Board Governance During Fundraising
Every biopharma company raises capital. Most do it repeatedly. And every fundraising round creates a governance environment where conflicts of interest multiply, information flows become asymmetric, and the board's fiduciary duties are tested in ways that routine operations never approach.
If your governance framework isn't designed for fundraising, you don't really have a governance framework.
The Conflict Landscape
In a typical Series B or C round, consider the conflicts sitting around the board table. Existing investor directors want favorable terms that protect their positions. New investors want maximum protection and minimum valuation. The CEO's equity stake makes them acutely sensitive to dilution. Independent directors may have relationships with potential investors. The company's law firm may also represent one of the investors.
None of these conflicts are disqualifying. All of them require management. The board's first governance act in any fundraising is to map the conflict landscape explicitly and decide how to handle each one — who recuses from what, what information flows to whom, and where independent judgment is most critical.
Maintaining Fiduciary Duties Under Pressure
Fundraising creates urgency that can erode governance discipline. The company needs capital. The timeline is compressed. Management presents a term sheet and asks for quick approval because the lead investor has a deadline.
This is precisely when governance matters most. A board that shortcuts its process because of fundraising pressure is failing at its core function. The questions don't change because the timeline is tight: Is this the right deal? Are the terms fair to all shareholders? Has the company explored alternatives adequately? Are the governance provisions in the new investment documents acceptable?
Speed is sometimes necessary. But speed achieved by eliminating board deliberation is not efficiency — it's abdication.
Information Asymmetry in Fundraising
During fundraising, the CEO typically knows far more about the deal landscape than the board. They've had conversations with multiple investors. They understand the range of available terms. They may have preferences based on relationships, strategic value, or personal considerations that don't perfectly align with shareholder interests.
Effective governance requires the board to have independent access to fundraising information. This doesn't mean micromanaging the process. It means requiring regular updates on all term sheets received, not just the one management recommends. It means understanding why alternatives were rejected. It means occasionally speaking directly with potential investors rather than relying solely on management's characterization.
Protecting All Shareholders
The most important governance principle during fundraising is one that boards frequently violate: the duty to act in the interests of all shareholders, not just the ones sitting in the boardroom.
When investor directors negotiate terms, they're representing their fund's interests. Those interests often align with the company's — but not always. Anti-dilution provisions, liquidation preferences, board composition requirements — these terms affect all shareholders, and the independent directors' role is to ensure that the deal works for everyone, not just the parties negotiating it.
After the Round Closes
Governance doesn't end when the round closes. The board should conduct a post-closing review: Were the governance processes adequate? Did conflicts get managed appropriately? Were any information gaps exposed that should be addressed for next time?
This retrospective discipline is rare but valuable. Every fundraising round teaches the board something about its own governance effectiveness — but only if someone takes the time to capture those lessons.