Can a venture team carry its board load?

Testing the plan
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You can test a team's capacity with three numbers from any fund deck: how often the fund takes board seats, how many companies it plans to build, and how many investment professionals it has. Board seats accumulate as a portfolio is built and rarely retire on schedule. A commitment made in year one is often still being served in year seven, alongside every seat added since. If the plan implies more board work per partner than the evidence suggests is sustainable, that is a question worth raising.

How often board seats get taken

The most cited evidence comes from Amornsiripanitch, Gompers and Xuan, whose study of venture investors on boards found that investors received a board seat in 43.9 percent of investments on average. Lead investor status was the strongest single predictor: lead investors held seats in 61.5 percent of observed investments, compared with 35 percent for non-leads. Board seats were also more common in earlier rounds.

So a fund that leads often at early stages should expect a substantial share of its companies to come with a board seat.

How many seats one person can serve

There is no authoritative answer, but practitioner views cluster. Built In Chicago's survey of investors lands on five to six seats as a working target per person, depending on geography, company stage and the time new investments require. SaaStr describes new investing generally slowing once a partner holds seven to ten board seats. Actual behavior often runs well past these ranges, which is part of why the question matters.

Run the three-number test

An illustrative example: a fund plans 30 companies, leads often and expects to take a board seat on roughly half of them, with two investment partners. That implies about 15 board seats, or seven to eight per partner by the end of the investment period, before counting observer roles or any seats from prior funds. That sits at the upper end of the practitioner ranges above. It is not disqualifying, but it is worth asking how the partners plan to carry it while still sourcing new investments.

GP load: capital per partner per year

A second capacity measure is GP load: fund size divided by the investment period, divided by the number of general partners. A $100 million fund with a four-year investment period and two general partners carries a GP load of $12.5 million per partner per year. That is an average implied by the plan, not a requirement. A high figure can mean larger checks, more investments or both, so read it alongside the company count and board practice. A firm raising a larger next fund without adding partners raises its GP load proportionally.

What the research does and does not show

Research gives reasons to examine capacity. Fulghieri and Sevilir model a venture capitalist's attention as a scarce resource that cannot easily be expanded. Barnes and Menzies, interviewing European fund-of-funds managers, found the venture team rated as the most important evaluation criterion. But Cumming, studying the same capital-per-manager-per-year measure across 214 venture funds, found it did not significantly predict how many investments each manager made per year. Capacity is worth testing; no single threshold settles it.

Questions to ask the manager

  • On what share of investments do you expect to take a board seat?
  • How many seats will each partner hold at the end of the investment period, including prior funds?
  • How do you handle board work as the portfolio grows: observers, other team members, a platform function?
  • How does your GP load change if the next fund is larger?

Related questions

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Sources

The published figures above are the best available evidence on the question. They are not thresholds, and the right load depends on how a firm distributes board work among its people.