I am unable to speak to how commonly this occurs by providing you with a figure such as 1 out of 4 times. It is not uncommon from my understanding, however I think a more productive way to look at this decision would be to ask yourself does seating an investor on the board with observer rights serve our company properly. For example, an investor board member with observer rights will have a seat at the table and receive pertinent information regarding the major issues facing the company. Rather than think of this as school master peering over your shoulder think of it as an opportunity to development of relationship and receive support by taking advantage of the networks and experience the investor possess.
Among investors this practice is viewed as a way to add value to the endeavor by providing an extra layer of resources and by offering alternative viewpoints. In this capacity, the investor is able to keep their people in the loop and happy and the startup can utilize a valuable resource. In sum, I wouldn’t be skeptical of this practice, but certainly just be certain both the company side and investor side understand their roles and how the arrangement will work so as to avoid stepping on each other’s toes.
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