What drives D&O premiums at each funding stage

Directors and officers insurance protects the personal assets of your founders, executives and board members when they are sued for how they ran the company. It also reimburses the company when it indemnifies them. For a venture backed startup, the single best predictor of price is funding stage, because stage is a proxy for how many parties have standing to sue.

Stage by stage

Bootstrapped and pre seed

Typically 3,000 to 6,000 dollars for a 1 million limit. With no outside board and few shareholders, the main exposure is employment practices. Many founders skip the policy at this point, which is defensible if there is no investor requirement.

Seed

Typically 5,000 to 12,000 dollars. The purchase is usually triggered by a term sheet condition. The new investor takes a board seat and wants the seat covered.

Series A

Typically 10,000 to 25,000 dollars. Preferred stock terms, protective provisions and a formal board create real fiduciary duties. Boards commonly move to a 2 million limit here.

Series B

Typically 20,000 to 45,000 dollars. Headcount growth pushes employment practices exposure up sharply, and secondary sales start to create disputes about valuation and information rights.

Series C or later

Typically 40,000 to 120,000 dollars and often structured as a tower. Underwriters begin pricing for a possible public offering, which brings securities claim exposure and a much larger set of disclosure duties.

The five factors underwriters weigh

• Capital raised and valuation. A down round is the most common trigger for a shareholder claim.
• Runway and solvency. Thin runway raises creditor claim risk and can restrict terms.
• Headcount and states of operation. Employment practices claims drive frequency, and some states are far more litigious than others.
• Governance quality. Independent directors, real board minutes and clean cap table records all help.
• Exit plans. Any planned offering or reverse merger moves you into a different rating class entirely.

What to check in the wording

Look for a full Side A grant so directors remain protected if the company cannot indemnify them, a broad definition of insured person that includes advisers and committee members, and a severability clause so one bad actor does not void cover for everyone. Watch the insured versus insured exclusion, which can bite in a bankruptcy.

Price your own stage with the startup D&O cost calculator.