If you raise a round of funding from a venture capital firm, you will have at least one and more often two members of the firm (or of the investor group if you have multiple investors) on your board.
The board will in general be composed of two company employees, usually the CEO and a founder, two VCs and an independent, meaning someone who is neither affiliated with the VC firm or the company.
VCs are likely to want one or more observer seats so they can bring an associate to the meeting.
This person should be able to provide the company some value from the advice side of things, but will not have a vote.
You are likely to schedule regular quarterly meetings, but may have more frequent, event-driven meetings as circumstances warrant.
In general, you will pay for the travel and board of the VCs and their entourage, but will not provide them any additional compensation.
Your independent board member should receive some compensation for his or her duties, although this may take the form of stock options.
Usually, one of the VC board members will be the partner with whom you've had your contact while in the due diligence process.
In the term-sheet negotiation process, you may want to try to negotiate a veto right on one of the VC slots, meaning you can veto their selection if you think the person does not add value.
This will give you the option of keeping off the board someone you believe has a difficult personality or just does not have the background or knowledge to add value to your company.
To keep strife at a minimum during your board meetings, keep your VCs informed between meetings.
The board meeting is not the time to alert them that you are defaulting on a loan or lost a major customer.
Create a package of materials for the board meeting and make sure the board members receive it well before the meeting.
Include a separate coversheet that notes any areas of particular interest.
When defining your board governance process, work with your accountant to set up appropriate committees and controls.
These items are easiest to define at the formation stages of the board rather than retroactively when under the pressure of an audit.
When you hold your board meetings, you may consider having your company counsel sit in on the meetings.
He or she should at least be informed of any resolutions taken and provided with a copy of the board minutes.
Having informed, enthusiastic board members will add significantly to the value of your company.
In many cases, the board will act as an advisory panel where strategic decisions can be mulled over and evaluated.
Do not view your board as potential adversaries and work hard to keep all of the board members working together in a cohesive manner.