The Startup Board Composition Problem: How VCs Can Build Them Better

When I first started studying startup boards for my doctorate, I was most excited to learn how board structures affect company performance.

Academics have a standard playbook for studying boards: focusing on observable characteristics like size, composition (executives vs non-executives), and independence. These traits are objective, measurable, and readily available from filings or company websites. In public firms, such characteristics are highly predictive of a board’s effectiveness and company performance.

But here’s the kicker: when applied to startup boards, these same metrics tell a very different story.

Public boards are designed for accountability and independence, tasked with growing shareholder value. Startup boards? Formed as a requirement post-investment, with heavily negotiated investor board seats, typically consisting of only investors and founders. Independence is minimal and conflicts are built into the structure.

Learning from the academic research about boards, the biggest surprise for me was realising how much can be deduced from just looking at board composition, i.e. without speaking to a single director:

Board Size

Boards with more than about 7-8 members are unlikely to be effective. Larger boards demand more coordination, communication and explanation. They take more time and compromises to reach a consensus, and often make less risky decisions. Research links larger boards to reduced performance variability and lower firm value.

On larger boards, it is also easier to ‘free ride’, i.e. execs or non-execs who are not pulling their weight, who turn up for lunch, and let others challenge and support.  A surprising consequence of this? CEO power increases with board size. Why? Because it is easier for the CEO to influence and control the narrative where group think takes hold.

Startup boards start small (3-5 people), but often expand quickly. Syndicated funding rounds can bring in multiple new directors or observers every 12–18 months. Without careful management, the board can become unwieldy, with conflicting time horizons for exit.

Board Composition

Research shows that shareholder representation on boards is generally positive - it aligns decisions with shareholder interests. But in startups, everyone on the board is a shareholder: founders, management, and investors. Even NEDs and Chairs are often encouraged to invest. With time, founder shareholding decreases whilst investor shareholding increases, amplifying the potential for shareholder conflicts.

Investors are notoriously time-poor. Many startup boards stay in “pitch mode,” with founders performing instead of collaborating and investors asking clarifying questions instead of adding value. Public boards evolve based on operational complexity, but startup boards are negotiated by incoming investors. At their best, startup boards drive growth. At their worst, they’re ego-driven, misaligned, and dysfunctional.

Board Independence

Research tells us board independence is a proxy for board effectiveness. In public firms, governance codes often require independent directors to outnumber executives. Independent boards reduce issues like excessive executive compensation, improve the quality of financial reporting, and resolve stakeholder conflicts.

Startup boards, by contrast, are inherently not independent. This is ironic because independence is precisely what startups need to balance investor conflicts and power struggles.

To be fair, startup board independence usually increases as firms grow, which is great. But you still see some high-profile unicorns only adding independent NEDs three months before they float on the stock exchange. And my least favourite practice? VCs advising founders to delay independent NEDs until Series B. I previously wrote about the importance of early boards here.

There is a growing movement to prioritise independent Chairs or NEDs earlier. Some prolific VCs advocate reserving two independent seats from the moment the board is formed (read here). I really like this approach.

Being Effective as a VC Board Member

The way board characteristics influence startup performance is something I think about constantly. The more I talk to founders and fellow investors, the clearer it becomes: the traits that define best practices in public boards - size, composition, independence - are warped in startups.

I see this as an opportunity to rethink how we can make these inherently quirky startup boards work better.

If you’re an early-career VC looking to level up your impact as a board member, here are the tips that have worked for me:

1. Board Size: Fit the Stage, Fit the Purpose

• Board size should reflect the startup’s stage and needs.

• Pro Tip: In heavily syndicated rounds, an “ideal” size may not be possible. Instead, help founders foster collaboration and strong communication to make the board work effectively.

  
  

2. Composition: Align Early, Avoid Drama

• Misaligned expectations or hidden agendas can erode trust fast.

• Pro Tip: Align on the board’s purpose early. Be transparent about replacing members, adding independents, or adjusting investor seats. Hold 1:1 and group alignment conversations with every new investor—trust starts with clarity.

  
  

3. Independent Directors: The Sooner, the Better

• Startups often wait too long to bring in independent directors, but neutral voices add credibility, governance expertise, and perspectives free of investor bias.

• Pro Tip: Advocate for at least one independent director post-investment—their impact grows as the startup scales. Hone your own independent judgment as an Investor Board Member, and always be upfront about any conflicts tied to your VC role. Transparency builds trust.

Bottom Line: As VCs, we have the power to shape startup boards for better or worse. By being intentional about size, composition, and independence, we’re not just investing capital — we are setting the stage for long-term success.