How much will I get paid on a startup board of directors

The dirty little secret is: you will likely get paid nothing for serving on a startup board of directors. Here's why.

So, first, to be clear, I'm talking about relatively early stage startups. Say, pre-seed to Series C or so. Companies that are about to go public start professionalizing their boards in various ways, and that's a whole different kettle of fish.

Early stage board composition

Composition matters because composition drives compensation. The reason you are there dictates whether you are paid in any way.

An early stage board has to have at least one board member by law if it's a Delaware C-corp (like most startups seeking investment). The most usual configuration, though, especially if any funds have been raised is 3-5 people.

Here's who will sit on those boards:

• The CEO (usually one of the founders), and perhaps one other cofounder
• The lead investor from the last round, and maybe one of their colleagues (especially true for corporate venture capital investors, aka CVCs), a co-lead investor, or the next largest investor
• Maybe an independent or two

Which board members get paid

If you're an employee of the company, you don't get paid extra to sit on the board - it's just part of your job.

Similarly, investors don't get paid to sit on their portfolio company boards because it's part of their job to oversee their investments. This also goes for an investor's colleagues from the operations side of a CVC.

Independents do get "paid". I use the quotes because payment is pretty much never in cash - it's in equity. Usually, independent board members get a grant of about 0.25%-1%, vesting over a couple of years. Successful startups with big exits will raise many more rounds of funding, so that grant will end up ridiculously diluted. It's unlikely to be worth much even for a unicorn. And since something like 90% of startups fail, the expected value of that equity is close to zero.

Lest you count on refresher grants, it's important to know that independent director positions usually come with a 2-3 year term of service. These are renewable, though more usually swapping out directors for fresh blood able to help with the most pressing problems, which change with scale, makes more sense.

If I don't get paid, why serve on a startup board?

Well, startup boards are fun! You don't have to do the work, but you get a ringside seat. You'll probably learn a lot about the market and technology developments, even if you're from the same industry. And you'll serve alongside investors and founders who you'll have a chance to build tight relationships with. And once you've served on one board, you're much more likely to get asked to serve on additional boards.

When you shouldn't take a startup board role

There are mostly obvious, but they bear repeating:

• If you don't believe in the founders. They deserve better, and the startup deserves better.
• If you don't like most of the people you'll serve with. Wait for a better opportunity - networking with people you don't enjoy spending time with isn't likely to open doors to anywhere you want to be.
• You're too busy to prepare properly for meetings and attend in full. The founders deserve better, and you won't be meeting your statutory fiduciary duty of care.
• You don't trust any of the players around the table. Gut instincts are worth paying attention to.
• The startup doesn't have sufficient Directors & Officers coverage. This is the insurance that will cover your legal fees if you get sued in your capacity as a director. I look for at least $1M of coverage for a very early startup and more as the startup (and the risk) grows.

In conclusion

Boards are great fun, but don't join an early stage startup board for the money - that's the world of private equity-backed, soon to be public, or public companies.

Join because startups are fun. Especially when you don't have to do the work.

If you'd like to read further, here's my article on how to get on a board of directors.

I'm not your lawyer, your therapist, your advisor, or your accountant. We're just internet friends, and these are just my experiences and personal opinions. Consult professionals for advice before you make any sudden moves in your startup.

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