Why it matters
Board composition determines who can fire the CEO. At seed and Series A, fair structures are: 2 founders + 1 investor + 1 mutual independent (3-2 founder favour), or 1 founder + 1 investor + 1 independent (balanced). A board that is 3-2 in favour of investors at Series A is a structural anomaly that will compound at every subsequent round. By Series B you will not control your company.
How to negotiate
At seed: founders should hold 2 of 3 seats. At Series A: 2 of 5, with at least one independent that requires founder consent. Reject any structure where the lead investor alone, or in combination with one other party they choose, controls a majority. Tie observer seats and director appointment rights to ownership thresholds that decline if they fail to follow on.
Example language
How this clause typically appears in a term sheet. Read it carefully — predatory language is often buried in routine paragraphs.
The Board shall consist of five (5) directors: two (2) designated by the holders of a majority of the Series A Preferred Stock, two (2) designated by the holders of a majority of the Common Stock, and one (1) independent director mutually agreed.
TURNSHEET provides intelligence, not legal advice. This page describes typical market behaviour and common negotiation tactics; your specific deal may have nuances that change the analysis. Always review your term sheet with qualified legal counsel before signing.