCs said it had become normal to pass on board seats in companies focusing on digital assets. Many founders want to limit the involvement of outside backers. A wide swath of largely unregulated projects such as DAOs do not even have formal boards.”
– John Jenkins