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is the company’s primary provider of capital. When more than one investor participates in a company’s financing, the one who pulls together the syndicate of investors who provide the company’s funding is referred to as the lead investor. Often, the lead investor serves as the syndicate’s representative on the company’s board of directors. Sometimes, however, all or most of the investors in a syndicate will want to be represented on a company’s board of directors. When this is the case, it is often because the syndicate members have different motivations for investing and do not feel comfortable having their interests represented by the lead investor. Sometimes the desire for more than one seat on the board springs from a lack of confidence in the lead member. Whatever the reason, management should resist attempts to place too many members of a single syndicate on its board of directors. With divergent motivations, too many venture board members can create a serious distraction to the business of running a company. More people add more experience to a board, but too many people in any decision-making group make decision making more difficult. Too many directors, particularly if a large number represent outside investors, can make decision making cumbersome. See: Board of Directors, Control, Syndications. |
