The Board of Directors Controls the Company

You are probably familiar with the term Board of Directors, but have you ever figured out what that term actually means?

Well, the board of directors is the board that controls the company, how the company is to chart its course for the fiscal year.

In short, whoever is on your company’s board of directors controls your company.

This is very important to know; unlike angel investors, who rarely ask for a seat on your board of directors, venture capitalists and other institutional investors almost always do.

You need to remember that venture capitalists invest in equity, which means that when they invest in your company, they buy some of your equity.

Hence, it is in their interest to exert some kind of control of your company and will want to see that you gain equity and they make profits off their investments.

The best way for investors to exert control of your company is to request a seat on your board of directors.

Usually, venture capital firms will require their investment partner, who invests in your company, to have at least one seat on your board of directors.

So how can you maintain the majority control of your company? Simple, the board of directors can be shared with both the investors and the executive team.

If the majority of the seats on the board of directors are held by the executive team and the company founders, then the company is controlled by its executive team and cofounders; if the majority of board seats are held by the investors, then the company’s investors control the company.


Having investors on the board of directors is not necessarily a bad thing. You need to remember that venture capitalists are not really interested in taking full control of a company they invest in, unless they see the management to be unbelievably incompetent.

In fact, having some investors on your board of directors can actually benefit your company because investors have business connections that can benefit your business.

Companies that investors invest in are known as part of that investor’s portfolio. Portfolio companies usually work closely with their investors and often advise them how the market of a given sector works.

You need to also keep in mind that many venture capitalists and other equity investors were either entrepreneurs or held key executive positions in large companies themselves, so they have the entrepreneurial experience and the proper connections which can be vital for a new start-up business to be successful.