An investor keeps asking for information rights and a board seat in the term sheet. What should I actually give a seed investor?
The short answer
At seed, give standard information rights (monthly or quarterly updates plus annual financials) to anyone writing a meaningful cheque, but do not hand out a board seat unless the lead is putting in real money and real value. A board seat is a permanent governance cost, not a thank-you gift. In India, watch for affirmative voting rights sneaking into the SHA that let a small investor block hiring, budgets, or your next round. Cap information rights at a minimum investment threshold so your cap table of angels does not each demand a monthly call.
Go deeper, your way
3 hand-picked resources, 3 link-checked. Pick how you want to dig in.
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Why we picked it
This is the founder-side reference that draws the exact line you need: it says outright that not every seed investor takes a board seat, keeps early boards to 1 to 3 people, and it is blunt that an observer seat is not a free consolation prize (observers push investor interests, every future investor then demands one, and confidentiality leaks). Use it to justify offering an observer seat instead of a voting seat to a lead who wants in.
A board seat is real governance control, not a thank-you; keep the early board tiny (1 to 3) and grant seats deliberately, not per investor
Observer seats look harmless but compound: they carry influence without accountability and set a precedent every later round will invoke
Information rights (financials plus budget, monthly or quarterly) are the standard thing you give investors, separate from and much cheaper than a board seat
Why we picked it
A lawyer-written plain-English breakdown of the three rights an investor bundles into one ask, so you can unbundle them at the table. It spells out that seed financials are unaudited (do not let anyone force audited statements on a seed budget) and that observer rights normally sit behind a 25 to 50 percent ownership threshold, which is your ammunition for capping who gets what by cheque size.
Information rights and inspection rights are cheap and standard; observer seats are the ask to push back on, and are usually gated to a 25 to 50 percent stake
Seed-stage financials should be unaudited: audited statements are a waste of scarce cash, so refuse that requirement
Threshold-gating rights (a minimum cheque before info or observer rights kick in) is normal practice, so cap your angels out of a monthly call
Why we picked it
The India-specific piece that names the exact trap in your answer: affirmative rights and reserved matters that let a small investor veto hiring, budgets, and your next round. It gives concrete founder-side defaults (split reserved matters into 'consent required' vs 'information only', set capex consent thresholds high enough that normal operations do not need a sign-off, refuse caps on founder pay and junior hiring) so you know what is standard vs aggressive in an Indian SHA.
Reserved matters (the Indian home of affirmative rights) run 18 to 25 items; split them into 'investor consent' vs 'information only' so a 10 percent holder cannot deadlock operations
Set consent thresholds (capex, debt) high enough that day-to-day running never needs investor sign-off, and refuse caps on founder comp and junior hiring
Post-2022 investors push wide 'bad leaver' triggers and broad vetoes; narrow them, because in India these rights live in the binding SHA, not just the term sheet
