Let's talk about the reality of taking money from professional investors. This is not the first time we cover this general topic or the last one. But this time, we focus on governance changes.
Once a company founder has used available funds from his resources and his friends and family, the next most obvious step is to look for money from angels and venture capitalists. in the order of $ 300,000 to $ 3,000,000.
This money comes with restrictions that a founder can not expect, including restrictions on the sale of founder shares, which require that the investor be allowed to sell an equal proportion of the proceeds. 39, shares on any sale of shares. protect the investor against a subsequent offer of shares at a lower price, and many more.
Almost always, professional investors, including angel investor groups and venture capitalists, also need at least one seat on the board of directors. The organization of investors is granted the seat as long as the investment subsists and the documents often designate the first representative assigned by the group of investors to the position.
Subsequently, we will explore the legal and ethical responsibilities of board members. But the intention of these "forced" investments of a representative on the board is obviously to ensure the use of the funds invested by the company and contribute to the growth of the value of the # 39; company. The combination of restrictive covenants in the investor's documents and the new dynamics of board members with an agenda make for a change in the company's culture, certainly for the CEO.
However, the external board members of a professional investor can be a very good asset to the company with the skills, experience and extensive relationships that many bring to the board table. ;administration.