Why Entrepreneurs Should Care about Provisions that Only Directly Impact the Investors
This article was originally published in Start Up
Executive Summary
Financing provisions that appear to only directly affect the various series of preferred stock can in fact impact the company's operations somewhere down the line. Such is the case with pay-to-play, voting rights, and a right of first refusal among investors.
You may also be interested in...
VC Term Sheets: Why We're so Pro on Anti-Dilution.
A VC's perspective on anti-dilution, an often convenient, and sometimes investment saving deal provision.
VC Term Sheets: Liquidation Preference and Participating Preferred
Arthur Klausner discusses liquidation and participating preferred stock in the third part of his series on VC term sheets.
Inside the Term-Sheet Mindset of a Life Sciences VC
When deal discussions get tough and there seems to be no way to cross the chasm between the entrepreneur's valuation expectations and the VC's choking point, the savvy professional investor will likely find a way to slant the secondary terms in order to achieve a deal that works.